12.4.20 – SIW
For all the paradigm shifts the access control market has experienced in recent years – growing adoption of cloud-based solutions, a transition away from proximity cards to mobile devices, the proliferation of facial recognition and other biometric technologies, etc. – the industry is still largely seen by many outside observers as one that specializes in delivering solutions to high-security applications.
This, according to Lee Odess, the Founder and CEO of consulting firm Group337 and author of the book, “The 6 Phase Changes Shaping Access Control,” is one of two “old truths” about the industry that no longer accurately reflect where market is or where it is headed.
While the high-security market is a good one to be in, Odess, who delivered a keynote address during Imperial Capital’s annual Security Investor Conference that was held virtually this week, said it is still more or less a cottage industry.
“The (access control) industry is in the midst of going mainstream, it’s going down market, broad, and even in the high-security side we’re seeing less friction,” explained Odess, a former executive at Allegion and Brivo. “If you put all of that together, it is a much larger story and it needs to start being talked to like that.”
According to the most recent projections from market research firm Omdia, the global market for physical access control equipment was estimated to be worth $5.88 billion in 2019, growing at a compound annual growth rate of 4.7% over the next five years and reaching $7.4 billion in 2024. Despite these overall healthy growth estimates, Odess believes that industry is “grossly underestimated” when it comes to its true potential and part of the problem is how the sector is viewed and reported.
“For example, the size of the SMB and enterprise market in the U.S. is well over 90%… and that alone dwarfs any of the numbers being reported,” he added. “When analysts call all the usual suspects to ask them how their market is doing or how their business is doing, they’re not talking to the right people and they’re not speaking to this marketplace. Our industry does not capture this market right now. We all talk about it but very few do it.”
Additionally, in those reported numbers, Odess said that a high percentage of the doors are not captured because they do not consider interior doors and that the true market demand has not been reached. However, one of the side effects of the Covid-19 pandemic with health concerns taking centerstage is that previous cost barriers that prevented these doors from being addressed are now falling by the wayside. The age of existing systems within many organizations, according to Odess, are also over 30 years old in some cases and budgets are now in place for upgrade projects.
Software Becomes More Prominent
The second old truth that Odess said should be done away with when analyzing the access control market is using the term “equipment,” which has become antiquated when examining the impact that software has had on the industry.
“This industry is being forced to appreciate software: software not as a feature of hardware but as a business,” he explained. “Hardware is becoming the feature of software and this is challenging conventional wisdoms in the players involved in our industry. Again, this is a hardware industry – even the historical software companies are more or less hardware companies.”
This is changing though as market pressures and new revenue opportunities presented by software, such as hosted and managed services, are accelerating. Historically, Odess said that the industry, which has long been resistant to change, was allowed to follow existing norms so long as these systems kept bad actors out and protected those within the walls of the facility, however; external pressures are now challenging conventional wisdoms, such as the old adage that you have to trade security for things to be more convenient. “Software has shown us that this is not true,” he said.
The Access Control Index
To provide a better overview of what companies are setup to meet the access control needs of both today and tomorrow, Odess and Group337 have developed the Access Control Index, a collection of public information, surveys from the companies, interviews with customers, and feedback from industry experts that is taken together and evaluated on a spectrum that weighs six different attributes – market reach, technology, innovation, marketing, talent, and the it factor (the organization’s story/cool factor) – to separate the wheat from the chaff when it comes to prospective industry performance. The Index, which has been used to evaluate 45 different access control companies, leverages a 70-point assessment scale and places organizations into four different categories:
- Commanders – companies setup for today and tomorrow
- Settlers – organizations that are just setup for today
- Futurists – those who are setup to succeed in tomorrow’s access control environment
- Traditionalists – firms that not setup well for either today or tomorrow.
Following the analysis, Odess said 52% of companies fell into the commanders category, 32% were labeled as traditionalists, and 8% were either futurists or settlers. Odess stressed, however, that these rankings were not meant to be a referendum on whether one company is better than another but rather demonstrate the reality that the market has changed and that companies in the industry must change.
“Access control companies need to move to strategy and tactics. There are signs of companies already doing so but the vast majority are not,” he added. “For the foreseeable future, the old school companies will see moderate growth, but in aggregate like a riptide it is going to erode over time, and it is complete chaos underneath.”
In addition, Odess believes that software will become prevalent and expected in many cases and that a staggering 50% of the companies analyzed in the Index will become irrelevant over time.
“I also believe that the moat we’ve had of install base is not going to be as important as it has been in the past,” he said. “I think that systems integrators will become more important but note, I did not say security integrators, I said system integrators and that is very different. I do think security integrators will start to be more like systems integrators and systems integrators that are typically in the logical access world will start to do security.”
Ultimately, even the way access control companies go to market is going to change but Odess does not see this as reason to worry.
“In the end, this is exciting. It is a critical time, and it is a time for action,” he said.
Joel Griffin is the Editor-in-Chief of SecurityInfoWatch.com and a veteran security journalist. You can reach him at firstname.lastname@example.org.