Who wins as access control moves to the cloud?
The security industry is notorious for proprietary systems that make it difficult to integrate different components/devices with one another. The cloud will change this for all manufacturers, and will quickly have an impact on the installer channel.
Installers who understand how to sell services and build long-term relationships with the end-users will benefit from the cloud. For installers who continue to live project-to-project, the cloud will mean shrinking margins and lower market share.
At VIZpin, for example, we categorize the companies who install our Access Control as a Service solution (ACaaS) as integrators, dealers or locksmiths. An integrator typically focuses on large projects where they install and “integrate” multiple systems, like access control, video, HVAC and elevators controls.
Much like computer networks 30 years ago, today’s security systems are not “plug-and-play,” so the integrator adds value by knowing how to make these systems work together. Typically, the vast majority of an integrator’s revenue comes from installation, and the value of an integrator’s business depends on how many projects are in the pipeline. As a result, access control systems purchased from integrators can often cost as much as $3,000/door to install. The costs are high because the integrator has little or no additional income from that project once it is installed so they have to make their profit up front.
We define “dealers” as companies that focus on smaller access control projects, typically 10 doors or less, and also sell alarm services. Dealers not only know how to install systems, they understand how to sell service. They work hard to attract and retain long-term service customers. They do not live (or build their business) on installation revenue.
Since long-term recurring revenue is more important for these companies than installation fees, they generally install systems for a lot less in exchange for a monthly service fee that includes all software upgrades. For example, a typical dealer will install a VIZpin system for less than $1,000/door and charge a $25/month service fee. End users appreciate this model. Rather than paying $3,000 upfront, they have an ongoing operating expense that doesn’t hit the $3,000 per door cost for about seven years. This model ensures the end user always has the latest features by simply paying a predictable, monthly fee. The dealers know that if they keep the customers happy, any future projects are unlikely to go out for bids.
Locksmiths are a new and emerging player in the electronic security space. They are highly regionalized, often multi-generation family-owned businesses with counter sales and small installation crews. Locksmiths target very small systems, normally one- or two-door systems and are frequently subcontractors to the integrators and dealers. They are usually less technical than integrators and dealers and charge less because they have lower overhead.
All three categories will be impacted by cloud services. As cloud-based systems become more widely accepted, the amount of on-site equipment and integration required for even the most sophisticated systems will decrease, as will the installation costs.
For access control, centralized access control panels and the associated cabling and labor will be replaced with small, inexpensive door controllers that talk directly to the cloud. In many cases, these door controllers will be built into the electric door strike, maglock or door handle itself.
Other building systems, like video and HVAC, will also connect directly to the cloud. The physical cameras and heating/cooling units will be onsite but the controls for those systems will be in the cloud. When this happens, the systems can talk to one another, or integrate, easily.
The cloud makes it much easier for products to talk to one another because it eliminates the need to deal with local, obsolete hardware, operating systems and software. Each manufacturer will publish their own API that allows other manufacturers to access data or controls from their service with little or no support from the manufacturer required.
As cloud-based solutions become reality, integrators will feel the squeeze and have to adjust to a market that no longer tolerates spending a lot upfront for a system that will soon be out of date. Integrators will move to a service model that allows their customers to expense the system over a long period while ensuring it will always have the latest feature.
Dealers will be positively impacted by the move to the cloud, as it will allow them to compete in the larger systems market without changing their staff or business model. The cloud will allow dealers to use lower level techs to install the on-site hardware, while everything else can be managed and configured by an administrator at their office with a few clicks.
The cloud will also open up the door for locksmiths to compete in the electronic access control arena as well. Remotely managed access control systems—once the exclusive domain of system integrators with networking experience—can now be installed with a few screws and power and in some cases, not even require a local network connection.
The only question is who will lead this migration? Will the security manufacturers recognize the 30-year old, on-site panel + software + PC architecture is no longer viable and make the shift to the cloud or will they wait for companies like Verizon and Google to do it for them?
Paul Bodell is president and CEO of VIZpin, a Lancaster, Pa.-based manufacturer of Bluetooth reader-controllers, smartphone apps and cloud-based access control and visitor management services.