Volume 54

Volume 54 | May 17, 2024

Welcome to Brief 54, titled "Security Integrators (Actually, Everyone in the Access Control Industry): The Time is Now."

The enterprise software revolution is here, and it presents a wealth of opportunities for security integrators and the broader access control industry. Let's delve into why the recent news is crucial for our industry and the driving forces behind my excitement.

Before we dive into the Brief, please check out the agenda for ACS24 Europe, which is right around the corner (May 29th and 30th in Zurich, cohosted with Google). You'll find a list of the 64 speakers, the topics, and all the networking opportunities (I am happy to say dormakaba has agreed to be the city host and partner with us at the welcome reception. Thank you). I am blown away at the event's reception and can't wait to get there. Tickets remain, so if you can make it, let me know. 

As always, your feedback is invaluable to us. Please let me know if there's any area where we can better meet your expectations.

Thank you!

PS: I am sure some of you may forward this, but please do so sparingly and encourage others to sign up here. Thank you!

Disclosure: I mention ServiceNow in this Brief. My wife works at ServiceNow. So there is no confusion, I do not have any inside information, nor has any of this been discussed with her to provide insights or information. What is written below is from my observations and conversations with people in the access control. Cool, now that we have that out of the way…back to the Brief.

Security Integrators (Actually, Everyone in the Access Control Industry): The Time is Now

The Announcement

Last week, an exciting announcement was made at the ServiceNow Knowledge Event in Las Vegas. ServiceNow and Alert Enterprise declared that the Alert Enterprise Workplace Access and Security app and the Physical Access Badge Management app are now certified as part of the ServiceNow Built on Now program.

The ServiceNow Built on Now program is a comprehensive framework, like others in the enterprise software industry, specifically, Salesforce's App Exchange, designed to support and acknowledge partners who develop applications directly on the ServiceNow platform. This program enables technology partners to build, test, certify, distribute, and sell fully integrated applications within the ServiceNow ecosystem. The advantages of being part of this program are numerous, offering benefits that are typical of most big tech programs, including:

Trust and Reliability: Applications certified under the Built on Now program comply with high-security standards and undergo a stringent certification process. This assures customers of the application's quality and reliability, designed to operate seamlessly within the ServiceNow environment.

Enhanced Capabilities: The program supports utilizing ServiceNow's core functionalities, such as ServicePortal, Workspace, Mobile, UI Pages, and forms. This ensures that the applications leverage the full potential of the ServiceNow platform, leading to an improved user experience.

Market Recognition: Participating in the Built on Now program is a testament to a partner's proven expertise (and effort) in ServiceNow. This enhances their credibility and market presence, making them a trusted choice for customers.

Interesting Integrations: During my research, I found one integration particularly intriguing due to its relevance to our industry: Velocity Smart Collect. This application integrates Smart Lockers with the ServiceNow platform, directly enabling controlled, auditable access to IT equipment from ServiceNow ITSM. This integration extends ServiceNow's capabilities from digital to physical workflows, demonstrating the versatility of applications built on the Now platform.

The Built on Now program is strategically vital for ServiceNow as it broadens the ecosystem of applications available on their platform, enhancing customer value proposition. It empowers ServiceNow to offer a broader range of solutions and capabilities (built by others), which customers can access and use directly through the ServiceNow Store. This enriches the customer experience and fosters further adoption and utilization of the ServiceNow platform.

Think of this as Apple with its App Store, Google with Google Play, and so on.

But the exciting part is what this all means, not that there is a platform or "store."

The Time for Transformation in the Physical Access Control Industry

So why do I believe this is a landmark moment for the physical access control industry?

To answer this, we need to look back at some previous Briefs.

In Brief 23, I asked, 'Who Will Be the Access Control App Store?' My thesis suggested that enterprise software applications like ServiceNow, Salesforce, and ADP would fulfill that role. And it's starting to come true.

In addition, back to Brief 1, titled 'A new channel: ISV and SIs,' I outlined why there is a massive opportunity for security integrators to become systems integrators and ISVs. This prediction is also becoming a reality.

Beyond the ServiceNow news, this opportunity was also highlighted last week when Google Wallet was launched in Europe and India with partners from the access control industry. In the announcement, Alert Enterprise and Wavelynx were acknowledged as system integrators. Let that sink in a bit. The enterprise software market is defining Alert Enterprise and Wavelynx, what we would call "PSIMs" or "manufacturers," system integrators.

Mix all of this, and, in essence, the transformation is happening and unfolding right now.

And we aren't going to control it.

The Impacts of this Change

This change has two less obvious yet significant impacts that I want to highlight:

The Opportunity for Security Integrators: The most substantial opportunity and potential winner in this shift is the security integrators. However, this is significant; you must want to seize this opportunity. Comes down to desire and action.

Beyond the Product: It's important to note that this shift extends beyond the product or, even more, something technical. And this is my key point. This transformation is more about business than technology. Some may interpret this news as 'just another PSIM,' but a broader look is essential to understand the transformation underway in our industry, and while, sure, it may be "another PSIM," that doesn't matter. What matters is everything else around it. This change has significant business implications, making me so excited.

Here is what I mean.

The Evolving Landscape of the Access Control Industry

We are witnessing a significant shift in the access control industry—an enterprise software revolution beyond IT or iterative changes. This change concerns who specifies systems, configures, sets up, and maintains them, AND NOW, how we engage with customers at the top of the sales funnel in totally different budgets. This revolution brings increased revenue and margin opportunities, especially for security integrators.

As I have often stated and written, the value proposition is expanding. It's not just about keeping bad people out, locking, and unlocking anymore.

There's a broader focus on operational efficiency through automation and untapped new revenue generation opportunities like on-demand services.

This transition can potentially pivot security integrators into new opportunities within the enterprise software industry while broadening the reach of system integrators into security.

The Emergence of a New Integrator

This shift sets up a new set of customer expectations: access control is no longer just about safety. Yes, access control is a utility, and yes, it is about safety, but it holds exponential value and stickiness beyond its core deliverable, unlike other industries. For example, unlike HVAC, access control is a point of engagement for all stakeholders in a building or space. And when executed correctly, the impacts are profound and lead to a chain of positive 'what's next' experiences. If the initial engagement or expertise is not executed correctly, the subsequent ones don't matter. If people feel safe and are indeed safe, they will order the lattes, come to work, get a massage at the gym, and so on. This presents a unique opportunity for the access control industry. And don't think the rest of the world, industries, VCs, PEs, don't see that also.

Moreover, the shift towards identity and being a physical source of record of who, what, where, and when in the physical world underscores the fact that we are now a data industry applied to security. And yet again, don't think the rest of the world, industries, VCs, PEs, don't see that also.

This shift (back) to identity and away from the door being the critical point of value also explains why, as we move forward, user experience will continue to play a vital role for all stakeholders and will be considered table stakes. And again, don't think the rest of the world—industries, VCs, PEs—doesn't see this, either.

Our industry has long been project and hardware-based, yet it's now on the brink of a significant shift toward recurring revenue and SaaS models.

This is why we're about to see a surge of capital from various sources.

This influx will disrupt old norms and establish new ones.

The question is, will we seize this opportunity and use our past as a springboard to the future? Or will our past weigh us down, allowing others to capitalize on the value we could have claimed?

Our industry is complex, more so than outsiders often realize. However, this is precisely when technology and abundant resources can challenge outdated practices.

We're just at the beginning. As the market continues to grow and the $70B total addressable market (TAM) becomes a reality, alternative access control will become the standard, and the high-security market will become the alternative. It's already happening.

We need to reimagine our identity as an industry.

A Simple Math Problem for Security Integrators to Consider

Suppose the previous statements or predictions do not convince you. A simple math problem may change your mind.

The net present value of companies in our industry has an opportunity to surge. For instance, the value range for security integrators can vary, typically falling between 4.5 to 6.5. These figures underline the evolving financial landscape of the industry and the potential it holds for those willing to embrace change and adapt accordingly.

Meanwhile, EBITDA multiples have remained relatively stable for enterprise software systems integrators, hovering between the 15x and 17x mark since 2018. The median EBITDA multiple for enterprise software companies was reported to be 15.3x in the first half of 2023.

In conclusion, the enterprise software revolution is a golden opportunity for security integrators. It is a transformation that is not just about technology but has crucial business implications. The time is now for security integrators to seize this opportunity, adapt to the changing landscape, and become the leaders in this enterprise software revolution.

If you don't, someone will. Someone(s) is(are).

ACS24 Europe is not just another event; it's the first access control and smart lock thought leadership conference in Europe. Building off of what we did at ACS24 in Washington, DC, we have 64 speakers from all over the globe, including our industry brands, end users, and ecosystem partners. Your presence at this event is highly valued, and I strongly recommend you attend. As members, you receive a 50% discount on the ticket price. We charge for tickets because we do not do sponsorships for the event. This ensures that we serve you and the attendees and are focused on creating an amazing thought leadership agenda and networking opportunity. ACS24 Europe opens with a reception on 5/29 at 6pm and kicks off at 8am on 5/30. We are thrilled to be cohosting it with Google at their amazing facility. I look forward to seeing you in Zurich. More information and how to get your tickets can be found here.