Our latest report on the World Market for Physical Security shows that over the last 10 years a steady increase in the share of video surveillance equipment being traded through the Systems Integrator route to market, when analysed through 5 different channels of distribution.
During this time a number of significant changes have taken place in the industry which has made Systems Integrators more influential in making the equipment buying decision both through direct and indirect routes.
The fundamental shift from analogue to IP Network cameras; Consolidation in the Distributor business and more recently aggressive pricing strategies; More integration and package solutions; And now the rapid growth of VSaaS. With the latter potentially meaning end users having a much closer relationship with the System Integrator.
The general trend of disintermediation (the removal of intermediaries from a supply chain) signifies major shifts in how the industry gets products / services to market, and this has had significant impact over the last 10 years in bringing down margins.
However almost all our interviewees believed that whilst distributors have lost share they still remain a favourite route for many of the major manufacturers, often because they have less hassle in administrating the selling process. However whilst this channel does add value, as margins decline and technology / know-how increases the balance favours dealing more direct with Systems Integrators.
During the next 10 years as the demand for IoT and VSaas grows rapidly we forecast that Systems Integrators will slowly but steadily take an increasing share of the market direct from the manufacturers of video surveillance equipment.
However before we can get to that stage we have to overcome the impact that Coronavirus is having on all the countries that have instituted lockdowns. This has caused an almost immediate cessation to normal trade and drastic consequences to economies. Know one can forecast when this virus will be controlled and therefore when businesses will get back to normal, but for sure, eventually it will.
Unfortunately Systems Integrators are in a weak position to resume trade because of the significant labour overhead/costs compared to manufacturers and in addition most are relatively small and not financially positioned to cover business costs for many months with little to no income. Many could be forced to close or take on debt.
Most Cloud Surveillance suppliers are in a much stronger position to finance the service up front and strong cash flow should be sufficient to attract investment. VSaaS is in a stronger position to get back to normal when Covid-19 is under control, but the questions arise as to System Integrator roles in these sales, as many of these offerings are sold directly to end users through companies such as Verkada and Meraki, with no integrator channel.
This could reduce the role of integrators, as end users no longer require them to access the product through specialized distribution channels. However this does not stop Systems Integrators from buying kit direct from other manufactures such as Axis Communications and Genetec and selling a service to their existing clients.
Longer term growth opportunities for System Integrators within the Internet of Things look more favourable and there is a shortage of companies with the necessary expertise to deliver such projects.