Should Security Integrators Focus on Recurring Revenues?

Author: John Honovich, Published on Oct 28, 2009

While integrators have historically generated 90% or more of their revenues from projects, for years many have advocated a shift to more service and recurring based revenue sources.

An October 2009 SSN interview with Ray Dean of Niscayah is the most recent to advocate the move to services. [Background Note: Ray Dean's company PEI was acquired by Niscayah in 2007. At the time, PEI's total 2006 revenue was reported as $11.6 Million USD with 20% through service contracts.]

The interview discusses changing integrator's mindsets including resistance by sales staff used to making commissions. Niscayah says they are focusing on jobs with a service oriented connection such as remote video monitoring, guard replacement, video escort, etc.

Economic Challenges

While such services are useful ancillary revenue streams for commercial/government integrators, it is unlikely that this can replace the financial importance of projects for many years to come.

Unlike residential offerings where the capital cost is low relative to the services that can be sold, the commercial/government market is the opposite. Most businesses need tens or hundreds of thousands of dollars of on-site equipment (readers, cameras, panel, servers, etc.). Since the customer needs 100% use of this equipment and tend not to need many services, the products have to be sold. Of course, some recurring revenue can be generated from maintenance contracts but most revenue will remain project based.

This is starting to change but only at the low end of the market. Managed/hosted video services are showing that similar to alarm monitoring, the capital equipment costs are becoming low enough that those costs can be subsidized from ongoing service contracts.

Central Financial Problem for Security Integrators

At the same time, security integrators face two major problems -- declines in gross margins for integration projects and a decrease in overall integration projects. The gross margin problem will likely never recover with margins permanently squeezed by the rise of on-line price competition. The decrease in integration projects is likely to be more temporary and should recover along with the economy.

The third emerging problem is new entrants (like cable companies, telcos and installation companies) with lower cost structure than security integrators offering managed/hosted video and access. Security integrators generally have design expertise and specialists in configuring and optimizing security systems. The more security systems move to "the cloud," the lower the need for on-site expertise reducing the competitive advantage of integrators.

While securing recurring revenue may be a goal, the feasibility for security integrators to achieve it is questionable.

[Update: While integrators like Niscayah have been pushing Axis hosted video, the results appear to be weak and insignificant to their overall business.]

1 report cite this report:

Top US Integrator Acquired by European Conglomerate on Nov 18, 2009
Adesta, one of the top US integrators and representative of network convergence was acquired by European based conglomerate G4S. In the US, Adesta...
Comments : PRO Members only. Login. or Join.

Related Reports on Integrators

ISS VMS / Video Analytics Company Profile on Aug 16, 2018
Who is ISS? In the past few months, they had one of the craziest ISC West promo items in years. Then, they hired industry veteran and ex-Dahua...
RealNetworks Free School Facial Recognition on Aug 03, 2018
The company that created RealPlayer is moving beyond media delivery and into the security space with a new facial recognition platform they have...
Improved Security And Surveillance Bidding - 2018 MasterFormat Divisions Examined) on Jul 19, 2018
Navigating the world of system specifications and bidding work can be complex and confusing, but a standard format exists, and understanding it...
4 Most Difficult Camera Installs (Statistics) on Jul 12, 2018
Heavy housings, cumbersome brackets, heavy ladders required, and tricky field of view requirements will cause difficulties no matter the camera...
Most Wanted Improvements In Manufacturer Technical Support (Statistics) on Jun 21, 2018
5 key areas of improvement and 1 clear wanted support feature were voiced by 140+ integrator responses to: What improvement in manufacturer...
The Dumb Ones: PSA's Bozeman On Cybersecurity on Jun 15, 2018
The smart ones are the hundred people who flew to Denver and spent $500+ on a 1.5-day conference featuring Dahua as a 'cyber responsible partner',...
Worst Features for Camera Installation (Statistics) on Jun 07, 2018
4 clear worst features for installing were identified by 140+ integrator respondents to: What feature(s) make a camera hard to install? The...
Top Features For Easy Camera Installation (Statistics) on Jun 05, 2018
Camera installation is the most fundamental and common task for video security technicians. Because of this, camera manufacturers market their...
Stats: IP Camera Dead On Arrival (DOA) Decline, Near Zero on Jun 01, 2018
New IPVM integrator statistics show that IP camera DoA rates have declined with zero dead on arrival units for many integrators and effectively...
Stats: Upgrading Cameras Far More Common Than Replacing Failed Cameras on May 30, 2018
The old saying "If It Ain't Broke, Don't Fix It" does not apply here. New IPVM statistics show that 60% of cameras that are replaced still work but...

Most Recent Industry Reports

2Gig Gun Lock / Motion Detector Tested on Aug 17, 2018
Safer guns for families and an opportunity for security dealers to sell more services? That is the aim of Nortek's 2GIG 'Gun Motion Detector'...
Video Analytics Integration Guide on Aug 16, 2018
Video analytics is hot again (at least conceptually) but integrating video analytics with VMSes can be challenging. This is especially significant...
Hikvision IP Camera Critical Vulnerability 2018 Disclosed on Aug 16, 2018
The same day that the US government passed a prohibition on Hikvision cameras, Hikvision disclosed a critical vulnerability for its IP...
ISS VMS / Video Analytics Company Profile on Aug 16, 2018
Who is ISS? In the past few months, they had one of the craziest ISC West promo items in years. Then, they hired industry veteran and ex-Dahua...
Chinese OEM Avycon Gets ADI Push on Aug 15, 2018
Who is Avycon? An American company? A Korean company? A couple of guys relabelling Chinese products? The latter is the best explanation. While...
Backboxes for Video Surveillance Tutorial on Aug 15, 2018
Backboxes are a necessity in surveillance, whether for managing cable whips, recessing cameras, adding wireless radios. But it can be confusing to...
Genetec Stratocast / Comcast 'Motion Insights' Examined on Aug 15, 2018
Comcast recently announced "SmartOffice Motion Insights", an extension to their Genetec OEMed cloud video service (covered by IPVM here). This...
SimpliSafe Violating California, Florida, and Texas Licensing Laws on Aug 14, 2018
IPVM has verified that DIY security system provider SimpliSafe, founded in 2006 and acquired in June of 2018 at a billion dollar valuation, is...
Ban of Dahua and Hikvision Is Now US Gov Law on Aug 13, 2018
The US President has signed the 2019 NDAA into law, banning the use of Dahua and Hikvision (and their OEMs) for the US government, for US...
Cut Milestone Licensing Costs 80% By Using Hikvision and Dahua NVRs (Tested) on Aug 13, 2018
Enterprise VMS licensing can be quite expensive, with $200 or more per channel common, meaning a 100 camera system can cost $20,000 in VMS...

The world's leading video surveillance information source, IPVM provides the best reporting, testing and training for 10,000+ members globally. Dedicated to independent and objective information, we uniquely refuse any and all advertisements, sponsorship and consulting from manufacturers.

About | FAQ | Contact