Volume 65 | July 25, 2024
"When Will the Alternative Access Control Market Become the Mainstream Market?"
Welcome to Brief 65…"When will the alternative access control market become the mainstream market?"
The question I get most from the community.
This transition, which is occurring right now, represents a significant change in our industry's landscape and soon the alternative will be the norm. Traditionally focused on high-security access control, valued at $10B globally, the industry is now recognizing the broader and more substantial alternative access control market, estimated between $60B to $90B. This market includes a diverse range of solutions serving deeper and wider areas of the market. The real catalyst for this shift is not just technological advancements but the widespread adoption of …read below to find out. Also, I give my prediction on when exactly I think we will seed the shift.
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I often hear this question from the community after expressing that this shift is happening right now, whether in my writing or presentations. Let's break down our industry's evolving landscape.
High-Security Access Control (Elephants) versus Alternative Access Control (Cheetahs and Eagles)
For years, our industry has been viewed through the lens of high-security access control, an industry valued at $10B globally by Omdia. But this perspective is limited. While high security is significant, it's just one part of a broader market we call "alternative access control."
This alternative segment, which includes a wider range of security solutions such as biometrics, cloud-based access control, and mobile access control, is substantially larger—estimated between $60B to $90B. Given its scale and the diverse range of solutions it encompasses, I argue that this alternative access control market represents the mainstream of our industry.
Picture our industry as a vast safari. For decades, we've been focused solely on hunting white elephants—the high-security market. We've built our entire ecosystem around these white elephants, developing specialized tools and tactics for them. We've become experts in elephant hunting, relying on them for sustenance, warmth, and prestige.
But what if I told you that while we've been fixated on elephants, an entire world of wildlife has been thriving beyond our view? Cheetahs, eagles, and countless other creatures represent the alternative access control market. For instance, most of the companies on our topology map, which offers cloud-based, vertically deep, and software-first solutions, are part of this huge ecosystem that's been fragmented and hiding in plain sight.
The Catalyst for Change: More Than Just Technology
Back to the question, "When will this shift happen? When will the alternative become the new mainstream?"
The answer isn't about fancy new technology, cloud, groundbreaking architectural innovation, or even the much-hyped NFC Wallet. No, the real catalyst for change is far more fundamental.
It's all about the business model.
Let me be clear: The driver that will flip our industry from a high-security cottage industry to a mainstream powerhouse is the widespread adoption of SaaS (Software as a Service) models throughout the entire value chain, resulting in substantial RR (recurring revenue). Embracing this model is not just a choice; it's necessary for our industry's future success. It's time to get ready for the transformation.
The SaaS/RMR Revolution: A Taste of the Future
Lock companies traditionally generate substantial revenue from hardware sales, with little to none from software. A lock sold brings in a significant immediate profit, with margins of around 40%. It's a good business.
But the market is going to start getting a taste of and rewarding those who generate it: RR and LTV (especially as it builds - unlike a project, time makes RR and LTV even better).
The SaaS model and all that comes with it, with its promise of long-term customer value, is the ultimate game changer in our industry. Many legacy companies in our industry are hesitant to stretch for it, comfortable with their familiar diet of hardware sales. Rewarded for safe and conservative business practices. But those who build for it on day one and those who dare to change will discover a whole new world of—recurring revenue, predictable business models, and potentially higher profitability.
The Journey to SaaS and Recurring Revenue Success
This journey to SaaS success isn't a sprint; it's a marathon. It takes time to reach those milestones:
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The average trek to $100M in Annual Recurring Revenue? About 8-10 years.
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The first $1M ARR? Nearly two years of perseverance.
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Achieving the "Rule of 40" (Growth Rate + Profit Margin ≥ 40%)? It's a continuous balancing act.
But the rewards are substantial. The businesses built around SaaS models will likely dwarf the legacy business metrics we've been using as currency in our industry.
The New Leaders
Our industry's new crop of leaders won't just be those who adopt AI early. The true visionaries will be those who understand SaaS business models, SaaS sales organizational design, SaaS support, and SaaS communication. It won't be incremental. It will be radical.
In Conclusion: When?
So, when will this shift happen? When will the alternative become the new mainstream?
My prediction: Within 3 years.
It has already begun. The question is, are you part of this transformation?
