IMS has been reading my blog...

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04/21/2010
Just kidding. But IMS Research's new report on the European systems integration market jibes with a lot of my thoughts on the future for security systems integrators. To wit:
Security Integrators Focus on Analysis & Design to Increase Profitability
As in, they need to look more like service providers than contractors. This message isn't exactly new to me or to IMS, but I think there's growing awareness in the marketplace that installation revenue is not the place to put your focus. Rather, it's the value you deliver with your intelligence as an integrator where you should capitalize:
The research, which focused on the installation and maintenance of security systems, identified analysis & design as the fastest growing service type, with revenues set to double between 2009 and 2013.
I might say that those services are typically provided ahead of time, and they should be added to those services that can provide a long-term relationship with a customer: monitoring, maintenance contracts, etc. Here's how IMS defines those things:
Analysis & design covers a wide range of services, including: risk analysis, vulnerability assessment, system audits, security policy analysis, system specification and design requirements. Historically, these services have been difficult to charge for as they are usually completed at the tender stage of the project, and have to be billed back as a part of the installation and service agreements. However, many systems integrators are looking to move away from the low profitability of the installation market and focus on analysis and design as a new revenue stream.
Bold is my emphasis. That's really the difficulty here. I have spoken with a few companies that are trying to get paid for their design work, in some cases not even caring if they get the installation work, but that's definitely the exception and not close to the rule. I think that's reasonable for larger companies with gravitas like Johnson Controls/Siemens, etc., but for your standard independent integrator, it's going to be a tough sell to get a local retail operation to pay for design and advisory services. However, I don't think an ongoing service contract or an ongoing monitoring service like virtual guard tour or video monitoring is nearly as tough a sell. Regardless, I agree that more and more integrators are telling me they agree with this:
"Installation is typically the least profitable service type and with hundreds of small regional players, it is a highly fragmented and price competitive market. In many cases, it makes more business sense for integrators to subcontract the basic installation to these regional installers.”
IMS is talking about Europe here, obviously, but I don't think things are remarkably different here in the United States. While I've heard anecdotally that the installers in Europe are more reliant on distributors for design support, and that the overall design skill level here in the U.S. is higher, that can only make it more likely that more folks here will agree with IMS' market view. Basically, we're looking at larger and larger separation between "integrators" and "installers," where here in the U.S. that line has been more blurred. Which are you?

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