Taking on the Elephant in the Room

Taking on the

Elephant

In the Room

In the face of significant obstacles, the 2022 SDM Top Systems Integrators are demonstrating the resilience, creativity and perseverance that keeps them at the top.

There’s an elephant in the room. It is large and looming and most certainly impacting this year’s top security integrators. But unlike that particular metaphorical expression, everyone is talking about this one — supply chain shortages. Of course, supply chain issues can be directly tied to fallout from the ongoing issue of COVID-19, the “great resignation,” and inflation, all of which were top of mind in this year’s responses to the 27th annual Top Systems Integrators Report survey.

“The biggest issues we had in 2021 were the continuance of COVID-19 restrictions such as illness, quarantine, and vaccinations,” writes TRL Systems Inc., ranked No. 24. “Also our industry is currently dealing with manpower issues. We have seen a reduction in qualified applicants across the board for field and project management personnel. Last but not least has been the economy; we are ALL having issues with cost due to our current supply chain mess in the world. We have seen two price increases in one year from our manufacturers as well as pricing surcharges. This has all had an impact on our profitability.”

No. 28 Dallas Security Systems Inc. & DSS Fire echoes that sentiment: “Supply chain issues are bad. We sell jobs, then have to wait for parts. Customers get impatient, as you can imagine.  Also, it is very difficult to find new employees. We still have most all of our lead techs but really new rookie helpers that we train to be lead techs. No one wants to work!”

No. 1 — 2021 was the year that Convergint established its digital transformation business to help customers adapt to the rapidly accelerating tech environment. Made several national and international acquisitions in 2021 and the first half of 2022. SDM’s 2007 and 2012 Systems Integrator of the Year. No. 2 — ADT Commercial acquired Edwards Electronic Systems in October 2021, and Key-Rite Security in May 2022. No. 3 — CTSI completed eight acquisitions in 2021, including three 2021-ranked TSI companies: AFA Protective Systems Inc. (ranked No. 11); Structure Works (ranked No. 10); and The Protection Bureau (ranked No. 34). The company continues its acquisition streak in 2022. No. 4 — Made several acquisitions, including G4S in March 2021. SDM’s 2016 Systems Integrator of the Year (as Securadyne Systems). SDM’s 2013 Systems Integrator of the Year (as G4S). No. 6 — Acquired several systems integrators, including 2021-ranked TSI companies 3Sixty Integrated (ranked No. 29). C&B already owned A3 Communications (ranked No. 8), and has acquired eight other companies since 2020. The company appears for the first time under its umbrella company name. No. 7 — Had record revenue, RMR, and opened new offices in Seattle, Charlotte, Boston, and Nashville. SDM’s 2015 Systems Integrator of the Year. No. 8 — Merged with No. 10-ranked IST in March 2022. SDM’s 2014 and 2021 Systems Integrator of the Year. No. 10 — Merged with No. 8-ranked Unlimited in March 2022. No. 11 – SDM’s 2017 Systems Integrator of the Year. No. 12 — SDM’s 2004 Systems Integrator of the Year. No. 16 — Significantly increased profitability. Expanded its footprint to Nevada, Texas, California, Ohio, and opened up a LATAM office in Mexico City, in addition to its Salt Lake City and Denver branch locations. SDM’s 2020 Systems Integrator of the Year. No. 19 — Ranked on the TSI for the first time. No. 21 — Seamlessly integrated a new acquisition and continued to grow the company. No. 27 — Purchased new corporate headquarters. Ranked on the TSI for the first time. No. 30 — Acquired Avalon Communication in March 2022. Ranked on the TSI for the first time. No. 35 — Pye-Barker now owns several security and fire companies it acquired in 2021 and early 2022, including 2021 TSI-ranked companies Mountain Alarm (No. 22) and Matson Alarm (No. 82). Expansion is continuing. Pye-Barker is ranked on the TSI for the first time as a group. No. 37 — Completed a major infrastructure project. No. 38 — Acquired Central Security & Equipment in Lake Placid, Fla., creating a fifth office. No. 39 — Largest security project sold in company history; a single project for over $7 million. No. 43 — Eliminated 100 percent of company debt. No. 44 — Built out managed services center and grew RMR by 30 percent. No. 45 — Integrated a CRM platform for the first time in company history. No. 48 — Purchased a new commercial building for its Knoxville location and did extensive renovations. No. 50 —  Awarded a $5 million JOC contract for Los Angeles County. No. 53 — Completed an acquisition. No. 58 — Completed FICAM PIV regulated access control system upgrades in the federal government sector. No. 66 — Converted to a new ERP and launched a SMB division. No. 69 — Obtained a city and state contract with the largest health and hospital facilities. No. 72 — Acquired OMNI Fire and Security (ranked No. 85 on the 2021 TSI). No. 74 —  Grew its fire alarm and sprinkler installation business. Ranked on the TSI for the first time. No. 77 — Ranked on the TSI for the first time. No. 78 — Completed first acquisition of a local alarm company. No. 80 — Booked two significant contracts for physical and cyber security integration. No. 84 — Ranked on the TSI for the first time. No. 96 — Surpassed $1 million in new install sales revenue for the year and surpassed $300K in service revenue. No. 97 — Ranked on the TSI for the first time. No. 99 — Made two acquisitions. No. 100 — Saw some of its largest increases in new installations in the company’s 26-year history.

Both in relation to 2021 and in predictions for the remainder of 2022 (surveys were conducted in March 2022), these same themes came up again and again in the comments.

“Supply chain issues seem to be the biggest barrier right now and into the foreseeable future for 2022,” writes No. 82, Custom Alarm. “In addition to supply chain issues, the continued increases in prices and surcharges and tariffs make it challenging to accurately and profitably quote and sell jobs. This continues to be a big pain point in that we not only find it difficult to get product, but the manufacturers continue to impose price increases numerous times a year even on previously placed orders. This is extremely frustrating.”

In spite of these barriers, this year’s Top Systems Integrators Report numbers tell a story of the resilience and resourcefulness of the security industry in general and these security integrators in particular.

As a whole, the top 100 systems integrators regained in 2021 much of integration revenue they lost in 2020, rebounding to a collective $4.48 billion in revenues — a 10 percent increase after a 12 percent decline last year — only 3 percentage points off their pre-pandemic 2019 numbers. And this was without revenue counted from Securitas (ranked No. 3 in 2021), which elected not to report this year due to its ongoing acquisition of Stanley. Others made up the difference, however, with both Pye-Barker and Cook and Boardman reporting for the first time as parent companies for a number of security integrators they have acquired in the last year, including several former top 100 companies. CTSI also moved far up the ranks, reflecting its acquisition streak in 2021 and 2022.

In spite of concerns about employee shortages, this year’s top integrators also employed more full-time workers than they did in either 2019 or 2020 — with a collective 43,204 employees compared to 36,783 in last year’s report.

Strategic Security Solutions, ranked No. 54, is one company that ramped up its hiring last year. “We have continued to see growth internally, including additional resources and manpower. We staffed up and capitalized on key personnel hires to help us fuel this growth going forward. Sales and operations have experienced growth, and valued training has helped build a solid foundation for our new hires. We have defined processes for streamlined project management, sales team development, internal back office processes and daily processes.”

Profits in 2021 also remained identical to 2020 numbers, and very close to 2019, in spite of inflation and rising costs, although at least one top integrator acknowledged this came at a price.

“We did a restructuring and refocusing of the business and raised rates even though the market was soft,” writes Netronix, ranked No. 9.

Given all this, it is not surprising that despite predictions of ongoing challenges, confidence remains high, with nearly 80 percent of companies predicting 2022 revenues will increase. Just 2 percent are predicting a decrease.

One reason for that might be that while supplies and labor may be a bump in the road, customer demand, new technology adoption, and project sales seem to be full speed ahead.

“In 2021 we were most proud to expand our technology offering to our existing and new client base,” writes Unlimited Technology, ranked No. 8 and SDM’s 2021 Systems Integrator of the Year. “We expanded our audio/visual and network technology offerings as well as bundling our security solutions with AI offerings and enhanced cybersecurity.”

Customers & Technology

When it comes to technology, cyber and AI are two of the top trends driving security integration business forward, along with cloud, mobile credentials, security as a service, and others.

For Integrated Security Technologies Inc., ranked No. 10, cyber security is at the top of its customer demands, followed by technologies that help them get back to work: “Cybersecurity tops the list. Ensuring systems are deployed in a manner in which they are ‘hardened’ and compliant with IT infrastructure policies is paramount. … Second on the list would be the adjustments in the workplace, as people return to a post-pandemic environment. Applying technologies such as visitor management, touchless technologies and cyber-secure technologies/services to support the remote workplace are all going to be heavily focused on by companies.”

Writing well before the most recent tragedy in Uvalde, Texas, several integrators also mentioned solutions to help with active shooter situations, from gunshot detection to AI.

“I believe cyber-attacks and active shooter attacks will be top of mind for businesses and safety personnel,” writes Darren Crawford, PSP, vice president and general manager commercial and national accounts for No. 47, Guardian Protection. “Our industry must do a better job to help prevent and mitigate the damage done by these events and drive technology that supplies our first responders with real-time communication and video that expedites neutralization of the threat and helps render aid to the wounded more quickly. I believe regulatory agencies such as OSHA’s General Duty Clause will drive more businesses to take steps to protect against an active shooter situation. Early gunshot detection is available, and I believe we’ll see more of these systems deployed. Artificial Intelligence (AI) companies are working to enhance early warning video detection of the presence of a gunman — prior to the first shot. I believe the industry should and will deploy more early warning systems and also help facilitate the inclusion of tactical casualty care training into active attack response planning so that personnel are better equipped to administer aid to the wounded.”

But because many of these technologies can be both difficult and expensive to supply right now, technology advances go hand in hand with managing customer expectations and maintaining those relationships.

No. 37 D/A Central writes, “AI is starting to supplant analytics; we need to pay attention to that. [But] inflation is going to be very difficult, especially managing existing contracts.”

Several top integrators also touted managed and hosted service offerings as a key ingredient to success in 2021 and beyond.

For example, No. 15 RFI Communications & Security Systems writes, “Supply chain will remain a major factor in 2022. Integrators will have to work closely with their customers on supply lead time. In some cases, due to time sensitivity, customers may need to move forward with a secondary or sometimes even a third product of preference than initially expected in order to comply with timelines. Additionally, the work-from-home/hybrid office shift will continue to result in more consolidation of office space and reduction in system size of many of our large campus systems, which may never return to the pre-pandemic levels we knew prior to 2020. Integrity and reliability of these systems will be paramount, which is where managed services can show their value. Cyber-threats will continue to grow, and manufacturers and integrators will have to work harder to ensure their practices and system deployments are properly secured.”

For No. 77 Watchmen Security Services LLC, it still comes down to the bread and butter of the security integrator, however: making systems work together. “Technologies working together will have the biggest impact on business in 2022 — having biometrics, video integration, cloud, wireless, touchless access, mobile credentials, building automation, etc., all working on the same platform in an easy to use way for the end user.”

2022 & Beyond

The themes of supply chain and labor concerns married with customer demands for new technology show no signs of going away any time soon. Most top security integrators cite these factors as the main issues and trends that will impact their company for the rest of 2022 and beyond.

No. 19 Preferred Technologies LLC writes that last year and this year are all about “supply chain, supply chain, supply chain! We cannot conduct work without materials. The labor market is tight. Staffing will probably get worse before it gets better, as the supply chain will likely consume a significant portion of the workforce. And customers are currently accepting cost increases for both materials and labor, but their acceptance of the cost increases will likely stop soon.”

No. 95 Vortex 1 Security also sees the twin issues of inflation and supply as the top concern for 2022: “The greatest impact to our business in 2022 will be the inflation pressures from the economy. Not only does this impact our pricing but it also affects our current employees and cost of living. This is by far the biggest issue for 2022. We are still expecting to see supply chain issues throughout the year as well.”

Yet, while everyone acknowledges that the current business climate is here to stay for the foreseeable future, these top security integrators are prepared to push through and use their strengths to succeed.

“Convergint will continue to see growth in 2022 as the enterprise demand for advanced and fully integrated global security systems increases,” writes the No. 1-ranked company. “Ongoing supply chain inefficiencies will pose a challenge and systems integrators can expect to have to work around unpredictable delays. Transparent communication with customers and partners will be absolutely critical to maintaining exceptional service.”

No. 84 Security Pros LLC writes, “We have a strong team that is embedded in our culture, and they are consistently improving their departments and their processes. This increases our focus on process improvement and efficiency. With the shift in the way our clients operate and incorporate our solutions into their business operation, winning the work is not going to be our problem. Overcoming supply chain issues and ever changing technology, while keeping our cashflow in line through progressive billing, and increased client communication is going to be key to long term success.”

Given their past performance in trying times, it is a good bet that these companies will be able to do just that. As the old adage goes, “How do you eat an elephant? One bite at a time.” SDM

The SDM 2022 Top Systems Integrators Report ranks North American companies by their security systems integration revenue. This ranking is based on data provided to or, in a few cases, estimated by SDM. Ranked companies were asked to submit either an audited or reviewed financial statement, or a copy of their income tax return showing total gross receipts for the stated period. The vast majority of the firms ranked are privately held.

The main table ranks 100 companies by their North American integration revenue in 2021 from their security system integration projects. Integration includes solutions such as design, project management, product, installation, programming, start-up, training, and time-and-materials-based service sold directly to an end-user customer or through a tier of contractors. This includes revenue related to security, such as: access control, ID/badging, video surveillance/analytics, intrusion alarms, perimeter security, electronic gate entry, intercom/communications, fire protection, IT/networks, etc. It does not include recurring monthly revenue (RMR), as that is counted toward ranking on the SDM 100.

However, due to the increasing focus from security integrators on increasing RMR through managed services, maintenance contracts and more, SDM ranks the Top 25 Top Systems Integrators in a separate table.

Note: an e following the figure indicates it is an SDM estimate.

To find a company by name, use the alphabetical index.