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SPECIAL REPORTTHEMSTATETRKAEOFA CCE S S C ON T R O LState of the Market:Access ControlAThe OmniProxreader fromHoneywell is onepossible solutionfor vandal-pronelocations likeseaports, airports,energy plants andschools, whichare all expectedto remain strongmarkets in 2009.lthough the security business is holdingup better than other parts of the economytoday, one area that is more challengedthan others is access control. Five outof six security systems integrators interviewed forthis article say the number of new access controlinstallations they are doing today is the same orlower than the number of new installations theywere doing a year ago. That’s a bit more pessimisticthan the results published in SDM’s earlier State ofthe Market articles on the intrusion alarm systemsmarket and the video surveillance market.Yet, there are bright spots within certain segments, services and geographic areas. And standardization, legislation, compliance and economicstimulus efforts may help stimulate the market andmaintain a healthy level of sales of access controlsolutions in 2009.THE PROFIT PICTUREAccess control is the third thing customers thinkabout when considering a security system, saysBob Holland, marketing manager for SecuraKey,a Chatsworth, Calif.-based manufacturer of accesscontrol equipment. To most customers, he says,“access is not quite as critical as cameras and alarms— in today’s economy, it’s something they can putoff upgrading or expanding.”Most security dealer/ integrators SDM spokewith say their average revenue per job has remainedstable, but some companies have seen a slightdecline. “Customers are using fewer readers, sothe revenue per job is down a bit,” admits ChrisDiguardi, president of Denver-based dealer/integrator Key-Rite Security.A few integrators, however, have noticed theopposite occur. Tri-Electronics, Hammond, Ind.,says its average revenue per job has increased, afact that Tri-Electronics president Tom Donovanattributes to a change in the company’s customermix. The type of company that would buy asmaller system is simply not buying, Donovanrelates.Margins are remaining stable compared with lastyear, most integrators say. But a few businesseshave observed a drop in margins, and others expectto see a drop if the downturn continues. “The oddsare we’re looking at smaller margins because customers are requiring more concessions,” commentsKeith Cahalen, manager of business solutions forSan Jose, Calif.-based integrator, RFI Communications and Security.“Our margins may be going down a hair becausewe have more competition coming in,” notes BarryKomisar, president and chief executive officer(CEO) of Vision Southeast, based in Birmingham,Ala. “We’re trying to put best practices in place tooffset that and keep the same margin.”PHOTO COURTESY OF HONEYWELL SECURITY36April 2009036-SDM0409-FT-StateMarketAccessControl.indd 3610/25/10 3:55 PM
Access control integrators are finding the market tobe a challenge in 2009, yet there are strengths withincertain segments, buoyed by standardization andlegislation.By Joan Engebretson, Contributing WriterAlan Kruglak, senior vice presidentof Germantown, Md.-based integratorGenesis Security Systems, has experienced a decline in average-revenue-perjob and in average margin as a result ofincreased competition. “With the general contraction of the market, any timeprojects come up now, everyone is bidding on them,” Kruglak says. “Marginshave dropped and prices have dropped.It’s a very crowded market because thereare fewer new projects.”The poor economy also is causingprojects to move more slowly, sourcessay. “The credit crunch has delayed theexecution of projects,” comments ScottMordell, executive vice president of TheChamberlain Group, an Elmhurst, Ill.based access control equipment supplier.“It’s delaying the closing of the deal. Youcan have an order, but if the customernever installs it because they don’t havethe cash, that’s not so great.”Cahalen also has seen customers delayand scale back on projects. Some customers have repeatedly pushed backtimelines, he says. But it could be worse.“The one thing that’s different in thiseconomy compared to the early 2000s ormid-1990s is that then customers wouldsay, ‘We won’t do the project,’” recallsCahalen. “In this economy, it’s muchmore common that customers are continuing to push jobs forward.”Confidence Drops in Potential forAccess Control SalesSDM asked dealers and integrators: “Considering the economic health of your business,how would you define the state of the market and the potential for sales of access controlsystems in 2009?”40Excellent37%35%35Very Good33%32% 05%5%51%0200720082009*percentage of respondents to SDM’s 2007 Industry Forecast Study, conducted November 2006.†percentage of respondents to SDM’s 2008 Industry Forecast Study, conducted November 2007.**percentage of respondents to SDM’s 2009 Industry Forecast Study, conducted November 2008among SDM’s subscribers.Source: SDM Industry Forecast StudyThe majority of dealers and integrators who participated in SDM’s 2009 ForecastStudy believe the access control market this year will range from “good” to “fair.”A lesser percentage of respondents than one year ago feel confident about theindustry’s ability to perform “very good” or “excellently.”Sponsored byAccess ControlApril 2009036-SDM0409-FT-StateMarketAccessControl.indd 373710/25/10 3:55 PM
STATE OF THE MARKET: ACCESS CONTROLPHOTO COURTESY OF HONEYWELL SECURITYMany in the industry believe government access control regulations like thefederal Transportation Worker Identification Credential (TWIC) program andthe Federal Information Processing Standard (FIPS) 201 will continue tosustain business in access control vertical markets.Perceptions of the health of the access controlmarket vary by geographic region. “We’re in muchbetter shape than companies on the coasts,” Donovannotes. Noting that many firms on the East and WestCoasts are publicly held, Donovan says, “Most ofthe companies we deal with aren’t public, so they’renot subject to stock market ups and downs.”WIN-PAK SE with VISTAIntegrates AccessControl, Digital Videoand Intrusion38high-profile incidents, Staley says, adding that onepotential client is considering adding access controlreaders to 5,000 dormitory room doors.The government market also continues to be astrong one for access control, sources say. TomEchols, vice president of access system sales forLouisville, Ky.-based equipment supplier Honeywell, points to the example of a first responderprogram that his company is involved with. Thatproject uses access control technology to verify theidentity of emergency personnel.Echols adds that, “the biotechnology, pharmaceutical and health care markets still are seeingpretty good growth.”“The stimulus package has earmarks targetingthose specific verticals; all of them will involveand trickle down into security,” describes SeanLeonard, director of access system marketing forHoneywell, in a reference to the stimulus bill thatwas signed into law earlier this year.Opportunities in some vertical markets are beingdriven by regulatory and legislative mandates.“Hospitals are spending a ton of money to comply with HIPAA,” comments Kruglak, referring tothe Health Insurance Portability and Accountability Act which, among other things, requires hospitals to keep track of who enters and exits certainareas and when. “We have hospitals with budgetsof 100,000 to 200,000 a year for this, and theseare not humungous hospitals.”Although HIPAA requirements are not new,they continue to drive investment, Cahalen notes.After initially using a manual system to complywith regulations, some hospitals are seeing thedrawbacks to that approach and are now seeking aOPPORTUNITIESDespite these challenges, dealers and integratorscontinue to find opportunities in today’s access control market. Certain vertical markets continue to bestrong, they say.Access Control Accounts for 13RS2 Technologies, a MunPercent of Installing Firms’ Revenuester, Ind.-based solutionsprovider, is hoping to makeDealers’ and integrators’ percentage of total revenue fromsignificant sales to the educaaccess controltional markets with a wireless,2005200620072009stand-alone card reader that11%10%12%13%*resulted from the company’spartnership with Swedish*percentage of respondents to SDM’s 2009 Industry Forecast Study, conducted November 2008firm, ASSA ABLOY. “It willallow us to deploy to doorsSource: SDM Industry Forecast Studythat were considered undeployable,” explains Gary Sta- Of dealers’ and integrators’ total annual revenue, an average of 13ley, national sales director and percent is derived from the sale of access control systems, accordingpartner for RS2 Technologies. to SDM’s Industry Forecast Study. The remainder comes from burglarColleges and universities have alarms (28 percent), video surveillance (23 percent), fire alarmsbecome particularly security- (18 percent), integrated security systems (10 percent) and residentialconscious as a result of several systems such as audio/video (5 percent).April 2009036-SDM0409-FT-StateMarketAccessControl.indd 3810/25/10 3:55 PM
NetAXS 2-Door AccessControl PanelShifts to Come in Access ControlEquipment SpendingSDM asked dealers and integrators to indicate how they expecttheir level of spending on access control systems in 2009 willcompare with previous years.Spending upSpending sameSpending down200768%*27%5%200861% †31%8%200946%**38%16%*percentage of respondents to SDM’s 2007 Industry Forecast Study, conducted November 2006.†percentage of respondents to SDM’s 2008 Industry Forecast Study, conducted November 2007.**percentage of respondents to SDM’s 2009 Industry Forecast Study, conducted November 2008among SDM’s subscribers.Source: SDM Industry Forecast StudyManufacturers will see shifts in spending on access control equipmentin 2009, dealers and integrators foretell. While more than 4 in 10 surveyrespondents indicate their spending on equipment will increase this yearcompared with last year, that’s down from more than 6 in 10 last year.PHOTO COURTESY OF HONEYWELL SECURITYhigher-tech solution — while still trying to keepcosts to a minimum, he says.Meanwhile, airports and seaports are beginning to comply with requirements of the federalTransportation Worker Identification Credential(TWIC) program. But as Cahalen notes, “They’restruggling with how to implement it given the factthat they sometimes barely have funding.”Another credential program for governmentworkers is Federal Information Processing Standard (FIPS) 201, which was created in responseto Homeland Security Presidential Directive(HSPD) 12. The FIPS 201 standard defines acommon credential that can be used by multiplefederal agencies to control physical access as wellas logical access to computer systems.FIPS 201 compliance is largely voluntary andsome integrators have been disappointed by itsprogress. But Martin Janiak, president of Veridt,a Middleton, Wis.-based developer of smart cardtechnology, sees the standard gaining momentum. “It’s starting to be used not just for logicalsecurity but for physical access as well, and therewill be more activity as we move through 2009,”predicts Janiak, whose company has partneredwith access control equipment provider CypressComputer Systems of Lapeer, Mich., on productstargeting the government markets.Energy companies have their own securityrequirements to address. The Federal EnergyRegulatory Council (FERC) and Nuclear Energy Regulatory Council (NERC) have imposedsecurity requirements on utility companies thatinclude an access control component. Brian Bergstrom, president of integrator SecureNet, in Carrollton, Texas, believes those requirements willpresent an opportunity for his company.Bergstrom, one of the most optimistic integrators among those interviewed, outlines severalother opportunities that he sees involving accesscontrol — as long as the integrator can demonstrate a payback to the customer. “Access controllocks and unlocks doors, but there’s so muchmore it can do today,” Bergstrom comments.He cites the example of a kiosk system thatSecureNet created for one client to allow employees to use their access control credential to determine how many vacation days they had left,With the decline innew construction,most integratorsforesee an increasedfocus on upgrades toexisting systems in2009. Honeywell’sNetAXS accesscontrol panel isdesigned to be backward compatible withmost installations,while requiring minimal programming orwiring changes.Sponsored byApril 2009036-SDM0409-FT-StateMarketAccessControl.indd 393910/25/10 3:55 PM
STATE OF THE MARKET: ACCESS CONTROLOpen Architecture Initiatives CouldCreate New OpportunitiesOmniClass ReadersContactless Smart CardReaders40PHOTO COURTESY OF HONEYWELL SECURITYTHE ROLE OF TECHNOLOGYThe poor economy is fueling strong growth forcompanies that offer access control on a hostedSecurity dealers and systems integrators could see bottom-line gainsor managed service basis. That approach minias a result of a security industry initiative to create open architecturemizes the amount and complexity of equipmentstandards for access control. The Security Industry Association (SIA) isat the customer site, relying instead on a wideworking to develop two standards with the goal of achieving a higher levelarea network connection to a secure centralizedof interoperability between equipment from different manufacturers.system operated by a supplier such as HoneywellAs Hunter Knight, a SIA board member and committee chairmanor Bethesda, Md.-based Brivo Systems. In comexplains, both standards are being developed under the guidelines ofparison with traditional alternatives, clients havethe American National Standards Institute (ANSI) and will be recoglower upfront costs, instead paying a monthlynized by ANSI. “One standard deals with how a device controls a door,”service fee.Knight comments. “The other is an access point controller. We’re“Any analysis from The Economist to Informahopeful that we can go out for publication review in the next three totion Week is forecasting strong growth for softsix months.” Within SIA, the standards fall under the Open Systemware-as-a-service simply because people want toIntegration Performance Standards (OSIPS) program.avoid capital expenditures,” comments Steve Van“Surveys show that most users of these types of products would likeTill, president and CEO of Brivo Systems.to have systems built on best of breed,” Knight says. The new standardsBrivo Systems experienced 100 percent growthshould help achieve that goal by enabling end users to pick and chooselast year and expects to see the same level ofamong manufacturers for different elements of a system.growth again for 2009. The company also has seenIn addition, the new standards could give integrators more flexibilits average revenue-per-customer increase steadilyity in competitive-bid situations. Currently integrators may be barredin recent years. “The revenue-per-customer isfrom bidding on certain projects because the paperwork specifies agoing up because we shifted from being a nicheparticular make and model of equipment, available only through limplayer serving smaller companies to being in Forited distribution channels. But the new standards should enhance thetune 500 companies,” Van Till explains.installing companies’ ability to substitute other models that provideThe move to managed services involves a mindthe same functionality, Knight predicts.shift for integrators, Echols believes. To addressthat, Honeywell has created what Echols calls asaving between 200,000 and 300,000 annually “playbook” or “comprehensive sales training tool”by eliminating the need for human resources per- which, he says, explains “why you would want todo this, how you do it and how you execute fromsonnel to answer those questions.“Another client was spending 2 million a year a sales perspective.”resetting employee passwords,” he says. “We wereable to get them a common credential and developa process to save them about 1 million.”And although several integrators note that thedecline in new construction will force installingcompanies to focus more on upgrades to existingsystems, Bergstrom still sees opportunities fornew system sales. “Even in bad times people aremoving,” he says. “When corporations downsize,there’s always a need for access control.”Bergstrom even sees upside in customers’ tendency to prioritize video security during an economic downturn. “Integration between video andaccess control is pulling a lot of access controlbusiness, because people like being able to controlboth through one interface,” he says.Biometric smart card technology can increase security and decrease administration costs becausethere are no personal identification codes (PINs) tomonitor or change.April 2009036-SDM0409-FT-StateMarketAccessControl.indd 4010/25/10 3:55 PM
STATE OF THE MARKET: ACCESS CONTROLPHOTO COURTESY OF HONEYWELL SECURITYHosted access control was not an option untilnetworked systems started to become mainstream— and the move toward more networked systems iscreating other opportunities, as well — along withsome challenges. Because networked systems minimize the amount of wiring that installers must run,they may be less expensive than traditional offerings. And as Leonard notes, the next advance innetwork technology could be heavier use of powerover Ethernet technology, which could deliveradditional cost savings by reducing the cost ofdelivering power to networked devices. But mostsources interviewed for this article do not expect toSDM Asked: “What Is the GreatestChallenge in the Access ControlMarket and How Are You Addressing It?”“Connecting the need with what technology can do. It’s about addressing end user needs with a decent value proposition. It needs to beurgent to the end user to make the sale, especially in a retrofit situation.” — Scott Mordell, The Chamberlain Group“The economy and consciousness of end users about spending money.We’re working harder and smarter. We tout ourselves as a provider ofintegrated systems.” — Barry Komisar, Vision Southeast“People are being very competitive on price. We try to sell on serviceand reputation and we’ve been successful with it.” — Chris Diguardi,Key-Rite Security“Trained people and competition. We’re spending more money on training.” — Brian Bergstrom, SecureNet“Locksmiths getting into the access control business. We addressit through education. We’re not the cheapest but our track recordspeaks for itself. We’re selling us, not the product.” — Tom Donovan,Tri-Electronics“The ability to keep the pace. We’re very actively working on differentsolutions. We address that by maintaining priorities and keeping thefocus on them.” — Martin Janiak, Veridt“People identify us with barium ferrite, but we also have proximity andthe latest contactless technology. Our biggest challenge is to remindcustomers that we have all these other options. That’s what we’ll befocusing on this year — getting feet on the street and training and morewebinars.” — Bob Holland, Secura KeyKiosks like Honeywell's LobbyWorks Kiosk workwell to supplement existing security plans andcan be installed after an initial system has beeninstalled. The kiosks can also be deployed as astandalone or networked solution.see revenues drop as a result of these informationtechnology (IT)-related advances. Instead, theysay, clients will use the savings to purchase moreextensive systems.“Clients often will secure more doors the lessexpensive it gets,” Bergstrom says.The move toward more networked systems maycause companies to have higher overhead, however. “Network technology is making us change ourbusiness model,” Komisar comments. “We haveCisco-trained and certified people on staff. If wedidn’t have strong IT, we wouldn’t be growing.”And as more and more client decision-makerscome from the IT side, integrators may see declining
stand-alone card reader that resulted from the company’s partnership with Swedish firm, ASSA ABLOY. “It will allow us to deploy to doors that were considered unde-ployable,” explains Gary Sta-ley, national sales
