Although there are several concerns like geopolitical tensions and supply chain constraints, 2022 has been a positive year, as customers restarted projects and purchases.
For businesses worldwide, the slow decrease in the intensity of the pandemic comes as a relief. Although there are several concerns like geopolitical tensions and supply chain constraints, 2022 has been a positive year, as customers restarted projects and purchases.
“dormakaba operated in a challenging business environment in the financial year 2021/22,” said Mirko Meier-Rentrop, Deputy VP for Group External Communications at dormakaba. “On the positive side, there was good demand in all regions, and the company closed the year with a good order intake and backlog. This was also reflected in the strong organic growth of 7.7 percent for the financial year 2021-22.”
Major challenges in 2022
COVID-19 wreaked havoc across businesses in 2020 and 2021. Even after the initial health care crisis eased, other issues in the form of supply chain constraints, chip shortage, and geopolitical tension threw the markets into disarray.
Persistent global volatility
Meier-Rentrop pointed out that several factors continued to affect the macroeconomic environment. There were still pandemic-related lockdowns in several countries, which had an impact, particularly in China, due to its zero-Covid strategy. The supply chain issues impacted high-margin electronic products where orders could not be processed due to the component shortage. On top of that, labor shortage hurt construction projects.
“Supply chain disruptions and inflationary trends, in particular, were unexpectedly exacerbated from March onwards by the war in Ukraine,” Meier-Rentrop continued. “dormakaba reacted swiftly and announced additional sales price increases to offset inflation. However, there is always a gap between a sharp increase in input costs and sales price realization, which can affect the bottom line.”
The impacts of the war in Ukraine and the accelerated inflation were also reflected in GDP development. In the first and second quarters of the financial year 2021-22, GDP in the G20 countries recorded quarter-on-quarter growth of 1.9 and 1.3 percent, respectively, according to OECD. In the third quarter of the financial year 2021-22, the impact of geopolitical tensions became evident as GDP growth in major developed and emerging economies contracted to 0.7 percent.
Chip shortage and supply chain uncertainties
The whole world is suffering from microchip shortages. Hanchul Kim, CEO of Suprema, said they export products and services to more than 140 countries, and dealing with an unpredictable supply chain and an increased cost of raw materials has been challenging.
Others agree, although adding that the new circumstances have also created new opportunities for businesses to explore.
“The global chip shortage has been the headlining challenge for many industries, ours included, in 2022,” said Devin Love, Senior Director for Software Products at Allegion. “Opportunity is even more present, as companies and building owners reconfigure how their spaces are utilized to preserve the privacy provided when working at home, while also offering the space for face-to-face collaboration that people desire.”
End user challenges
Over the last decade, the physical and mobile access industry has drastically evolved, especially during the pandemic. Prabhuraj Patil, Commercial Director for Physical Access Control Solutions in South Asia at HID Global, pointed out that from a customer’s point of view, challenges ranged from vulnerabilities to adjusting to the post-pandemic world.
Some of these critical market changes, triggers, and opportunities are reflected in HID’s recent survey, “New State of Access Control Report Underscores Growing Demand for Future-Proof Mobile Solutions.”
“Security and convenience were the top two challenges cited by over 1,000 global respondents,” Patil said. “In the same survey, 40 percent stated that protecting against security vulnerabilities was their biggest challenge while being able to issue and revoke ID credentials efficiently was selected by 37 percent. In addition, an ongoing challenge that many businesses are facing as a result of hybrid work models and remote teams is around administering access control credentials.”
Trends in consumer demand
The COVID-19 pandemic is not over, but its risks have reduced significantly. Even the World Health Organization recently suggested that the end is in sight. While consumers may take this as a cue to return to life and work, their approach to the market altered significantly.
Touchless continues despite pandemic ease
Interestingly the market appeared to pick up from the changes that the pandemic brought about. For instance, touchless solutions have become a norm over the last two years. But even as the pandemic abates, the market shows no intention of going back to the fingerprint and other older technologies.
“All regions have recovered from the pandemic, so business is back on track,” Kim said. “During COVID-19, contactless solutions received a lot of attention in the access control market. As we shifted into the post-COVID era, this demand has increased even more as the irreplaceable advantages of contactless solutions have been made apparent. Contactless access control, including facial recognition, QR codes, barcodes, and mobile access technology, is more hygienic, more convenient, more accurate, and faster.”
Market awareness of new technologies
Kim said that as the market recovered, Suprema won several large projects that companies put on hold during COVID-19. They found that the demand for biometric and contactless solutions is increasing, especially facial recognition.
“Adding to this, the demand for mobile access is growing in regions known to be fast at adopting new technology,” Kim added. “Suprema’s experience at adapting to rapidly changing markets and customer needs, along with our reputation for having the most advanced biometric and mobile access solutions on the market, combined to help us meet the increased demand.”
Significantly, customers are becoming more aware of best practices in access control and how to make the most of it. The market is also at the cusp of using mobile credential solutions.
“The access control market is experiencing an awakening,” said Love. “Information about how spaces are being utilized and seamless access for all residents, tenants, and employees, is of increasing value. Mobile credentials are an expectation, but the industry is only scratching the surface on the potential technology can deliver to the space.”
Patil pointed out that while there have been several challenges, the attention has now gradually moved to adopting new technologies to help mitigate risk and create safer workplaces.
“This, in turn, has created a great opportunity for players like us,” Patil said. “In light of this demand, we have had a good response from our local customers to key innovations such as HID Mobile Access, Next Generation HID Signo Readers, HID Aero Controllers, and Seos Credential Technology.”
Factors driving demand
According to Kim, as the economy revitalized after the COVID-19 pandemic subsided, all the markets began to reopen. This increased the demand for adopting new security standards such as contactless authentication, enhanced security for growing companies, and replacing old, outdated security systems.
Echoing similar sentiments and getting more into the specifics, Meier-Rentrop added that dormakaba experienced good demand in most of its markets with good order intakes and order backlogs in the financial year 2021-22.
“The turbulent geopolitical conditions of the moment should not obscure the fundamental trends of the industry, which remain unchanged from before the Covid-19 pandemic and will continue to drive dormakaba’s technical and commercial development.” Meier-Rentrop said, listing five major factors that are currently driving the demand.
Increasing prosperity
The world as a whole is becoming more prosperous. The need for security and protection that characterize the middle classes in developed countries will become the norm in more places.
Demographic change
At the same time, the average life expectancy is rising steadily, which means that institutions and private homes increasingly need barrier-free solutions that allow senior citizens to move easily from room to room.
Urbanization
The world is becoming more urban, cities larger, and infrastructure more complex, requiring sophisticated solutions to support the seamless flow of people to where they want to go.
Need for security
Buildings and land should be both easily accessible and secure from a broad spectrum of threats. Meeting these combined needs efficiently and conveniently demands a comprehensive access solution.
Technology
Finally, technology influences practically every aspect of the access and security market, from digitization and distribution channels to the networking of products in the “Internet of Things.” Customers expect that their experience of access solutions should integrate seamlessly with their personal digital environments.
“These five trends influence everything that dormakaba does, from strategy through product development to marketing and sales,” Meier-Rentrop added. “In addition to these five megatrends, dormakaba expects access and credentialing policies across all vertical end markets to be strengthened, emphasizing adaptability, versatility, and health.”
Major verticals driving demand for access control
The peculiar nature of the post-covid market has ensured that almost all verticals began to see strong growth in 2022. While companies restarted commercial projects that were stalled for almost two years, governments have begun to invest in infrastructure with a vision to improve economies and offer better facilities.
Commercial projects
For dormakaba, growth in the commercial sector’s construction and expansions in the industrial sector helped to regain market positions. With normalcy expected to return to the travel sector, other verticals like hospitality are also in a recovery trajectory.
“Growth in Americas was driven by a recovery in the US commercial construction market, particularly in renovation and replacement, Latin America strength, market share gains, and price realization that roughly equaled the volume contribution,” said Meier-Rentrop added. “In Asia Pacific, all major markets contributed to growth. Continued good growth momentum came from the business with touchless access solutions. For example, sales for touchless solutions in Hong Kong increased by around 50 percent in 2021-22 versus the previous year. And there was strong double-digit growth in door hardware, entrance systems, lodging systems, and mechanical key systems.”
Growth for commercial solutions in Greater China, such as in lodging systems, overcompensated for the negative effects of the lockdowns as well as some weakness in the residential market. Worldwide, the importance of data centers has also increased, prompting a need for better security systems in this vertical.
“Data consumption peaked during COVID-19 as people engaged in primarily online activities during lockdowns,” Kim pointed out. “This led to an increased importance placed on data center protection. Subsequently, the adoption of Suprema’s access control terminals by data center companies also increased.”
Housing and Education
The current economic circumstances increase interest in access control solutions in the residential sector. Love pointed out that a lack of affordable housing is partly driving up residential demand, while government spending has allowed higher education and other institutional organizations to invest in infrastructure.
“Overall, long-term drivers along with reconfiguration of spaces have sustained commercial demand, and electronic access control is gaining adoption beyond perimeter security,” Love added.
Kim agreed that education is a sector where demand is increasing, particularly for mobile access solutions.
“Most students use smartphones, and an emphasis on convenience is growing in today’s world,” Kim said. “Mobile access allows students to easily access school buildings on campus by authenticating their identity with their smartphones.”
Airports and critical infrastructure
According to Meier-Rentrop, growth in Europe & Africa could continue on the back of a strong order book and a solid project pipeline across major markets - such as dormakaba’s major contracts with Avinor to deliver self-boarding gates, one-way corridors, and related services for all Norwegian airports, and the REWE Group in Austria, the national supermarket chain.
Kim added that oil and gas companies have also shown a strong interest in access control to enhance security on their sites. This may potentially be due to supply issues arising from situations in Russia.
David Thean, the General Manager of Asia at Gallagher Security, also added they are seeing an uptake in new construction projects compared to the past 3 years, albeit a little below what we have expected because of concerns about a possible global recession.
"The government sector/vertical has seen the most demand and growth because of infrastructure-upgrading and a push for urbanization," Thean said. "Another vertical would be the hospitality sector, as these businesses are making a big comeback because borders are reopening and people across the world are starting to travel again for tourism."
Changes in systems integration business in 2022
According to Meier-Rentrop, the systems integration work has substantially changed with the massive, lowered efforts to integrate solutions on modern API. Nevertheless, there is a substantial demand to address all other aspects of deploying solutions to customers and maintaining this over a lifetime.
“For this, and especially with COVID-19 limitations, everything allowing remote intervention and supervision has become enjoyable,” Meier-Rentrop said. “With the increasing lack of skilled resources, there is a rapidly increasing demand to make things easy. All mentioned aspects will lead to a changed situation that the offerings which are the most efficient to select, deploy, and to be run remotely ideally will be the first choice of the integrators.”
Kim added that customized services are the main trend among system integrators now.
“As corporate IT systems are consolidated for efficiency, they require customized integration according to specific needs,” Kim pointed out. “Suprema has been continuously expanding partnerships with several companies, such as Genetec, to provide integrated services.”
Finally, the supply chain shortage and increased need for integrated systems have also impacted the systems integration businesses. IT systems are becoming more approachable, and integrators are becoming more IT savvy. The stakeholder list is growing because cybersecurity is at the top of customer demands, and there is evidence that the industry is rising to the occasion to satisfy both physical and logical security requirements.
“The supply chain shortages have impacted integrators, leading them to adopt new technology and find other ways to accomplish the task at hand,” Patil said. “Also, the convergence of physical and logical security remains a strong trend, and an increase in flexible work arrangements has emphasized the need for managing people and spaces in a distributed fashion, not tied to a single administrator’s desk or location.”
Thean added that they see many integrators trying to catch up from the past two years in travel and face-to-face activities with customers. They are able to go back to doing business “the old way”, face-to-face, which is the only sustainable way of building business relationships.
"We are also seeing many integrators investing in marketing and participating in many expos and exhibitions in Asia," Thean said.
The industry bouncing back
Despite the challenges, the access control industry is on the path to recovery. For most solution providers and integrators, the priority would be to regain momentum. Demand had been strong even before the pandemic as more customers adopted new solutions, but now it's accelerated even more.