Security Sales & Integration

November 2012

SSI serves security installing contractors providing systems and services; surveillance, access control, biometrics, fire alarm and home control/automation. Coverage in commercial and residential product applications, designs, techniques, operations.

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product category, as well as percent- ages for each category that installing fi rms provide. Visit securitysales.com/ CEDIA-report. For more information about the association and the annual CEDIA Expo, see sidebar on page 40.) In total, this assemblage of dealers was estimated to have earned annual revenue between $13.5 billion and $14.5 billion in 2011, which marked an increase of 3.5%-3.9% compared to 2010 results. T e largest dealer segment in CEDIA is ESCs, which represent about 42% of the total among all dealer channel types. Revenue earned by ESCs — which CEDIA defi nes as custom electronics- A/V installation companies — accounted for as much as $8.7 billion in 2011. Installing security contractors are the second-largest grouping with an estimated 5,300-5,900 fi rms, earning revenues upward of $2.5 billion in 2011. T e estimated size and revenue totals for additional dealer segments are: electrical contractors, 1,750-1,950 and $600M-$700M; IT professionals, 3,200- 3,600 and $45MǦ$48M; and "other, " 1,400-1,600 and $1.6B-$1.8B. CEDIA's market research projects revenue growth for all types of install- ing dealers in 2012 except for security companies, which are expected to see revenues decline 4% from $2.3 billion to $2.2 billion. However, when the margin of error is considered into the survey response results, earnings could actually be about the same as the previous year, according to CEDIA and Parks Associ- ates. T e survey revenue numbers factor in equipment sales and installation fees, but not recurring revenue for monitoring services. Reasons for an actual slight de- cline in revenue may include competi- tive pressures, as well as the assumption that security dealers are taking a lower price point for equipment and instal- lation and instead focusing on creating recurring revenue. "After a few years of discouraging data, this year's report when it came back was, for me as a data cruncher, optimistic. It showed some growth. It showed that [installing contractors] were feeling as though they could take a breath and start to take some risks Dealer Channel Revenue Comparison Dealer Channel 2010 2011 % of Expected Expected Revenue Growth Electronic systems contractors $7.8B $8.3B IT professionals Security installing contractors $2.2B $2.3B Electrical contractors Other (i.e. remodelers) $300M $500M $400M $600M $1.5B $1.6B 5% 5% -4% 14% 5% in 2012 $8.7B $500M $2.2B $700M $1.7B Among all installing contractor types, only security dealers are projected to see a slight decline in revenue for 2012. When the margin of error is factored, earnings could actually be about the same as 2011. A slight decline in revenue may be caused by competitive pressures, as well as the assumption that security dealers are taking a lower price point for equipment and installation and instead focusing on creating recurring revenue. Note: surveyed revenue numbers include equipment sales and installation fees and exclude monitoring fees. Source: CEDIA again," Shonkwiler says. Survey results show that while there are still project categories that remain stagnant, on the whole companies have started to hire again and revenues are improving as project wins increase. T ose are encouraging and positive signs compared to what survey participants forecasted in CEDIA's fi rst study in 2010. "In some areas their optimism actu- ally didn't even come close to touching how good 2012 is looking to end in areas such as mobile device integration, home networking, outdoor installation," Shonk- wiler says. "We knew we were going to see growth in some areas that was prom- ising, but the growth ended up being greater than we even expected it to be. " MOBILE DRIVES MASS ADOPTION Going forward, dealers across the board report they plan to increase their port- folio of product categories as a means of driving revenues, including for up- selling and seeking business with new clientele. Let's take a close look at some of the results among individual product categories. Mobile device integration — A whop- ping 90% of dealers that install control systems are integrating a mobile device for control, with 33% indicating it is the primary control device. T is likely won't come as a surprise but Apple's iOS dominates as the most common mobile platform in use. In fact, a large majority (86%) of those providing mobile device integration are selling docking stations as an addǦon for such devices as iPads and iPhones. Notably, 41% of all dealer channels indicate that clients are in- creasingly expressing interest in control systems with mobile device integration. "T e mobile device integration is extremely encouraging. It lets us know the company owners that are doing this type of work are adjusting to product changes, " Shonkwiler says. Home networking systems — T e aver- age number of installations in this market segment is projected to increase 40% in 2012 compared to the previous year, with an average project size of about $900. T e residential network is rapidly becoming the backbone of virtually every low-volt- age subsystem in the home, according to Shonkwiler. No longer are home networks comprised of simple printer sharing and basic Internet access. Today's homes are being outfi tted to handle voice, data and entertainment, while surveillance, medi- cal sensors, teleconferencing, automation and other control features are projected to grow in prominence. "No matter what happens in the world of home electronics and the price points they are at and the markets they are serving, installers have found that their services — specifi cally managing the network, systems integration and NOVEMBER 2012 / SECURITYSALES.COM / 39

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