Six in 10 integrators were able to move ahead in 2012 and counted an increase in systems integration revenue; but one-third slipped back — showing that the security marketplace is not yet where it was pre-recession.
A 9 percent decrease in the 2012 revenue for SDM’s Top Systems Integrators is a deceiving number because individual company results did not recede to that extent. By all accounts, systems integrators described 2012 as average to improved — at least moderately better than the dismal results they encountered in 2011. While some companies found it “challenging,” others experienced the opposite. Most were in the middle — financial performance was neither stellar nor stagnant, but “acceptable” compared with the past few years.
“2012 was another challenging year for the larger commercial integrated systems business. It wasn’t worse than 2011 but about the same,” notes No. 25-ranked ASG Security, Beltsville, Md. “There are still fewer projects, less funding and great pressure on margins. However, the low and mid markets performed very well for us again; specifically, a continued great resurgence in residential sales with excitement around our enhanced service platform. Small business was also a continued strong growth segment for the company, led by enhanced intrusion sales and cloud-based video services.” ASG Security reported $20.9 million in 2012 North American systems integration revenue, 6 percent less than in 2011. However, the company simultaneously climbed on the just-released SDM 100, with 12.4 percent better recurring monthly revenue — an outward sign of the company’s comments regarding their stellar residential program.
Revenue classified as North American systems integration revenue fell from $6.91 billion in 2011, to $6.29 billion in 2012 — even though 10 more companies were included in the report. However, for comparison purposes, SDMmeasures the top 100 companies’ 2011 integration revenue ($6.88 billion) against the top 100’s 2012 integration revenue ($6.24 billion). Partly responsible for the decline is the removal of ADT from the Top Systems Integrators Report, as this company was split in 2012 into separate businesses that handle residential and small commercial (ADT) and commercial security (Tyco Integrated Security). In addition, SDMis reporting a modified, but lower, estimate for Siemens Industry Inc. based on new information.
For systems integrators in general, they saw a marked improvement in spending availability in their markets. In most cases, this translated to higher sales, greater revenue, and even better profits.
Business was “BETTER than 2011,” remarks No. 33-ranked MidCo Inc., located in Burr Ridge, Ill. “Business revenue and profits are growing.”
Among the Top Systems Integrators ranked in this report, for which year-to-year comparisons could be made, 62 percent reported increased systems integration revenue. But as many as one-third (33 percent) of integrators reported decreased revenue from systems integration. So, many are still struggling against challenges in the market, such as minimized spending by clients, very little to no new construction in their territories, and heated competition, among other factors.
“The market was flat across all segments,” remarks No. 6-ranked Johnson Controls Inc., based in Milwaukee.
“The market was strong, but much more competitive, with overall gross margins declining,” states Genesis Security Systems LLC, Germantown, Md., ranked No. 34.
While the challenges and hurdles to better growth in systems integration revenue continue, there is no doubt that some improvement was seen between 2011 and 2012, and it continues into the current year. Among SDM’s Top Systems Integrators, 78 percent expect revenues to increase in 2013 compared with last year.