Access Control Is Opening Doors to More Than Security

Fifty-two percent of the respondents to the SDM 2022 Forecast (conducted in November 2021) rated their confidence in the access control market as very good or excellent, with only 14 percent believing it was fair/poor. This represents a 5 percentage point bump from last year’s perception. // SOURCE: SDM 2021 AND 2022 INDUSTRY FORECAST STUDIES

Of those surveyed for SDM’s Industry Forecast, 46 percent expect revenue from access control systems (on-premise and cloud-based) to increase in 2022, 50 percent expect it to remain the same, and 4 percent expect revenue to decrease. // SOURCE: SDM 2022 INDUSTRY FORECAST STUDY

These trends represent a market for access control products that is large and growing. Group 337, a Bethesda, Md.-based consortium of executives focused on growth in the security, access control, and IoT industries, estimates that in 2021, the global access control industry was a $70 billion total addressable market, according to CEO Lee Odess.

This is great news for the electronic security industry, which stands to gain from the growth of new access control products and services. More than half (52 percent) of respondents to SDM’s Industry Forecast 2022 Study ranked the state of the access control systems market in 2021 — including on-premises and cloud/web-based/hosted systems — as very good to excellent.

This is an upswing from last year’s study, when 47 percent rated the access control space as good/excellent. Overall, the access control space fared well, even during the initial stages of the pandemic, only falling 7 percentage points in the SDM Forecast last year, and rebounding this year to near pre-pandemic optimism.

According to the 2022 Industry Forecast, 73 percent of respondents currently provide access control services to their customers, and an additional 15 percent plan to offer it within the next one to five years.

Nexkey’s dashboard, introduced in 2020, provides intelligent insights on a building’s spaces from data captured from access control, including occupancy rates, flow of people, and which building entrances are used most. // IMAGE COURTESY NEXKEY

Rebounding From the Worst of the Pandemic

While there were definitely drawbacks — primarily in supply chain challenges and hiring — most sources we spoke with grew their access control sales in 2021, especially compared with the uncertainty and cancelled installations of the year before.

“Access control sales remained strong throughout 2021, despite a few projects getting ‘paused’ by clients due to shifting priorities, which caused us to shift completion dates into the new year and adjust revenue goals,” says Charles Baker, president/CEO of California Commercial Security (CCS), San Diego, Calif. “After having such a phenomenal year in 2020, it was going to be difficult to match those results. 2021 was not as good, but lessons were learned and the company is putting our best foot forward for 2022.”

Richard Goldsobel, vice president of Continental Access, a division of Napco Security Technologies, Amityville, N.Y., credits continued growth of cloud and wireless connectivity as a major contributor to Napco’s growth in 2021, as well as a wider breadth of video VMS integration and APIs. “We performed very well. 2021 was an improvement over 2020, and we saw nice growth that we fully expect to continue going forward,” he says.

Wong of Ojo Technology agrees. “We did significantly better in 2021 in all aspects: top revenue, bottom-line profit, and bookings,” she says. “Also, the average order dollar amount was much higher than in 2020.”

Alex Housten president, dormakaba Americas, Indianapolis, says, “The market in 2021 showed steady progress from the prior year. While commercial new construction activity remains impacted due to lower project starts in the prior year, aftermarket and renovation activity has strengthened with the rebound in building traffic, public events, and travel. Owner interest in enhancing trust and confidence with building occupants increased interest in access solutions broadly — especially in dormakaba’s entrance and access control solutions. Of course, labor availability, a couple of pandemic waves, and an often tight supply chain presented challenges to overcome.”

Integrated Security Technologies Inc., an integrator based in Herndon, Va., exceeded its target by more than 30 percent and had a record year of sales and growth, says Chris Villarreal, director of enterprise accounts. “Demand for access control continued to grow in 2021, especially in regulated industries,” he says. While IST’s education market vertical was slower than anticipated, its federal government business drastically exceeded expectations, driven by Federal Identity, Credential, and Access Management (FICAM) physical access control compliance, he says.

Steve Van Till, founder and CEO of Brivo, Bethesda, Md., attributes his company’s 25 percent growth from 2020 to 2021 to the pandemic, which shifted business focus from on-premise to cloud-based access control solutions. Organizations with older access control structures found it difficult to manage systems and people, while those with cloud-based systems could issue mobile credentials from literally anywhere in the country. “The reason we grew is because we have a broad customer base: commercial real estate, enterprise, and multifamily,” he says.

Increased use of the cloud, mobile, and web-based systems for access is supported by the 2022 SDM Industry Forecast results as well. Among companies that offer managed/cloud-based services, managed access control is the top service currently offered (72 percent, up from 64 percent in the 2021 study), followed by remote video monitoring, VSaaS, and ACaaS, with 46 percent planning to offer it in the future.

Access control providers were especially busy in the third and fourth quarters of 2021, as overall demand increased when customers began returning to their facilities and focused on completing a large backlog of security and infrastructure projects, says Brian Thomas, president, security integration solutions and acting president at A3 Communications, an Irmo, S.C.-based wholly owned integrator partner of Cook and Boardman. It also helped sales when A3’s staff could once again interact in person with its customer base. “The simplicity and efficiency of face-to-face interaction is not coincidental to our performance in the back half of ’21,” he adds.

Workplace changes wrought by the global pandemic are spurring much of the demand for access control. “Back-to-work is our main driver in growth,” says John Nemerofsky, CEO, SAGE Integration, Kent, Ohio. He described how one of SAGE’s large Atlanta clients currently has 4,000 people coming back to work, another 4,000 in the following month, and an additional 8,000 in May. “Capital projects are back on now that people are back to work with the builds they didn’t do during COVID,” he says.

While restricting certain people from certain places at certain times is the primary purpose of access control, leveraging the data from those activities helps with other tasks like contact tracing, which was critical during the worst of the pandemic and continues today, Slaughterbeck says. “Health monitoring has been a big trend in 2021 and we expect that to continue in 2022,” he says. “Another growing trend is that building managers are using data to measure corporate environments and evaluate if they have too much real estate or not enough based on in-person versus remote work changes.”

However, some reported challenges in 2021, especially around supply chain and hiring.

Ojo Technologies, an integrator headquartered in Fremont, Calif., has started selling door locking hardware beyond the typical door controllers and readers, a decision that helped its business grow top revenue, bottom profit, and bookings in 2021, says CEO and Founder Angie Wong. // IMAGE COURTESY OJO TECHNOLOGIES

For Strategic Security Solutions, 2021 sales were very good, with clients looking for innovative solutions to business challenges arising from the pandemic, Slaughterbeck says. “However, execution was very challenging in 2021 with supply chain interruptions and labor shortages causing major strains on project execution,” he adds. He predicts that the biggest challenge for integrators going forward will be the ability to get equipment. “To combat this, we are holding a lot more inventory than we usually would.”

Access control companies in the industry don’t typically make their own hardware, so the supply chain issue has hit everybody, Goldsobel says. However, he notes that Napco supplies many brands of card readers to customers, so this has had less of an impact than if they relied on a single line. “We have a great manufacturing group and good communication,” he says. “We let integrators know what’s happening and adapt where we can, and put good processes in place to communicate that.”

Access control and door hardware are experiencing extremely long lead times, says Wong of Ojo Technology. “Access control is a very hardware/equipment dependent industry. Without the hardware, you can’t do access control. We have been trying to be creative to bring in other revenues that are not installation driven, such as system design and engineering, repair, and support services.”

Responding to market demand for smarter access control, Ojo started selling door locking hardware beyond the typical door controllers and readers, which has been successful in bringing in new revenue, Wong says. However, “The learning curve on door locking hardware is deep because it’s complicated and the smallest error can be very costly and halt the installation,” Wong says. “Door locking hardware typically is custom ordered, with restocking fees on all returns, even brand-new unopened product, and reordering has long lead times. Being able to lock the doors, especially exterior doors, is extremely critical for any facilities. We are pursuing this new business with a great emphasis on staff training and bill of materials accuracy.”

Allied Universal’s Lantrip says his company was at plan in 2021, while the access control industry as a whole was down slightly. “It was a weird year,” he says. “We were expecting COVID to be behind us, but it was up and down, depending on the market you’re in. … But it was still much better than 2020.”

COVID-19 caused access control integrators and manufacturers to shift focus from commercial office space to other verticals, including multi-family homes, industrial, medical spaces, and federal government business. Allied, for example, specializes in several verticals, including critical infrastructure, data centers, the medical space, education, and commercial office buildings, Lantrip says. Some of sectors pursued installations in 2021, while others put it on hold, so it was “all over the board,” he adds.

Additionally, the nature of the access control sell cycle possibly skewed 2021 revenue results, AMAG’s John Becker says. “The sell cycle in access control doesn’t happen over a couple of months — more like 18 months,” he says. “We just did an installation) last year that was from 2014.”

More Growth & Challenges in Sight

When asked about the main challenges they face in 2022, access control integrators cited two above all: supply chain uncertainty, and a dearth of talent.

In fact, it was listed by nearly half of SDM Industry Forecast respondents as their biggest challenge (47 percent), followed by “finding/retaining employees” at 39 percent and general ongoing pandemic impacts (32 percent).

“Integrators must be aware and prepared for the inevitable, potential supply chain delays and cost increases,” says Mark Prowten, director of product management at Nortek Control, Carlsbad, Calif. “With this, setting customer expectations, building into their quotes that prices could change on short notice, and the availability of certain systems could push back estimated installation dates are important and key in business right now.”

Britenstine adds, “While interest and activity are high, Aiphone continues to navigate the pandemic’s deceleration of the supply chain and uptick in chip shortages through decades of experience and resources. By offering a variety of both new and established products, Aiphone will do its best to fulfill customers’ needs in 2022.”

After supply chain issues, finding talent is the No. 2 challenge in the industry now, Nemerofsky says. To help alleviate the problem, SAGE focuses on striking a balance between training promising recruits for production certification, and hiring experienced people. “It’s not cost efficient to have a $100,000-a-year tech running cable when we can hire a contractor to do it for $40 an hour,” he says.

Villarreal of ISP agrees. “Finding and maintaining highly technical and experienced personnel will be a key to success and something that will not be easily attained,” he says.

At Strategic Security Solutions, the HR team has implemented an apprenticeship program, recruiting promising employees from other industries to graduate into security industry professions, Slaughterbeck says.

Another challenge for security integrators is the threat of commoditization, which Wong says is, “an inevitable evolution of all industries. Access control is still a good margin business, but when the manufacturers make things simpler and plug and play, labor will be reduced and margins will be eroded,” she says. “With the cloud headend, it always takes away a lot of professional services in both system installation and commissioning, as well as post installation system management services. But it’s the future. We as integrators must continue to reinvent ourselves and examine our solution offerings to look for new businesses and new services to make up for the lost revenue. Staying stagnant is complacency, which will eventually leave you behind.”

Mark K. Duato, senior vice president of strategic integration solutions for Cook and Boardman Group, Winston-Salem, N.C., believes the biggest challenge integrators face is increased competition across all markets. “When projects are put out to bid, usually more companies are focused on winning than in the past,” he says. “Integrators need to continue to be exceptional at what they do well because companies will invest in expertise. Don’t try to be too many things to too many people. … You have to decide what you want to be and what to focus in on.”

Other issues involve simply staying abreast of the many changes in the market, says Stamatelos of Genetec. While access control is changing rapidly, the change isn’t as evident as with a visual market like video. ”But there’s a lot going on in the back end that can help customers, so it’s important to be aware so they can better position themselves to educate end users.”

In spite of the challenges, however, most were optimistic about what’s ahead for access control in 2022.

“We are very bullish for 2022,” says Angelo Faenza, head of digital access solutions, ASSA ABLOY Opening Solutions, New Haven, Conn. “We went into January with orders that were beyond anything we had ever seen before. All signs are that they will continue to come in at a record pace, even with the supply chain challenges that everyone is facing.”

Ingala of Watchmen Security agrees. “Expectations for 2022 are high. Interest rates are still fairly low, new construction is still developing, multi-family and industrial developments don’t seem to be slowing down. With the coronavirus, more people are using touchless technology to control spaces.”

Brivo is forecasting more than 50 percent growth in 2022, and significant growth for the access control industry in general, Van Till says. “Access control has come to be regarded as a fourth utility for real estate and the workplace,” he says. “After water, electrical and HVAC, you have to have access control to operate an office, building, factory — you can’t run a modern building without it. The entire industry will do well for that reason.”

Baker of CCS confirms that his company’s sales forecasting year-over-year is looking stable, with an increase of requests for quotes on the horizon. “COVID continues to challenge closing sales as well as a moderate level of volatility in securing government contracts,” he adds.

Integrators that have expanded their services beyond traditional access control during the pandemic are especially well positioned to succeed this year and beyond.

“We have been fortunate to have diversified our business in the past several years by not being just ‘card readers and cameras,’” says Jim DeStefano, senior vice president, Unlimited Technology Inc., Chester Springs, Pa. (SDM’s 2021 Systems Integrator of the Year) “Our health-based monitoring solutions, along with our cyber and IT and physical security managed services, have continued to be invaluable to our customers looking for that one hand to shake. Being able to take on physical security, IP device health monitoring, cyber, IT system implementation and management, as well as other project requirements not normally associated with system integrators, has been key to our success.”

Lantrip adds, “We’re seeing price increases all over the place with inflation, and that’s going to drive its own set of challenges we have to work through. But work is picking up in almost every sector, looking at how to secure businesses, how to bring people back to work, how to look at security differently to make it part of safety and not just security. We’re optimistic about a good year in 2022.”