IHS research: Systems integration market to grow

Growth driven mainly by increases in the service and maintenance sector
 - 
Wednesday, August 24, 2016

LONDON—New findings from global research firm IHS Markit reveal that the global market for security systems integration will grow to $75.7 billion by 2020, up from $60.3 billion in 2015.

The global market will increase at a CAGR of 4.6 percent to 2020, driven mainly by service and maintenance services, which will climb from $14.5 billion in 2015 to $18.8 billion in 2020, at a CAGR of 5.4 percent.

The Americas region, which includes North and Latin America, will rise from $22.3 billion in 2015 to $25.4 billion in 2020, a CAGR of 2.7 percent.

IHS Markit senior analyst Oliver Philippou told Security Systems News that a number of factors are contributing to this global growth overall.

“The equipment part is being driven by technology changes, increased use of newer equipment, while the service part is being driven by an increase in use of service and maintenance contracts and a move to a model where fees will be paid out more on a recurring monthly basis, as opposed to just an initial upfront cost,” said Philippou.

From 2015 to 2020, the services market—encompassing design and consultancy, installation, and service and maintenance—is forecast to be the fastest-growing sector of this market, said Philippou.

“Integrators are looking for a more stable and steady revenue stream, and are going to be looking more increasingly at RMR business models,” he explained. “This is really going to be the talking point of the systems integrators’ business models in the coming years.”

According to IHS data, service revenue in the Americas accounted for 63 percent of total security systems integration in that region, while in Europe, Middle East and Africa (EMEA) it accounted for 56 percent, and revenue from services in Asia-Pacific (APAC) region made up just 43 percent of the market.

“Service and maintenance is viewed by most security system integrators as a primary profit center, because contracts tend to generate a predictable revenue stream,” noted Philippou. “Service agreements also allow integrators to further develop customer relationships, increasing the chance for future upgrades, retrofits and new installations.”

Although retail and commercial installations do not always include maintenance contracts, Philippou pointed out that there is still “good revenue potential in these markets,” he said, as commercial business and retailers with multiple locations can generate substantially more service revenue than a single airport project, for example.

Moving forward, IHS Markit research shows that growth within the Americas region, which is still the largest region overall globally, will be outpaced by Asia in the next five years, due mainly to growth in China.