Review preview (2016/2017): challenges and how market consolidation affects integrators

Review preview (2016/2017): challenges and how market consolidation affects integrators
Although the systems integration market looks positive, it is not without challenges. As the technology advances, systems integrators have to deal with more difficulties than before. Moreover, the industry has seen several mergers and acquisitions lately. Here we examine how they have affected the systems integrator.

Challenges ahead for the SI
Security systems integrators (SI) who are beginning to understand the importance of adopting new technologies to provide the best solutions to their customers are encountering certain specific challenges.

“The biggest challenge faced by the industry is the lack of understanding of the IoT and big data concepts,” said Tanzil Mahmood, Security System Director at Securitas UAE. “These concepts are well grasped by the IT industry, but I feel that the security industry will probably take a bit longer to fully integrate. Several companies are dabbling with this concept, and in the next few years we will see some interesting products and services being launched in our market.”

Another problem is the integration of different products, their compatibility with each other. If it is not coming from the same manufacturer, the SIs have to ensure that the products work well with each other.

But perhaps all these issues seem trivial compared to something else — the problem of cybersecurity.

“The key issue that systems integrators are going to be facing, especially in 2017 and 2018, is the risk in cybersecurity,” said Philippou. “This year itself there have been several examples of how security equipment were used as a way in for cyberattacks. This needs to be a focus for the industry going forward. If there are continued issues of cybersecurity, it could be a major hindrance to growth.”

“The biggest problem the electronic security industry currently faces is the lack of cybersecurity standards in our offerings to the regulated industries that we serve,” said Andrew Lanning, Co-Founder of the Hawaii-based Integrated Security Technologies. “That guidance is finally beginning to have an impact on design and contracting requirements, so the manufacturers are waking up to this problem they’ve ignored for decades, the integrators are being tasked to incorporate IT security standards into their offerings, and all supply chain companies to regulated industries are being forced to evaluate their internal cyber maturity. Big data elements from electronic security systems flow easily into other data within building management, retail management, distribution centers, etc. Capitalizing on the business intelligence gains will be an increasingly important factor within IT budgets, and electronic security system integrators need to understand their client’s risks very, very well in order to leverage the information they provide so they remain prioritized in funding decisions. We are studying the opportunity to bundle these data services in with our monthly offerings, but we’ve developed no formal program to date.”

Asked about ways to counter this issue, Franklin gave an example of what his company does. The company has an IT security product that they can put into their customers’ network which will continuously look for vulnerabilities. So if someone is to hack into the network or even physically remove a camera, the program will automatically shut that port down.

But the key point is to make sure that the security department works closely with the IT department. In Franklin’s own words, there is no point in having a discussion on security if people from the IT department are not at the table.

Market consolidation and the integrator
The security market has witnessed quite a few mergers and acquisitions from manufacturers in the year 2016. These include FLIR Systems acquiring DVTEL, Hikvision Digital Technology acquiring Pyronix, etc. There have also been partnerships between companies like Bosch Security Systems and Sony.

SIs generally remain divided on whether such M&A activities have a positive impact on them. According to Brent Franklin, President of Unlimited Technology, such activities keep narrowing the field, forcing the price of the equipment to go up. After a merger, the manufacturers could have a different upper management team and they could have a different dealer program that could hurt the systems integrator. However, he added that the market is in the process of consolidation and that we can expect more announcements in the future.

“It is an evolving market, there is going to be more mergers and acquisitions to come. I am only hoping that the integrator could be standing throughout it,” Franklin said. But there are others who feel that mergers and acquisitions are not going to affect the systems integrator much.

“We don’t see the manufacturer to manufacturer buyout and acquisition affecting us,” said David Collins, Sales Manager of the U.K.-based NG Bailey. “The market seems to be crowded with products. Far too many products. I think there will be a levelling out over the years and the number of manufacturers in the market might go down.”

The sentiment was echoed by Infodip Security, a distributor in France. According to Stephane Motillon, President of Infodip Security, a major concern with deals like the one between Sony and Bosch is the risk of reduction of vendors as previously witnessed in the IT sector. 

In 2016, the global systems integration market picked up from its weak levels of the previous year. Growth was driven by services and maintenance and new technologies coming in. However, despite the positive outlook, continuing market consolidation and technical challenges make some aspects uncertain.
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