The stats say it's sink or swim in the security industry, and staying afloat means adding value. If that sounds like a stark message, the good news is it's within the grasp of any integrator or installer to offer the service-based approach that clients need now. But it means acting fast. If you're in security systems integration, here's what you need to know to survive a year that will see much of the market shrink by 25%.
The lowest sales since 2013
Add value or fail. That might sound punchy, but it's the reality many in the security industry are facing. Clients' budgets are squeezed, but a race to the bottom on price never ends well for anyone. Instead, security businesses must adapt from product-focused sales models to service-based ones. That's the message from new industry analysis.
Recent figures from industry expert Patrick Haas in French security industry publication, En Toute Sécurité, show sales in the French CCTV market are set to fall 25% year-on-year in 2020. This will reverse almost a decade of growth, with total value ending up at €1.1 billion, a little under the tally for 2013. That's against a backdrop of average yearly growth of 5.1% since 2015, and the picture looks similar across the whole industry.
And just in case you're not gritting your teeth yet, Haas's projections show that while ordinarily 80% of video security businesses are profitable, that figure could easily fall to 60% this year. One in four previously profitable businesses could find themselves in the red.
Time to change: Service is the future
So far, so bleak. So we'll lighten the mood: Haas sees a bright future for security integrators and installers who can ride out the market conditions created by this year's pandemic, and so do we at Havr. But surviving means doing things differently. It's time to innovate. And fast.
When we find ourselves facing hard times, it's tempting to stick with tried-and-tested. Keep your head down and keep going.
But tried-and-tested is not the way out of this. As clients slow down investment in security products and ditch suppliers, it doesn't take a genius to see which ones they'll keep: the trusted partners who offer them added value, time and again. The ones they don't just buy things from. The ones who provide them with value-added services.
Add to that your clients' budgeting: businesses everywhere are shifting traditional capex spend to more efficient opex models. It's already happened in IT; security is catching up - your offering has to match that.
The most vulnerable companies are small installers… who offer off-the-shelf solutions, without much added value.
- Patrick Haas, En Toute Sécurité (translated)
What does that actually look like? Fundamentally it's a shift from capex spend to opex.
Instead of one-off upfront purchases for goods that a client can buy anywhere, it means recurring costs for a tailored, differentiated service solution. If that sounds like a big shift, it might be easier than you think.
What security service models look like
Just take video surveillance as an example. Once upon a time it was about selling and installing systems.
Now forward-thinking businesses are creating their own services based around those systems: outsourced video monitoring, Software as a Service (SaaS) integrations that provide recurring revenue - these service offerings not only differentiate your business; they turn one-off projects into reliable, recurring monthly revenue streams.
CCTV is just the start. The service model gives everyone a better deal in most areas of security - access control is no different.
It's not just the result of new products. It's about doing things in a completely different way. As clients look to reduce costs and outsource where they can, smart security businesses are still gaining new business by creating new services. Of course, you might need some new products in your inventory, but if you find the right ones then you can adopt this new model without even adding new capabilities of your own.
Major manufacturers are already setting up for this. It's no coincidence the likes of Axis and Bosch are investing in massive open platforms designed for developing services. They know they have a bigger future as service and platform providers than as hardware vendors. It's also one reason we built our technology to be totally interoperable with pretty much anything.
The security integration business model is more likely to include a monthly fee for service that allows a client to scale their requirements...
- Danny Berkovic, Securitas, Security Electronics and Networks
The benefits of the service model: Everybody wins
There are so many benefits to the service model - both for providers and end clients. As a service provider you replace one-offs with recurring revenue, giving you much greater certainty on your cash flow and financial projections. You stand to get greater customer lifetime value (CLV) by retaining clients for longer. You can run services more efficiently than single projects at greater profit.
Your clients get a financial plan that suits them as they shift capex spending to opex. And they can choose to scale up when they need to, safe in the knowledge that it's a simple addition of new sites, users or devices to your service.
Short-term revenue or certainty and long-term profit?
So if you're on a sales push, consider the service model. Lost clients have to be replaced by new ones, of course. But is a like-for-like replacement really the best thing for your business?
Instead of replacing a one-off installation with a similar job that may or may not lead to repeat business, what if you replaced it with a service account where you contract your client for three years? The total annual revenue might even be slightly less. But you get reliable recurring revenue for a full three years. More than that, you become a valuable, trusted partner to your client. You build your relationship over that time. And, because of the way you structure the deal with your suppliers, while the revenue might be less, your gross margin actually increases.
All this has been a long time coming. The crisis created by the pandemic has simply accelerated it in the security industry. If you're not sure where to start, we can help - have a chat with us and we can help you start offering Access Control as a Service (ACaaS) right away.
We'll add more soon. Check back in later.