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February 2012 Vol. 34, No. 2
CONTENTS SSI’s annual security industry financial analysis and stocks report explains why the roller-coaster ride in 2011 ended on a sour note. Plus, find out why improved stock performance is projected in 2012.
— See page 34
❮❮ The Business Issue
34 Publicly traded security companies in 2011 suffered worse performance than Bears Take a Bite Out of Security Investors
reflected by major U.S. market indexes. Yet industry M&A activity grew year over year and is poised for continued growth in 2012. By Walter Bailey
STORY: P1 Makes National Accounts Priority No. 1 40 COVER Long one of the largest and best-known residential installation and monitoring providers, Protection 1 has had its share of ups and downs. Now an ownership change with celebrated CEO Tim Whall at the reins has P1 broadening its ambitions in the commercial marketplace. By Scott Goldfine
to Future-Proof Your Business 46 How Whether an owner intends to hold onto a security systems business long-
term, pass it down through generations or sell it, a solid plan is critical to build the value necessary to accomplish those goals. Getting down and dirty to implement and execute today can have you smelling like a rose tomorrow. By Dorsie Mosher and Steve Rubin
Control of Remote Video 50 Taking Remote video services help clients justify capital investments in securi-
ty surveillance systems and obtain valuable features unavailable via localized video solutions. Security contractors are in a prime position to generate new recurring revenue streams from this lucrative business opportunity. By Jerry Cordasco
54
8 Between Us Pros With Scott Goldfine Almost two dozen notions to help you run a finely tuned business operation.
12 Advisory Board Forum
Why “construction-minded procurement” undermines security deployment.
22 Convergence Channel With Paul Boucherle
Understand clients’ operation to produce business value for them.
26 Tech Talk With Bob Dolph
Techniques to properly bond and ground equipment and systems.
30 Fire Side Chat With Shane Clary
Fire/life-safety pros unite to stem false alarms, or face disconcerting consequences.
32 Monitoring Matters With Kevin Lehan Practical ways to touch the customer long after the initial sale.
70 In the Know With Jay Hauhn
Turn end users’ proprietary data into ROI gold with business intelligence systems.
72 The Big Idea With Ron Davis
Marketing insights to help you grow your brand.
76 Legal Briefing With Ken Kirschenbaum Entering into a buy-sell transaction? Learn fundamental steps to protect your assets.
High-Rise Scales Heights of Integration
An integrator designs a sophisticated security solution for a new, technologically advanced tower in Miami’s financial district. Video and visitor management systems, access control, turnstiles, and floor-specific elevator systems are controlled through software in a single location or in multiple areas on the network. By Rodney Bosch
◗ DEPARTMENTS
Cover photo by Protection 1
2
◗ COLUMNS
4 15 60 64 66 74
Security Exchange Industry Pulse The Essentials Building Your Business Ad Index MarketPlace
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Security Exchange Sounding Off securitysales.com
Nonresponse in San Jose Ignites Industry Powder Keg The recent news of the San Jose Police Department’s (SJPD) decision to no longer respond to unverified alarms (check out securitysales.com/indepth012012) has stunned the security industry. The following letters represent some of the reactions.—Ed.
In Vermont we took the bull by the horns and got this false alarm issue under control. It took a lot of work and we fired more than a few clients, but our efforts paid off. Clients not knowing their passcodes were the largest cause of false alarms. Our fix for this big problem was to make all user codes match the passcode. When a client is asked for their passcode from the central station and they don’t know it, they are then asked, “What code did you use to turn off your alarm?” When they realize this is the same as the passcode they are able to give the correct information … and a false alarm is avoided! This fix alone had a huge impact. LEE ACCAVALLO, CEO Royal Technologies Rutland, Vt.
“Our police department is choosing to deploy officers where they are needed the most.” You mean Dunkin’ Donuts and that sleepy street corner? It sounds to me like they just don’t want to work as hard. Twelve-thousand alarm calls in a year, that’s 1,000 per month, 30 a day in a city with a population just under a million. Come on guys, it’s not taking up that much time and resources. Police rarely go “where they are needed most.” Instead, they power trip and arrest people for smoking pot or peeing in the street. Yeah, that’s real work. HA! Most cops are idiots who couldn’t make it in the real world and trip when they get any sort of power and a gun. Not to pigeonhole 4
the REAL officers, but the majority are this way — especially the ones responding to alarm calls. Perhaps they should hire better candidates who actually want to work, rather than making it more difficult for the public to have police sent when they have an alarm. Way to go SJPD; let’s cut our costs while we raise that of our residents. Idiots unite! “ANON” Online post
All the while Next-Gen 911 is developing that recognizes text and emailgenerated alerts that cannot be verified. Another possible solution is video verification as some of the new automated realtime alert technologies include video. However, while an embedded video of an event would qualify as verification, as I understand it fixed cameras only present a limited view of the environment. And cameras that can be directed require an interface and training for the responders. Given the budget status, I find it unlikely either will be forthcoming soon. If fixed cameras are the default solution based upon the existing state-ofplay, then the many cameras needed for full coverage becomes a burden for the homeowner. Verified response is a hot topic nationwide and has been for many years. The percentages false positive/unverified alarms are shockingly high. They are in excess of 80% as I recall. In my opinion this speaks to the need for systems that utilize local private sector responding enterprises to augment 911. For example, intelligently communicate certain classes of duress events first to neighborhood patrols with triage to 911. RIK WARREN, National Channel Manager Lok8u Ltd. Atlanta
Peggy Onstad Publisher, ext. 477 Rodney Bosch Managing Editor, ext. 426 Paul Boucherle, Shane Clary, Ron Davis, Bob Dolph, Peter Giacalone, Ken Kirschenbaum, Jeff Zwirn Contributing Writers
Scott Goldfine Editor-in-Chief 114 Chatworth Lane Mooresville, NC 28117 (704) 663-7125 Fax: (704) 663-7145 Ashley Willis Associate Editor, ext. 419
Sr. Production Manager Sarah Paredes, ext. 497 Art Director Margery Young Audience Marketing Manager Katie Fillingame Staff E-mail addresses are firstname.lastname@security sales.com (e.g. scott.goldfine@securitysales.com) Contributors‘ E-mail addresses are secsales@bobit.com. HOW TO CONTACT ADVERTISING & MARKETING
■ West
Dynise Plaisance-Hiebert 3520 Challenger St. Torrance, CA 90503 (760) 519-5541 Fax: (310) 533-2502
■ East Peggy Onstad 3520 Challenger St. Torrance, CA 90503 (949) 305-5541 Fax: (949) 305-5549
ADVERTISING SALES TERRITORIES
Classified-MarketPlace Ads Peggy Onstad, (949) 305-5541 EDITORIAL ADVISORY BOARD Ed Bonifas, Alarm Detection Systems, Aurora, Ill. Bill Bozeman, PSA Security Network, Westminster, Colo. Shandon Harbour, SDA Security, San Diego Jim Henry, Henry Bros. Electronics, Fair Lawn, N.J. Michael Jagger, Provident Security, Vancouver, British Columbia, Canada John Jennings, Safeguard Security and Communications, Scottsdale, Ariz. Sandy Jones, Sandra Jones and Co., Chardon, Ohio J. Matthew Ladd, The Protection Bureau, Exton, Pa. Mike Miller, Moon Security Service, Pasco, Wash. Joe Nuccio, ASG Security, Beltsville, Md. Alan L. Pepper, Mitchell, Silberberg & Knupp LLP, Los Angeles Eric Yunag, Dakota Security Systems, Sioux Falls, S.D. HOW TO GET YOUR NEWS TO US E-mail: secsales@bobit.com Mail: 3520 Challenger St., Torrance, CA 90503 Fax: (310) 533-2502 FOR SUBSCRIPTION INQUIRIES (888) 239-2455 BOBIT BUSINESS MEDIA Edward J. Bobit, Chairman Ty F. Bobit, President & CEO (310) 533-2400 Printed in USA
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application articles, product notices, expert columns, blogs and much more. Whether it’s IP cameras, megapixel cameras, HDcctv, video management systems (VMS), DVRs, NVRs, servers, storage alternatives, compression, standards, systems integration, monitors, fiber, UTP, WiFi, mesh networks, etc. — you’ll have all the info you need at red-hot market by making the IP the click of a mouse. Join others Video / Surveillance Channel one who are equally serious about this of your primary online destinations.
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Fire Victim Blames Alarm Company for Defective System
Honeywell Security & Communications President Steps Down
CAA Seeks to Postpone San Jose’s Abrupt Move to Adopt Verified Response Policy
AICC: House Approves Bill That Could Increase False Alarm Dispatches
Report: Video Surveillance Sales Will Grow Despite Economic Uncertainty
SECURITY SCANNER®
Security Scanner® Web Poll Question:
What would you peg as your business’ projected growth rate for 2012? 20% OR HIGHER
10% TO 19%
5% TO 9%
1% TO 4%
FLAT
EXPECT TO SEE REVENUE DECLINE
40% 18% 21% 11% 5% 5%
If the outlook of respondents to the December Security Scanner Web poll comes to fruition, 2012 will be a bullish year indeed for electronic security businesses, and one most other industries would drool over. Nearly six in 10 (58%) expect to achieve growth of 10% or higher during the period, with four in 10 anticipating a whopping 40% uptick. Only one in 10 foresee status quo or things getting worse. For a look at how publicly traded security firms did in 2011, check out the report on page 34. For more insight in support of a robust year ahead, check out the “Hot Seat” interview on page 18. Log onto securitysales.com to view SSI’s Security Scanner archives as well as cast your vote for the February question: In which of the following areas do you believe your company could most stand to improve? BLOGS
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Some of the things we’re talking about …
For the latest news as it happens, sign up for SSI’s eControl Panel at www.securitysales.com
• Do the Yellow Pages Have You Seeing Red? • Payroll Tax Cut Extension: How It Affects You and Your Employees • How Integrators Can Handle the ‘Punch List Creep’ • AMAG’s Open House Opens a Door for Integrators to Strengthen Partnership • Candlestick Park Upgrade Hints at New Stadium’s Security Plan Engage in the conversation!
securitysales.com • FEBRUARY 2012
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Between Us Pros
23 Big Business Ideas
I
t caught me a little off-guard when Ron Davis, an icon I have had the pleasure of knowing since coming into the industry in 1998 and whose column runs in this magazine, asked me for my “Big Idea” (see page 72). How dare he turn the tables on me! I guess I shouldn’t have been too surprised since Ron
similarly put me on the spot some 10 years ago for his “Audio Insights” program. My answer then was offering bundled services, a strategy that not only has held up but resonates even more today. Ron’s recent inquiry really got me thinking, and this being our Business Issue I figured I’d share 23 additional ideas with you. 1. Attitude can trump experience — hire people with fire in their bellies. Skills can be learned and acquired; attitude is innate. 2. Lead by example — but don’t assume that is enough. Check in with reports and effectively communicate regularly. 3. Be disciplined and organized — multitasking is a way of professional life. Minimize what falls between the cracks. 4. Concentrate on core strengths — focus on what you and your business do best. Maximize those qualities as your differentiator. Mind the competition, but don’t let it distract you from your course. 5. Rely on experts for guidance — face up to what you don’t know, and seek assistance from those who do. 6. Control what you actually can — so much is out of your true control. Accept it, but optimize where you can effect change. 7. Solicit feedback on managers — it’s not enough to state an “open-door policy.” Proactively seek input on supervisors. 8. Respect the industry’s history — know the evolution of the business, technology, people, etc. A deeper understanding helps identify trends and avoid pitfalls. 9. Establish a true business plan — don’t fly by the seat of your pants. Plan, implement, execute, evaluate, adjust and repeat. Follow-through is essential. 10. Be proud of what we do — security and life safety are noble pursuits. Make sure that flows through your entire firm.
8
By Scott Goldfine scott.goldfine@ securitysales.com
11. Deliver real customer service — many talk the talk, few walk the walk. Continually monitor and improve. 12. Have responsive internal customer service — empower your people to take action, and don’t sweat them over small stuff. Knock down silos between departments. Corporate culture is critical. 13. Promote training everywhere — this includes making sure managers know how to manage. Often people ascend with no true managerial training. 14. Always be networking — build relationships with peers, among the community, other businesses, first responders, etc. 15. Join trade associations — support them at a minimum. Ideally, be participatory. 16. Be flexible and nimble — adapting to change is essential for longevity. 17. Provide career paths — a key ingredient to retain and motivate personnel. Don’t let them stagnate. 18. Favor quality over quantity — base offerings on value. Avoid selling on price. Don’t become a commodity. 19. Stay engaged with customers — communicate regularly to increase retention and upselling opportunities. 20. Reinvest in business — spend a buck to make a buck. Don’t just pull money out. 21. Be ready to sell tomorrow — maintain accurate records, accounts, etc. Have an exit strategy. 22. Let no one be indispensible — don’t allow your business to be overly dependent on any single person. 23. Keep things in perspective — remember what is truly important (people, values). The right reasons bring positive results. ■ Editor-in-Chief Scott Goldfine has spent more than 13 years with SECURITY SALES & INTEGRATION. He can be reached at (704) 663-7125 or scott.goldfine@securitysales.com.
securitysales.com • FEBRUARY 2012
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Tech Talk Board Forum Advisory
Security Demands Teamwork By Jim Henry jim.henry@kratos-hbe.com
T Inclusion in new construction specs shows that appreciation of the need for security has increased. However, the failure to treat it differently than traditional construction trades can be a major cause for end-user dissatisfaction with system functionality. Jim Henry is Executive Vice President of KRATOS|HBE.
he recent 10th anniversary of 9/11 prompted much discussion about how our country’s and the public’s opinion of security changed on that fateful day. Those of us in the security industry before 9/11 already had a keen awareness of the determination of criminals and terrorists to circumvent security processes and systems to achieve their objectives. That day the gap between our industry’s reality and public comprehension of the seriousness of threats we all face narrowed dramatically. The 9/11 tragedy radically raised the urgency to develop, enact and adhere to countermeasures. It also triggered demand for electronic security systems (ESS) to protect our vast infrastructure. That demand has driven a decade of development of technologies resulting in new and improved security products. Today, specifiers and integrators can design and implement ESS with much greater detection sensitivity, lower false alarm rates, greater availability of intelligent information, and detailed archived data for forensic analysis. Although positive indicators of security industry stability and growth, there is one change increasingly counterproductive to performance and end-user satisfaction. As the capital budget dollars appropriated for ESS rose, constructive collaboration on ESS design, deployment and commissioning by the consultant/specifier, integrator and end user was weakened by a “construction-minded procurement process” developed for civil projects. Although this has effectively served the construction and real estate industry for more than a century, it is not well suited for systems where configuration and programming have a material effect on functionality. It is very understandable how and why this problem has evolved. Prior to 9/11, a common frustration of security systems integrators was, “Security is underappreciated. It is
the last system to be deployed and the first to be cut. It is too often sacrificed by end users to free up funds to satisfy compliance and/ or invest in areas with a more defined ROI.” Inclusion of ESS in new construction specs shows that appreciation of the need for security has increased. That is very positive and I believe a direct consequence of 9/11. However, the failure (in most cases) to treat ESS differently than traditional construction trades can be a major cause for end-user dissatisfaction with functionality. Granted, security as an afterthought (pre9/11) was frustrating. However, in cases where integrators and specifiers were recognized by owners and end users as trusted advisors with subject matter expertise, collaboration on ESS design and deployment resulted in higher end-user satisfaction than systems today! In spite of today’s products being more accurate and stable, when they get “bundled,” installed and commissioned with little or no specifier or end-user involvement in the award and execution phase, the ESS falls short. Fixing this problem does not mean excluding ESS from construction specs. It incumbent upon key stakeholders of security systems to recognize new technologies and products are increasingly software-based with great capability and flexibility. Those advancements can exacerbate end-user dissatisfaction when the procurement process treats ESS as a construction trade. Others have also noticed this problem. Ray Coulombe formed SecuritySpecifiers (securityspecifiers.com) to help provide specifiers with resources for inclusion in construction specifications with importance equal to system functionality. When projects are awarded based on that balanced consideration, constructive collaboration is possible and end-user satisfaction is enhanced. ■
12 securitysales.com • FEBRUARY 2012
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Industry Pulse In Depth
Alarm Brokers Indicted for Duping Millions From Investors
©iStockphoto.com/Vladimir Cetinski
$2.4 loan to Firstline Security Inc., a of victims. The indictment handed ALBANY, N.Y. — Alarm industry infirm that generated alarm contracts. up on Jan. 26 by the federal grand vestors Timothy McGinn and David The indictment alleges that McGinn jury followed a two-year investigaSmith have been charged with fraud and Smith knew that Firstline was tion by the Internal Revenue Service in a wide-ranging federal indictfacing a lawsuit with its broker dealand FBI. ment that alleges they swindled miler, but did not reveal it to inlions of dollars from invesvestors, nor alert them when tors’ accounts and used the Firstline filed for bankruptcy money to support their lavand defaulted on loans. ish lifestyles. “Instead, the defendants A 30-count indictment that directed that investors reincludes charges of conspirceive $2 million of lulling payacy, mail and wire fraud, sements by transferring money curities fraud and filing false from other entities controlled tax returns was handed up by by McGinn and Smith, and a federal grand jury on Jan. their firm sold approximately 26. The following day, Mc$600,000 of one of the FirstGinn and Smith pleaded not line investments without any guilty to the charges. Both disclosure of the bankruptmen were released on their Alarm industry investors Timothy McGinn and David Smith were own recognizance after each indicted for allegedly swindling millions of dollars from investors’ cy or defaults,” according to a statement released by the Jussigned $100,000 bonds. At accounts and using the money to support their lavish lifestyles. tice Department. press time, no date had been Other counts relate to the IntegratThe alleged victims, many of whom set for further action. ed Excellence Trusts. McGinn and were inexperienced investors, were McGinn, the former CEO of Albany, Smith allegedly raised about $1.2 milunwittingly lured to invest in highN.Y.-based Integrated Alarm Serviclion from investors in connection risk securities and duped into believes Group Inc. (IASG), and Smith face with a loan to benefit Integrated Exing the accounts would safely yield up to 30 years in prison on allegations cellence Inc., which also generated high returns, according to federal they operated a years-long scheme inalarm contracts. The indictment alprosecutors. volving the misappropriation of at leges that McGinn and Smith were “It’s a terrible experience to have least $8 million in investors’ funds. Ataware the payments received from the trust you have placed in someone torneys for McGinn and Smith could the loan were not sufficient to pay inabused, especially when that person not be reached for comment. vestors. Again, lulling payments — a is someone who holds a position that McGinn and Smith operated Mcsmall amount of money paid to vicwould ordinarily be expected to be Ginn, Smith & Co., a registered brotims to avoid or delay discovery or trustworthy,” says SSI’s “Legal Briefker-dealer and investment firm that disclosure of the fraud — were diing” columnist Ken Kirschenbaum, a was put into receivership in 2010. In rected to the investors by transferring recognized alarm law expert and U.S. a related civil case, the Securities and money from other entities controlled Bankruptcy Trustee in New York. “We Exchange Commission (SEC) filed by McGinn and Smith. have certain expectations of those ena civil lawsuit against the long-time The indictment also accuses Mctrusted with our health and welfare. business partners, accusing them of Ginn and Smith of personally taking Licensed alarm professionals, though mismanaging $136 million in client nearly $3 million from investor acnot managing money, are expected to assets that were placed in unregulatcounts and using the funds for counsafeguard privacy and security.” ed, high-risk investment funds, intry club memberships in New York, The top federal counts against Mccluding a sex-themed cruise line. South Florida and Ireland, and to pay Ginn and Smith relate to Firstline SeThe SEC charged McGinn and mortgages on expensive homes in ries B Trusts, which raised money Smith with running a Ponzi scheme New York and Florida. from investors in connection with a that bilked money from hundreds securitysales.com • FEBRUARY 2012 15
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Industry Pulse Industry News
Kratos Said to Have Acquired IR’s Systems Integration Division SAN DIEGO — Kratos Defense & Security Solutions Inc. has acquired the systems integration business of Ingersoll Rand (IR), according to sources. On Jan. 3, Kratos announced on its Web site that it had purchased the systems integration business from one of its “primary competitors” for $20 million. While Kratos officials say they are not at liberty to name the business, sources tell SSI the company is Ingersoll Rand Security Technologies. When contacted by SSI, Anne Wages in IR’s corporate communications office, said in an E-mail the company is “in a quiet period and are unable to comment at this time.” According to Kratos’ announcement, the newly acquired business “designs, engineers, deploys, manages and maintains specialty security systems at some of the United States’ most strategic asset and critical infrastructure locations.” IR Security Technologies received a contract worth about $20.4 million in 2008 to install security solutions for Tow-
ESA Leadership Summit Underscores Pace of Industry Change IRVING, Texas — The Electronic Security Association (ESA) emphasized dual themes of growth and change at its 2012 Leadership Summit, held here Jan. 9- 12 at the Omni Mandalay Hotel. The event’s mix of educational sessions, membership meetings and networking opportunities underscored the association’s continued
The Electronic Security Association (ESA) hosted its 2012 Leadership Summit Jan. 9-12 at the Omni Mandalay Hotel.
emergence as a growing, responsive force in the electronic security and fire/life-safety industry. The event’s first day started with an open house at ESA’s new headquarters in Irving. Guests included local government officials and members of the business community. ESA continued its co-hosted format combining the Leadership Summit with the Electronic Security Integrators Forum (ESI Forum). Also, highlighted was the Diamond Awards Dinner, which showed impressive geographic diversity, honoring Chartered Chapters in Alabama, Arizona, Illinois, Utah, Virginia, Washington and Wisconsin.
er One (Freedom Tower) at the World Trade Center in New York City. IR’s list of high profile clients include Yankee Stadium as well several others in the banking and financial services market, according to sources. Ben Goodwin, president of Kratos’ PSS division, tells SSI the newly acquired business brings with it 265 employees and 15 regional offices. Although declining to confirm or identify the business, he said the acquisition includes regional offices in the following cities where Kratos currently does not have a presence: Atlanta, Boston, Charlottesville, N.C., Chicago, Detroit, Miami, Orlando, San Francisco and Toronto. The business also had a customer call center in Kansas City, Kan., which Kratos will continue to operate 24/7. The IR division was created mainly through acquisitions, including Dover Plains, N.Y.-based Electronic Technologies Corp. (ETC) in 2002 and Florida-based Security One Systems in 2005.
CSAA, SSI to Launch Five Diamond Marketing MARVEL Awards VIENNA, Va. — The Central Station Alarm Association (CSAA) and SECURITY SALES & INTEGRATION (SSI) have partnered to create the CSAA Five Diamond Marketing MARVEL Awards Program. Specifically geared toward central stations that have achieved CSAA Five Diamond certification, the new program will honor companies that creatively use their Five Diamond status to gain a com- CSAA and SSI launched the petitive edge in the marketplace. The program aims Five Diamond Marketing to educate all electronic security companies on best MARVEL Awards to help central stations leverage the prestimarketing practices, and encourage CSAA compagious Five Diamond certification nies to attain CSAA Five Diamond designation. in the marketplace. “We are excited to introduce this new award,” CSAA Past President Ralph Sevinor says. “Our partnership with SSI, one of the most well respected magazines in the security industry, will help to bring great visibility to Marvel award recipients, as well as the CSAA Five Diamond program.” The MARVEL award will be presented during the Icebreaker Luncheon at the 2012 Electronic Security Expo (ESX) in Nashville, Tenn. Interested parties can download the award application in mid-February on both the CSAA and SSI Web sites.
P1 Acquires in Calif. Desert Near Palm Springs INDIO, Calif. — Protection 1 (P1) has completed a fold-in acquisition of Custom System Technologies (CST) based here, near Palm Springs. Terms of the deal were not released. P1 will add about 1,100 customers (60% commercial, 40% residential) to its client base. The company will service the accounts from its branch in Riverside, Calif., P1 Vice
President of Finance Liz Neufeld tells SSI. CST’s roster of clients include Annenberg Foundation, Coachella Valley Unified School District, Embassy Suites Hotel, Wienerschnitzel Restaurants, among others. To read about P1 strategies in 2012 and much more about the company, see page 40 for an exclusive interview with its CEO, Tim Whall.
16 securitysales.com • FEBRUARY 2012
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Industry Pulse
HOT SEAT: Projecting 2012’s Industry Performance Will Schmidt is managing director of CapitalSource’s Security Lending Group, based in Los Angeles. In keeping with this month’s Business Issue theme, we sought Schmidt’s projections for 2012 as well his insights on current financing trends and challenges. Are you bullish on the industry’s prospects for 2012? Where do see real business opportunity? The companies we speak to seem to have done very well through the recession by controlling costs and right-sizing overhead in their business. It helps that many of the businesses have a large component of RMR, which anchored their business through those difficult times. But we are seeing many businesses already talk about an uptick in installation revenue and a thawing in the markets generally. I am optimistic that 2012 will be an improving year with growth on the top line from an installation perspective for many of the participants in the industry. I’ve been in the industry for 14 years and I would say now is as an exciting time as I have ever seen. The combination of pervasive, inexpensive broadband and wireless connectivity is really enabling a whole new suite of services to residential and commercial customers that are creating perhaps an unprecedented opportunity for alarm companies to command greater RMR for these services. Examples would include remote video monitoring, interactive residential services, energy monitoring, remote video in the home, managed access control on the commercial side. A bunch of these services are finally getting to the sweet spot where broad adoption is occurring. Financing has been very tight or even nonexistent for all but the most
Will Schmidt Managing Director, Security Lending Group CapitalSource
successful companies. Will that ease in 2012? The credit markets will continue to improve. [Installing security firms] with large recurring bases will absolutely continue to have plenty of interest from the banks and finance companies that participate in the security industry. On the integration side, companies that borrow on the basis of the earnings of their business — a multiple of EBTDA — did see more challenges to obtain those sorts of loans through the recession period. That is starting to ease up and I would expect that to continue improve in 2012. What financial factors determine the well-being of an alarm company? The No. 1 indicator of a company’s health is the attrition rate they are experiencing. There are so many factors that go into that. To name a few: How a customer is sold; how good the company is doing servicing the customer after they are sold; the competitive environment of their particular market. The second thing is the cost
to create the customer. That would be the dollars spent to install a new alarm customer minus the amount that the customer would pay divided by the amount of RMR that is created. Being able to create accounts at a rational cost is critical because that is where the value is created in the business and doing so efficiently is important. The last factor is the margin that the company has on monitoring and servicing their customers and making sure they are doing so efficiently and they are getting as much a profit from their existing account base as possible. So those are the top three factors, but there is another element which is incredibly important for any company: To have good, sound reporting and be able to demonstrate those numbers. Having a good accounting system and the ability to track the amount of RMR put on and canceled in a month, and have sound attrition reporting with backup for all these reports that can be audited, is incredibly helpful. It is good not just for when you want to raise capital with a debt provider, but it is also helpful if you ever want to sell your business or do any sort of any other capital market transaction. It’s also incredibly helpful to know all these metrics and be able to manage those metrics. I would encourage anyone, whether they need financing or not, to make sure they have sound internal reporting and make the investment in personnel and systems. Make sure you are tracking what is probably the most valuable asset in your company — the RMR base.
FIND IT ON THE WEB F For much more from our conversation, visit F the Hot Seat at securitysales.com/hotseat.
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Industry Pulse DataBank
Rising Demand for Service Quality, User Experience Increasingly, electronics consumers expect much more than quality devices; they desire a quality experience. That trend is supported by consumer research conducted by IBM, which found that with the proliferation of connected devices and increased network accessibility, consumers are demanding high performance and enhanced, integrated device experiences. Vendors, and by extension dealers and integrators, must focus on providing consumers with products and associated services that ultimately transform the way they live, work and entertain themselves.
Top Purchasing Influencers 82% 85%
79%
◗SECURITY CIRCUIT
Future purchases
Past purchases
82% 66%
69%
63%
69%
71%
69%
63%
68%
60%
59%
59%
65%
SSI will host its 17th annual SAMMY Awards March 27 in Las Vegas.
Feb. 27-29: World Game Protection Conference & Expo — Las Vegas; worldgameprotection.com; (702) 407-9900. March 1-3: National Systems Contractors Association (NSCA) Business & Leadership Conference —Dallas; nsca.org; (800) 466-6722. Price
Product specification
Brand
Design
Internet Device connectivity interoperability
Content/ service availability
Customer service
Consumers consider a variety of factors when making electronics purchasing decisions. Price and specifications are key factors. However, a shift is afoot in what consumers will consider when making future purchases. An increasing importance will be placed on all purchasing criteria. In particular, the importance of Internet connectivity rises, surpassing both brand and design. Device interoperability, service availability and customer service also gain greater importance. Source: IBM
Growing Demand for Service Quality Scope for improvement
Service quality satisfaction level
March 6: Aronson Security Group (ASG) Security Summit & Expo — Seattle; aronsonsecurity.com; (512) 358-4411. March 27: SSI’s SAMMY Awards and Industry Hall of Fame Induction Ceremony — Sands Expo & Convention Center in Las Vegas; thesammyawards.com; (310) 533-2426. March 28-30: ISC West; Sands Expo & Convention Center in Las Vegas; iscwest.com; (800) 840-5602.
Stable provision of services
56%
Did You Know?
Provision of user information
56%
Dealers are charging
58%
Number of services
Usage support
54%
Account management
53%
%
9 less
52%
Device interoperability
46%
Interaction with service provider
44%
Interaction with device manufacturers
0%
50%
100%
Consumers are demanding vast improvements in service quality. When asked to rate satisfaction with aspects of services they are currently using, consumers rated most at roughly 50%. There is much room for progress in all aspects of service, in particular those relating to how service providers and vendors interact with consumers. A big bulls-eye of opportunity here awaits those providers that can best connect with consumers in order to meet or exceed their service expectations.
for access control installations and averaging the same number of openings (seven) as they did in 2010. Find more SecuritySTATS at www.securitysales.com/securitystats
Source: IBM
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Convergence Channel
The Keys to Unlocking Your Client’s Castle Making noise about product capabilities alone will not convince or produce added business value. Instead you must roll up your sleeves and do your homework about your customer’s business operation.
T
his month I shall endeavor to brighten up your cold winter doldrums by taking a festive and interactive, multimedia approach to this column. So fire up your computer or smartphone and view this video clip: youtube.com/ watch?v=rzcLQRXW6B0. Watch it at least twice. Fair warning; it features Monty Python.
By Paul Boucherle paul@matterhornconsulting.com
around integrated security solutions often seems like the search for the Holy Grail. Enlisting help in seeking the Grail can be challenging. It seems everybody is too busy guarding their castles. It will continue to be difficult when we approach opportunities the same way each and every time. Knock on lots of castle doors and the conversations may result in a response like the one King Arthur had. The bottom line is you don’t always have to storm the castle walls or banter with gatekeepers over logic, justifications and value. There is a better approach and it starts with changing your perspective.
©iStockphoto.com/Anton Brand
Don’t Bring the Noise
You don’t have to storm castle walls or banter with gatekeepers over logic, justifications and value. There is a better approach and it starts with changing your perspective.
While British humor may escape you, the points I will hopefully make will not. For you Python fans out there, you are likely already familiar with this scene from the classic “Monty Python and the Holy Grail” where King Arthur gets caught up in a debate about the migration of swallows while trying to gain access to a castle. How is this relevant? Because building added operational business value
Consider for a moment the classical marketing hype vs. operational performance dilemma so well portrayed in the video clip when King Arthur “rides” up (on foot) to the castle to seek recruits for his Holy Grail quest with his trusty sidekick, Patsy, deftly using coconuts to mimic the sounds of galloping horse hooves. It sounds great at a distance, but up close does it work in reality? That depends on your perspective of looking up a castle wall at your customer or down at someone who wants to get inside your castle. Rethink how you can build your credibility with new and most importantly existing customers to help them lower their drawbridges and invite you in. Making noise about product capabilities alone, no matter how enthusiastic, will not convince or produce added business value. It may even make it more difficult for sales teams
to build operational business value. A technical or specification approach alone may create artificial moats around the castle you seek. It’s human nature to be a little skeptical when standing guard on the castle wall, but it’s darn prudent when it comes to managing your budgets and career. Instead of banging coconuts together, you must roll up your sleeves and do your homework about your customer’s business operation. Business value is in the eye of the beholder. Perhaps an example would help our quest.
Learn Clients’ Business Inside/Out I will use the “quick serve” restaurant segment as an example. I have a fair amount of experience working with security professionals in that market. Some of the best are innovative, intelligent, don’t pull punches, are business savvy, and hate coconuts! They include Gene James of Food Makers and Christopher Manning of Wendy’s. They taught me how to look at their business differently and from their unique business perspectives. I listened and learned. What do you need to do to understand the operational issues your customers face, so you can help create operational and security value? Step back and find the relevant operational and security issues that are indigenous to the markets you serve. Unlike the coconuts King Arthur used to simulate credibility, you must earn it from credible mentors. Characteristics that describe the business profile and operational needs of the quick serve market include: multilocation,
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Convergence Channel pure logistics is certainly one of them. When you are responsible for 30-40 locations, you have distance, time, investigations and travel that can impact your operational performance. As a smart systems integrator, your challenge is to optimize these factors. While these factors vary Business value is in the eye of the beholder. You must based on needs, schedules and roll up your sleeves and do your homework about your events, they are a metric that customer’s business operation. Understand the operational issues your customer faces so you can help create can be measured or quantified in ranges of numbers. Have a both operational and security value. dialogue to create some baselines that any solution should seek to resmall footprint, high volume, food safeduce, optimize, streamline or improve ty, brand protection, well developed de(think ROSI). This is a good start. livery processes, high cash transaction rates and very tough competition. They must be operationally (business) solid How to Offer True Tangible Value and profitable (security) to survive. Next, let’s talk about migrating vidLet’s say you are a regional security eo technology that, unlike coconuts, or operational manager for one of these can be readily found in nearly every chains; you have many challenges, and market segment today. There is virtu-
ally no limit to the different video migration paths we can select. What is interesting is the quick serve segment was underserved from several perspectives by the video security industry for years. The reasons for this become apparent when we consider some of the business drivers faced by quick serve companies: price efficient buying; standardization of process; employee turnover rate and training; cash handling business; operational performance per store; and dynamic operational environment for installation and service. With the options being the cheapest commodity DVR, expensive complex NVR or more recently video surveillance as a service (VSaaS), guess which won out most of the time? The choice when budgets were impacted was clear. The problem, of course, was video quality, availability with downtime,
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surprises of no video available when least expected and consistency of service, which this market considers a given. Bandwidth and connectivity to stores historically may have been an issue that precluded networked-based solutions. Installation and service scheduling has been another big issue with dynamic store activity and food delivery cycles. Finally, integrating of changing third-party point-of-service (POS) data streams with analysis and operational data were basically beer talk at the end of the day; possible but not really probable. So what changed? To continue the Monty Python references: the laden airspeed velocity of African swallows. All it took was a company with a different or fresh perspective — one that took time to learn the business challenges to tailor product offerings that met the operational added-value needs.
Innovative Provider Prevails Louisville, Colo.-based Envysion (envysion.com) is a good example of a company that focused on learning the operational value proposition of this market. This provider recognized an underserved part of the market and addressed price, position, purpose and simplicity of technology in delivering improved operational capabilities in the following ways: • Pricing: slightly higher than lowend DVRs and lower than featureladen NVR offerings • Positioning: added actionable thirdparty POS data intuitively with video data • Purpose: addressed the needs of both security and operational managers for training • Simplicity: really easy to use, configure, install and maintain. The solution Envysion offered had some unique operational features
such as integrating the POS register data with the video, not just overlaid but rather integrated and searchable to save time. The firm also integrated PCI compliance to protect credit card data two years ago when virtually no DVR makers offered that feature. Finally, the company recently announced an alliance to offer solutions bundled on Sony laptops. Simple, effective, purpose-built and saves time. How do you like them coconuts? Apparently the quick serve market has responded quite favorably. Remember to use your coconuts to think about creating operational efficiencies through security solutions, and not just making noise like Patsy does for King Arthur. ■ Paul Boucherle, Certified Protection Professional (CPP) and Certified Sherpa Coach (CSC), is principal of Canfield, Ohio-based Matterhorn Consulting (www. matterhornconsulting.com). He has more than 30 years of diverse security and safety industry experience and can be contacted at paul@matterhornconsulting.com.
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Tech Talk
Making Sure Your Installations Are Firmly Grounded For both safety and compliance reasons, the proper bonding and grounding of equipment and systems is essential. Find out what is required by the most recent codes and how to satisfy picky inspectors.
T
he practice of proper electrically bonding and grounding equipment is a topic that often confuses techs in the field. For more than 15 years we have been instructed to electrically bond separated systems together, but absent was better guidance on just how to accomplish that. This practice is important mainly for the safety of technical personnel, us-
ers and system equipment. So in addition to looking at developing better bonding and grounding strategies, we’ll note some of the relevant changes that have taken place in the National Electrical Code (NEC, also known as NFPA 70). Even experienced techs can benefit from reviewing techniques that make for smooth, compliant and successful installations.
By Bob Dolph bdolph.ssi@gmail.com
High Priority Even for Low Voltage When inspectors place emphasis on bonding and grounding, it’s typically for high voltage or “line voltage” electrical equipment of 120-240VAC. On the other hand, the security industry deals primarily with low-voltage equipment, and there is often the misconception that bonding and grounding and the NEC have nothing to do with lowvoltage equipment. This can cause a rude awakening for a tech when it results in an electrical inspector rejecting an installation. The fact is bonding and grounding affects the overall integrity of any system and ensures it is electrically safe. Since the NEC mostly emphasizes rules pertaining to line and high voltage, low voltage can mean anything below 30 or 50 volts. Unfortunately, this is often not very clearly explained. As a point of reference, articles covering low-voltage and power-limited devices, wiring, and systems are generally contained in Chapters 7 and 8 of the NEC. However, Chapters 4 and 5 contain the requirements for Low-Voltage Lighting (Article 411), Intrinsically Safe Systems (Article 504) and Sound Systems (Article 640).
Definitions and Methods
Courtesy ERICO
ERICO’s ERITECH intersystem bonding termination bar is a good example of using a specially designed device to bond separate systems for compliance to the NEC.
Let’s now define what is meant by the terminology of bonding and grounding, and the differences between the two. Grounding refers to connecting the noncurrent-carrying, accessible parts
26 securitysales.com • FEBRUARY 2012
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Major U.S. cellular carriers have made their stance clear:
The 2G Sunset has started. If you install a GSM or GPRS based product you will be forced to replace it with a modern 3G one within a few years. For the average security dealer, this will amount to thousands of dollars of revenue spent on truck rolls and replacement equipment. To avoid the sudden impact of the next sunset, switch to 3G products today.
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Tech Talk
TECH TALK Tool Tip
Courtesy Mike Holt Enterprises
One of the best ways to stay in tune with changes in the National Electrical Code (NEC) is through quality training and reference material. That is why this month I am featuring one of my favorite programs: the Mike Holt Enterprises Series of illustrated guides. I have personally attended Mike’s code and license preparation programs. This material is well worth a serious look for upgrading the professional arena of your business. Make sure to check it out at mikeholt.com.
Mike Holt Enterprises offers a wealth of educational and training books, DVDs and other materials aimed at electrical professionals and others allied to the field.
of electrical circuits to ground (earth) as protection from hazards such as electrical voltages, static charges, voltage spikes, or inadequate insulation. Bonding refers to the connection of various ground circuits to a common grounding electrode system to avoid voltage potentials between them. When grounding a system, even low voltage, you must have a good earth ground. This is typically a grounding rod of at least five feet in length. The most common place for this is the system demarcation point at the perimeter of the building. That is also a good spot to attempt to deflect lightning surges on the system. Security system manufacturers take great effort to provide equipment with lightning surge suppression. However, these protection devices will not work properly without a good earth ground. Even if you think your AC line voltage outlet is a good ground you had better double check to make sure. Do you always have to drive your own ground rod? Not really; you alternatively electrically bond your equipment to another local system that has a good ground. In turn, all systems will then have reference to a good earth ground. Remember, according to the NEC, the distance of that bonding connection cannot be longer than 20 feet, there must be a common ground point (see photo) and the correct gauge conductor (not smaller than 14 AWG) must be used. Also, don’t forget that most exterior cold water and utility pipes, such as
gas service, cannot be considered a reliable earth ground. Many of those conduits, such as that connected to water faucets, use insulated PVC piping below ground. (NOTE: The term grounding conductor previously used in Article 800, NEC has been replaced in NEC 2011 by either bonding conductor or grounding electrode conductor (GEC) where applicable to more accurately reflect the application and function of the conductor.)
Tips for Passing Inspections Many of us have learned to use the NEC book as the bible for meeting electrical code applications for our installations. However, you may run into situations where the selection and/or application of a particular UL product is questioned. The electrical inspector (AHJ) may declare that a listed device in your bonding and grounding application does not meet code. A good FREE reference source to help avoid this situation is the UL White Book (download at www. ul.com/global/eng/pages/offerings/perspectives/regulator/electrical/newsletters). Version 2011 is the latest, but older versions are available as most likely these are being used by your AHJ. Additionally, don’t forget to check UL University for its latest 90-minute online “Understanding the UL White Book” training session. It is a free selfpaced, hands-on interactive course that is an invaluable resource for electrical inspectors, installers, electrical
designers and counter staff at the local electrical supply house. It will walk you through the steps to achieve a codecompliant installation using UL Certified products. Remember, if you are cited by an inspector the reason may not always be correct and resources such as the UL White Book can help you defend your position. Also be sure to ask the inspector for a NEC article reference when he/ she challenges your supposed installation violation. While we are discussing the latest NEC cycle of 2011, it is not uncommon for AHJs and inspectors to be slow to transition to newer codes. They may still be adhering to older cycles such as 2005 or 2008, so make sure to you know what version of NEC they are using. In the past, you could only reference the NEC if you had purchased a copy from the National Fire Protection Association (NFPA). One of my biggest beefs has been that if you are required to comply with this code, you should not have to pay for standards material to reference it. Great news … you can now read several versions of NFPA 70 and other standards online for FREE. Go to nfpa. org and select NFPA 70 in the List of NFPA Codes & Standards section.
Products Can Simplify the Process To conclude this month’s topic, I urge learning to use new products that help you conform to requirements such as bonding and grounding. An example is the ERITECH intersystem bonding termination bar (IBTB) from Solon, Ohio-based ERICO (erico.com), whose fasteners and connectors I have often talked about. When visiting that Web site, be sure to check out the code compliance chapter in the ERICO Low Voltage Fastener 2011 catalog (LT0405) and the IBTB intro video. This will give you better insight into the applications. ■ Bob Dolph has served in various technical management and advisory positions in the security industry for 30+ years. To share tips and installation questions, E-mail Bob at bdolph.ssi@gmail.com. Check out his Tech Shack blog at www.securitysales.com/blog.
28 securitysales.com • FEBRUARY 2012
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Telguard is evolving to 3G. To protect our customers from the negative impact of the 2G Sunset, Telguard’s existing product lines are completely transitioning to 3G. Every time you install a Telguard 3G cellular alarm communicator for residential, commercial or PERS, you’ll know that’s one less customer you have to worry about when the upcoming 2G Sunset arrives.
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Fire Side Chat
Alarms Need to Stop Crying Wolf It is a sad and troubling fact that many people react to fire alarms with indifference. It’s critical everyone associated with the life-safety mission put forth a committed and coordinated effort to reduce false or unwanted alarms, and in doing so restore the public’s faith in electronic fire detection.
R
fact, operations appeared to be normal, with the exception of the flashing strobes and temporal code 3 coming from the notification appliances. A single fire engine from the Orange County Fire Authority was dispatched to the facility. When I noticed the firefighters were departing I asked if it was safe to enter, which they said it was. The cause of the alarm was construction near a smoke detector. In another incident toward the end of November and during a broadcast
©iStockphoto.com/aleksandr-mansurov-ru
ecently, as I was entering John Wayne Airport in Orange County, Calif., the building’s fire alarm began to sound. At the time of the event (around 5:30 p.m.), there must have been close to 1,000 people inside. However, as far as I could tell, besides myself there was only one woman who departed from Terminal B. The alarm probably sounded for 15 minutes and yet there was no mass of humanity gathering outside. In
Let’s stop crying, “Wolf!” Our industry has an obligation to provide fire alarm systems that the public will see as reliable and not have the first thought be that an alarm must be false. This will require a concerted effort over time but the payoff in saved lives will be priceless.
By Shane Clary smclary@bayalarm.com
of the “NBC Nightly News,” the fire alarm went off at the 30 Rockefeller Center Building that the network uses in part for its New York studios. Anchor Brian Williams continued to broadcast the news, and offered an on-air apology for the fire alarm going off in the background. This can be viewed on YouTube. Research shows people will wait for a second verification that an alarm is “real” before leaving a building. Indications of a real fire alarm would be things such as smelling smoke, or seeing smoke, flames or other people leaving the building. On the occasions where I have been in a building in which the fire alarm system has activated, even I have thought, “Is this a real alarm?” In two cases, I have been in a building in which the alarm was from an actual fire, both times being hotels. Fires do occur. Fire alarm systems do detect fires and they do provide notification to individuals within the building to take heed and evacuate. The problem is that fire alarms can also be false. This could be due to a building contractor not having smoke detectors removed for service prior to construction, sprinkler contractors or facility personnel failing to notify a supervising station prior to working on a sprinkler system, manual stations being pulled for no reason, or a host of other causes. It’s time for us to face this music and sing a different tune.
30 securitysales.com • FEBRUARY 2012
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Trade Targeting Unwanted Alarms The number of unwanted alarms has become a major topic within the International Association of Fire Chiefs (IAFC). During the proposal and comment cycle for the 2013 edition of NFPA 72, The National Fire Alarm and Signaling Code, IAFC submitted a number of proposals and comments in an effort to reduce the number of unwanted alarms. It is the position of the chiefs that responding to the fire alarm activations are a drain on vital resources, and places both firefighters and the public at risk with engines going Code 3 to an alarm. While the majority of these proposed changes to NFPA 72 were not accepted by the technical committees that received them, several were pushed through. The proposal that raised the most controversy dealt with allowing a supervising station to verify an alarm signal from a commercial location within 90 seconds of receipt. This would be similar to the allowance now within NFPA 72 for single-family dwellings. The Technical Committee for Supervising Stations, along with representatives from IAFC, hammered out a compromise that will allow local jurisdictions to “opt in” for verification. Last summer the National Fire Protection Association’s (NFPA) research foundation held a summit co-sponsored by IAFC and the U.S. Fire Administration on the reduction of unwanted alarms. Also participating in the meeting were the Central Station Alarm Association (CSAA), Automatic Fire Alarm Association (AFAA) and Electronic Security Association (ESA). A day was spent in discussions on steps that can and should be taken for the reduction of unwanted alarms. A follow-up summit is being contemplated for later this year. While alarm verification may reduce some unwanted alarms, the provisions found within NFPA 72, when
followed, will reduce these sorts of alarms. While this short article cannot be a complete tutorial for those requirements, I have included a sidebar that lists critical steps for reducing unwanted alarms.
Critical Steps for a Better Future
vironment that would be hostile to the detector, false alarms will still occur. Building owners, various service providers and occupants must also take steps so as not to generate an unwanted alarm. The alarm that occurred at the John Wayne Airport could have and should have been pre-
The changes to the way people react to a fire alarm 8 Ways to Fight False Alarms signal will not change over1. Qualified designers night. Public education will 2. Qualified installers and service personnel be required to get the word 3. The correct detector for the environment out that the alarm signal you 4. Inspection, testing and maintenance of the system are hearing could legitimately indicate there is a fire within 5. Owner education the building. Fire alarm sys6. Adjustment of water-flow detection to account for tems are installed to provide local water surge early detection and notifica7. Duct detectors programmed as supervisory devices tion so building occupants 8. Tagging of water suppression systems of who to call can leave while there’s still an prior to service opportunity to do so. Fires occur in buildings every day; it is not that unusual of circumstancvented by having the smoke detector(s) es. Human nature seems to go along in the area of construction temporarthe thought process that a fire could ily removed from service. Fire alarm never happen in this building, so it contractors and systems integrators must be false. need to coordinate with building ownThe fire alarm industry must work to ers when tenant improvement work educate the public that when you hear takes place. The probability of a cona fire alarm, it is time to leave the buildstruction-related false alarm must be ing. But before this education will resreduced while at the same time not onate, the fire alarm industry and syscompromising protection of occupants tems integrators must strive to design, within the building. install and maintain fire alarm systems Our industry has an obligation to that are not prone to unwanted alarms. provide automatic fire alarm systems In addition to new systems, efforts that the public will see as reliable and must be made to decrease unwantnot have the first thought be that an ed alarms from existing systems. This alarm must be false. Fire departments would include but not be limited to are likewise obligated to treat those testing in accordance with NFPA 72, alarms as having a high probability of replacement of devices, appliances, being an actual event as opposed to an wiring and components, and the posunwanted activation. This will require sible relocation of detection based on a concerted effort over time so when the existing environment within the an alarm is activated occupants will protected premises. take notice and evacuate or relocate Technology has changed through the to a safe location. The payoff in saved years, so the system types installed tolives will be priceless. ■ day are not the same as those installed Shane Clary, Ph.D., has more than 37 years of security 10, 20 or 30 years ago. Smoke detecand fire alarm industry experience. He serves on a tors are less prone to unwanted alarms, number of NFPA technical committees, and is Vice President of Codes and Standards Compliance for but if installed incorrectly or in an enPacheco, Calif.-headquartered Bay Alarm Co.
◗
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Monitoring Matters
Keep Selling Even After You Close the Sale
M
arketing communication with your alarm system customers should not only happen during the presale stage, but throughout your professional relationship. Continuous communication with your customers will help lengthen your affiliation and often result in additional sales opportunities after customers realize they need a service your company provides. For example, consider the young family that selected your company to install a simple, yet effective, alarm system right after they bought their first house a few years ago. What if
present them ideas by continuously promoting the services you offer.
By Kevin Lehan k.lehan@emergency24.com
Easy Ways to Touch the Customer
Nearly all of the new services that come to market are originated at the central station level, and those companies have a responsibility to develop interest in their new offerings too. However, once an alarm dealer chooses to incorporate a new technology into its company’s offerings, it becomes that business’ job to sell the service to its customers, with support of the central station. In addition to a comprehensive Web site, the most efficient, cost-effective way for an alarm Don’t expect customers to look contractor to mainfor ways to spend money with tain an ongoing your company. You must present sales conversation them ideas by continuously with its customers promoting the services you offer. is to include printed materials about the firm’s complete line of products and services with hard-cothat family now has a child entering py billing statements. the home alone after school? CertainAnother popular format to promote ly, mom and dad will be more comtwo distinct ideas is a letter sheet cut fortable knowing they can receive an in thirds with printing on the front and alert when this happens — or if it does back. In most cases, a glossy letternot happen. Those parents might even sized sheet folded in thirds and addbe enticed to go a step further and leed to a billing statement in a standard verage video technology to look in on No. 10 envelope remains less than one their child from a secure Internet conounce, meaning that postage will not nection. Others may even be inclined increase for that quarter’s mailing. to use GPS technology to track their These types of end-user material youngster’s whereabouts at all times. are usually offered by central stations Obviously, as a security professionfor the purpose of helping you grow al, you know there are products and your business. By eliminating the cost services that enable each of these caof material development (content and pabilities quite easily. But do your cusprinting) and with no extra postage retomers know this too? Don’t expect quired, why not take advantage of a customers to look for ways to spend free post-sale marketing campaign? money with your company. You must
Utilizing Customized Content It is important for alarm contractors to carefully select the materials used in a post-sale marketing campaign, which could mean segregating your commercial and residential accounts to receive distinctly different messages. The reason is that homeowners are not interested in solutions for large-scale agricultural facilities and, conversely, the director of corporate security is not interested in learning about personal emergency response service (PERS) for the elderly — at least not at work. Other factors to consider are your geographic location, as well as the season of the year because the immediate concern of drifting snow banks that block air vents (resulting in a carbon monoxide buildup) is not very high in Miami or the rest of the United States during peak summer months. The point is: To maximize the effectiveness of a post-sale marketing campaign, you must provide customers with relevant and timely information that will make an impact as soon as they read it. It is the collective alarm industry’s job to continuously educate customers about the services we provide. Although a Web site is a component of this ongoing education, printed materials remain the most effective. ■ Kevin Lehan is Manager of Public Relations for Des Plaines, Ill.-based Emergency24 Inc. He also serves as executive director of the Illinois Electronic Security Association (IESA).
32 securitysales.com • FEBRUARY 2012
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Δ∇TThe Business Issue INDUSTRY FINANCE
BEARS Take A
©iStockphoto.com/Nick M. Do
BITE Out of
Security Investors Publicly traded security companies in 2011 suffered worse performance than reflected by major U.S. market indexes. Yet industry M&A activity grew year over year and is poised for continued growth in 2012.
M
By Walter Bailey
any electronic security industry firms and observers wonder what happened in 2011. Stock prices were down and valuations experienced compression; while industry sales were generally up and most profit levels remained relatively solid. It appears the aftershocks from the 2008-09 financial crises and the ongoing global debt/budget concerns proved too much for this historically strong industry segment. Where 2010 was a year when security sector stocks performed well and finished the year strongly, the industry enjoyed no such repeat act in 2011. Stocks got off to a good start and maintained that performance through most of the second quarter. During the summer months all markets experienced a deep sell-off, but security stocks never recovered.
For 2010, industry stock prices closed aggregately trading at 85% of component companies’ 52-week highs, whereas 2011 yielded a disappointing 71% end point. Industry stocks finished the year down approximately 9%. By comparison the Dow Jones Industrial Average finished +5%; the S&P 500, -1%; and the NASDAQ composite, -5%. So why didn’t industry stocks regain their footing? Certain macro fundamentals are changing the industry and therefore impacting participants’ valuations and performance. The overall industry is concurrently experiencing revenue stagnation in legacy markets; increased convergence with the defense and IT sectors; competition against those and other new entrants
34 securitysales.com • FEBRUARY 2012
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ANNUAL SECURITY INVESTING ANALYSIS
Security Industry Index Vs. U.S. Equity Indexes 115
110
105
100
95
90
85
80
75 Jan-11
Feb-11
Mar-11
Apr-11
May-11 Security
Jun-11 Dow Jones
Jul-11
Aug-11
Sep-11
NASDAQ
Oct-11
Nov-11
Dec-11
S&P 500
The above 2011 indexed price performance illustrates how the security industry followed a similar up and down path in the first part of the year. During the summer months all markets experienced a deep sell-off; however security stocks never recovered. Source: CapitalIQ
for slow-growing revenues; and suffering due to a continued reliance in U.S.based markets on material public-sector economic support. Not surprising, with valuations off, there was a significant amount of strategic and opportunistic mergers and acquisitions (M&A) activity. Buyers consisted of legacy industry companies, IT companies, defense primes, as well as new entrants and financial buyers. For 2011, aggregate deal values and volumes rose. The financial and investment well-being of the security industry is detailed here in SECURITY SALES & INTEGRATION annual stocks report. We examine the financial performance of the industry for 2011 and offer some perspective on what can be expected in 2012.
Large Caps Delivered Stability Let’s start in by examining which security market segments (as measured by equity market capitalizations) were worst hit in 2011. As you’ll see, the scale of capital played a key role. Smaller stocks suffered more than their larger capitalization peers. Large-
cap firms finished the year with an almost 2% gain, beating the S&P100 index by almost 3%. Mid-cap companies lost approximately 19% of equity value versus their comparable index, which was down less than 5%. Smallcap companies were worse off, respectively losing approximately 23% (their comparable index was off 7%). Hardest hit were micro-cap companies, which collectively experienced a more than 31% contraction in equity value. The broad market axiom of safety in larger capitalization stocks proved out. Large caps experience less volatility and therefore may not enjoy huge gains, but nor do they experience such acute fall-offs when selling occurs. Some of these results were impacted by aggressive share repurchases where companies saw the opportunity to buy their shares at discounted values. Also impacting the results were capital markets that remained relatively closed to issuers for much of 2011.
Industry Sector Performance The chart titled “2011 vs. 2010 Security Sector Performance” on page <TK>
shows the harsh realities of where valuation multiples for individual industry sectors ended in 2011. The only sector to turn in positive year-over-year gains was Credentialing/ID Solutions. For Alarm Equipment/Physical Access companies, equity values contracted approximately 15%, driven in part by an almost 20% contraction in sector EBITDA (earnings before interest, taxes, depreciation and amortization) margins. Notwithstanding Kaba’s margin improvements, lower revenues drove the stock down. In contrast, NAPCO’s return to profitability yielded year-over-year stock appreciation of 40% and thereby outperforming much of the rest of the pack. Despite a double-digit increase in sector sales, Asset Tracking/Intelligent Traffic Systems companies experienced an average decline in equity values of more than 30%. Sector heavyweight Trimble was the sole price gainer, in part due to year-over-year revenue and margin gains. Many sector companies have very strong margins but weak valuations, suggesting a vulnerability to opportunistic M&A.
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C4ISR/Threat Detection firms saw sector sales increase slightly and margins were up, but sky-high valuations came down as markets penalized outliers. More than 15% of sector companies used the depressed markets to repurchase shares they felt were undervalued. Cepheid turned in an impressive 61% gain in equity value on the back of margins increasing by 20%. The big disconnect in the sector was Kratos Defense & Security Solutions, whose stock was down 16% despite having turned in sales growth of 53% and EBITDA growth of more than 95%. Corrections, Guarding & Investigations companies had increased sales but also modest margin contractions. Unlike many other sectors, this group’s larger players were able to shore up equity capital losses via borrowing. Again, share repurchases contributed to noise in the numbers with Corrections Corporation of America (CCA) repurchasing almost 10% of its outstanding shares. The sector surprise was The GEO Group Inc., which delivered in excess of 30% sales and EBITDA growth, although its stock fell more than 30%. Pureplay guarding companies Brink’s and Alarmforce were the only equity value gainers highlighting a market bias against government-driven revenues. Credentialing/ID Solutions saw sales rise driving valuations and equity values to increase despite modest shrinkage in margins. This was the only sector to have no stock repurchases. Authentec was the big winner with a value gain exceeding 50%; sales rose almost 50% and negative EBITDA was cut by more than 50%. SafeTic appears to have been wrongly punished givens its attractive recovery and growth prospects. Large Cap/Defense Primes experienced increasing sector sales and margins, and they similarly held onto equity values. Overall sector equity value shrank due to 50% of participants effecting share repurchases, with almost 15% of these firms repurchasing more than 10% of outstanding shares. Goodrich was the positive outlier, trading high off its merger announcement value of $16.4 billion. On the downside, SAIC’s margin
contraction of 24% drove an almost 25% decline in equity value (also contributing was SAIC’s repurchase of more than 8% of its outstanding shares). Safety/ Protection companies saw sector sales shrink by more than 5%, but margins held and expanded for some firms. Overall, sector equity values contracted a punitive 20%. As an example, OshKosh’s valuation was off 39% as a result of the 15% drop in revenues and an almost 50% fall in EBITDA margin. Mine Safety delivered the best performance with a 7% gain in equity value due to 40% margin gains and an 18% revenue gain. The Security/Defense Integrators sector’s average margins dipped below 10% (the lowest average in the industry) and sales rose only modestly, putting pressure on equity values. Sector equity values were down by an industryleading average of 30%. Computer sciences suffered the most with a drop of 52%, in part the result of a more than a 15% drop in margins. New competitive pressures (from defense and IT companies) hurt all sector stocks. CACI, which delivered 10% revenue gains and an almost 25% increase in EBITDA, was the best performer with a 5% price increase. (CACI’s equity value still declined due to the repurchase of more than 13% of its outstanding shares.)
Technology Will Drive Growth Whether looking back at company successes and high-valued M&As or looking forward to where opportunities will present themselves, technology differentiation is key. Continuing from 2010, the “cloud” is a market reality and driving change. Related to that is the exploding cyber-security sector. Additional areas of distinct growth will include: wireless devices; communications platforms; integrated/converged services; and security as a service (SaaS)/managed services models in areas like video surveillance and physical security information management (PSIM). In 2011, cyber-security deals represented more than $15 billion in transactional value. PricewaterhouseCoopers (PwC) indicates “cybersecurity [deals] are expected to continue to grow given the fragmentation of the market and the attractive growth outlook.” Further, PwC suggests that cyber-security spending was to reach $60 billion globally by 2011 and is expected to grow at 10% annually during the next three to five years. This year will also see growth in the wireless and communications domains. Wireless is ubiquitous and large firms that have product holes are filling them via acquisitions of smaller tech-
◗ 2011 vs. 2010 Security Sector Performance December 31, 2011 Enterprise Value/ Revenues EBITDA Alarm Equipment/Physical Access
0.9x
6.8x
December 31, 2010 Enterprise Value/ Revenues EBITDA
Variance (%) Enterprise Value/ Revenues EBITDA
1.1x
8.6x
-18%
-21%
Asset Tracking/Intelligent Traffic
1.2x
8.8x
1.7x
14.2x
-33%
-38%
C4ISR/Threat Detection
1.7x
8.3x
1.9x
10x
-8%
-17%
Corrections/Guarding
1.0x
7.0x
1.1x
7.8x
-13
-10%
Credentialing/ID Solutions
2.5x
10x
2.1x
12x
21%
-17%
Large Cap/Defense Primes
0.8x
7.2x
0.9x
8.4x
-5%
-13%
Safety/Protection
0.8x
7.3x
1.0x
9.6x
-17%
-23%
Security/Defense Integrators
0.5x
5.7x
0.6x
8.8x
-16%
-35%
Overall Average
1.2x
7.6x
1.3x
9.9x
-9%
-23%
Overall Median
0.9x
7.3x
1.1x
9.2x
-15%
-21%
The only sector to turn in positive year-over-year gains was Credentialing/ID Solutions. Industry stock prices closed aggregately trading at 71% of component companies’ 52-week highs versus the previous year’s 85% finish. Source: CapitalIQ
securitysales.com • FEBRUARY 2012 37
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ANNUAL SECURITY INVESTING ANALYSIS
◗ 2011 M&A Activity in Review
©iStockphoto.com/Mauro Scarone Vezzoso
In 2011, the security industry Qinetiq, TranTech and World• Private equity players spent witnessed a significant number of wide Information Networks more than $6.5 billion acquiring mergers and acquisitions. Notable • L1’s identity solutions and assets including Monitronics, acquirers and transactions for the credentialing businesses were SRA, Securitas Direct and RAE year included: carved up by large global players BAE and Safran for $1.9 billion Examining M&A players that • Stanley paid $1.2 billion for • Diversifying its revenue were present in both 2010 and systems integrator Niscayah streams, The GEO Group 2011, companies like Kratos, (outbidding Securitas), as well acquired Behavioral IntervenStanley, United Technologies as closing its $62 million acquitions for $415 million Corp. (UTC) and others continue sition of Infologix • Kratos Defense & Security Solutions grew its sector revenues by closing the Henry Brothers acquisition for $45 million, as well as technology buys with Integral Systems and SecureInfo totaling almost $300 million • Tyco Int’l (now splitting itself into separate sector pure plays) grew sector revenues with multiple deals for Visonic, Signature Security and Proximex • ManTech spent more than $250 As valuations for security industry stocks retreated in 2011, there million increasing its solutions de- was a large amount of strategic and opportunistic M&A activity. livery footprint by acquiring the Buyers consisted of legacy industry companies, IT companies, Retica Systems business from defense primes, among others.
nology providers. Many new wireless technologies are incubated by venture capitalists (VCs) and/or Department of Defense (DoD) Small Business Innovation Research (SBIR) grant platforms. Both the VC and SBIR funds have increased and dollars are again aggressively flowing into continued technology evolutions. Specific to communications platforms, the military is gradually migrating to commercial-off-the-self (COTS) platforms as the base for personal communications devices. This will drive a new round of growth in handheld devices and likely prompt security markets to re-evaluate outdated proprietary architectures relating to communications. As the industry fights to protect its revenues, models like managed services for video surveillance, data analytics, security management and PSIM are increasingly attractive. Customers can “push” expertise requirements, system upgrades, etc., to the services provider and the providers are accepting this model in order to preserve revenue streams. As long as margin com-
pression is not problematic this will be an effective model. But once margins begin to erode there will be pain points at the service provider level. While many of the larger legacy industry participants were relatively quiet on the M&A front in 2011, that was in part due to integration of prior acquisitions and fine tuning portfolios for delivering well-honed integrated or converged services. Corporations like Honeywell, Schneider Electric, UTC, Siemens, Johnson Controls Inc. (JCI) and others are now well established providers of converged/integrated services. These generally global and largescale firms have bundled together delivery of their various business units’ products and services to create even stronger customer relationships. Critical in the success of this model will be the adequacy of customer satisfaction with these solutions. In some respects, this has been a logical evolution for these players and they have yet to deliver customers anything that drives a critical differentiator.
to invest and strategically manage their industry assets. In contrast, many other legacy industry participants are falling behind the innovation and acquisition activities being exhibited by newer industry competitors. Companies aggressively pursuing industry assets and revenues include the likes of IBM, Cisco, HP, Intel, General Dynamics, Lockheed Martin, BAE, Boeing and L3. It is clear that technology and defense firms are looking to leverage their respective competencies and take meaningful share in the security market. While the larger deals and the bigger companies grab the headlines, there is a lot going on in the smaller-sized deal markets. In the coming year the industry is likely to experience continued growth of smaller deals, private company exits and niche technology acquisitions.
For real innovation, these and other players will turn to niche technology and integration services providers via channel partnership or acquisition in order to deliver customers best-ofbreed offerings. When addressing who pays for all of this, last year we mentioned the concern over adequate budgets to meet the needs of increased investment. It appears 2011 was the “wake-up” year. The U.S. security market has been significantly reliant on public funds/support ever since 2001. Now that support is shrinking and both industry participants and customers must do more with less. Pressure is mounting due to the material federal budget issues and the mandated cut in defense spending. While the base DoD budget still exceeds $500 billion, many programs and expenditures are being cut, which translates into market uncertainty for the Department of Homeland Security (DHS) and security sector dollars. ■ Walter Bailey is CEO and Senior Managing Director of Focus Consulting Partners, a boutique advisory firm based in New York City. He can be contacted at (917) 209-7707 or wbailey@focusconsultingpartners.com.
38 securitysales.com • FEBRUARY 2012
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Δ∇TThe Business Issue
EXCLUSIVE! EXECUTIVE INTERVIEW E
Makes National A c
P1 Priority No. Long one of the largest and best-known residential installation and monitoring providers, Protection 1 has had its share of ups and downs. Now an ownership change with celebrated CEO Tim Whall at the reins has P1 broadening its ambitions in the commercial marketplace.
T
By Scott Goldfine
he number of installing and monitoring security systems providers qualifying as household brand names can be counted on one hand, with a couple of fingers left over. Protection 1 is one of them. That alone would have made it major news in 2010 when the business was acquired and taken private by an affiliate of Chicago-based equity firm GTCR in a reported $828 million transaction. The fact the deal also placed Tim Whall, one of the industry’s most respected and successful CEOs, at P1’s helm made it monumental. Whall’s 28-year security industry career includes leadership positions with SecurityLink, ADT, Honeywell Security Monitoring and Stanley Convergent Security Solutions. The energetic, shrewd and savvy executive has been instrumental in some of the industry’s highest profile transactions. Besides P1 these include SecurityLink, where Whall transformed negative revenues to $80 million in earnings in just six months and which later sold to Tyco for $1 billion, and HSM, where
he improved annual revenue by at least 17% for three straight years and which sold to StanleyWorks for $545 million. Launched in 1988 by utility firm PacifiCorp., Protection One established headquarters in Southern California. In 1991, the business was acquired by an investor group that included John Mack and taken public in 1994. Focused primarily on the residential market, an aggressive strategy that included several acquisitions and a marketing blitz fueled exponential growth in revenues and geography. By the end of the 1990s, P1 was the nation’s second-largest home security firm. However, the onset of the new millennium saw regulatory, financial and questionable business practice issues waylay the operation. In 2001, Richard Ginsburg, then just 32, came in as CEO aiming to restore P1’s luster. He was largely successful, leading one of the biggest operating restructurings in alarm industry history.
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A ccounts
1
its CMS division, P1 is also the nation’s largest wholesale monitoring provider. During the latter part of 2010 and first half of 2011, Whall spent the bulk of his time transitioning P1 to bring it in line with his vision. Central to his strategy is transforming the company from primarily residential security into a commercial power, with particular strength in national accounts. As has been his hallmark, Whall also has P1 focused on unrivaled customer service and lowering attrition. Recent initiatives include eliminating automated phone attendants and the Tech Tracker service, which electronically alerts clients when a technician is en route and includes his/her photo. In an exclusive and in-depth interview, SSI picks Whall’s brain to learn more about P1’s direction and gain management insights from one of the industry’s most accomplished executives.
What did P1’s previous leadership get right and where did they fail? Did you see opportunity where they didn’t? Tim Whall: The previous team deservedly got a lot of kudos for taking a company that was having financial trouble, getting it stabilized, and moving it forward. There was a culture of customer care and wanting to do right CEO Tim Whall (center) anticipates 2012 residential vol- by the customer when we got ume to grow 0%-5%, but revenue will grow more as P1 here that was very positive. I targets higher priced systems. For commercial, he says, really didn’t see anything as a “25% to 50% is what we’re going to see in year-overfailure. But it was a little suryear growth; even higher for national accounts.” prising to see the lack of industry participation by P1 in the assoIt was under his watch in 2007 that Integrated Alarm Services Group (IASG) ciations and groups. As far as opportunities we see that and its family of companies, including Criticom Int’l, was acquired. Although they did not, the previous managethe recession subsequently took its toll, ment saw and started down the paths we thought were good areas to go and Ginsburg’s efforts helped make P1 atgrow with, similar to where Brink’s was tractive to GTCR and Whall. going. They’re both predominantly resToday, Romeoville, Ill.-based P1 is idential moving toward commercial America’s No. 2 electronic security and into the national accounts space, company with more than 65 branch loand P1 was definitely on that path. cations and 2,500 employees providing Their acquisition of PSI [Protection installation, maintenance and moniService Industries, included in 2007 toring services to in excess of 1 million single- and multifamily residential acquisition of IASG] was clearly an indication of their interest to be a bigger and commercial customers. Through
player in the commercial market and starting a national accounts program. Those are great spots to take advantage of and so it was mostly about what we could do to really accelerate the growth in those areas. After a management team has been in place for a while, someone new takes a look at the same issue and might have a slightly different solution or a different way to attack a problem that the business has been trying to solve. I think we just took a more aggressive approach to what we thought was the opportunity there and put a few more resources to it. What is your process for zeroing in on opportunities, and developing and executing go-to-market success? Whall: The process for both is pretty much the same. You review the business and its entirety across each of the departments or divisions. You then benchmark it against what you know will be a successful performance, putting your pluses down where you think you’re a leader and checking it against the industry average. If you need improvement, you’re circling that area and asking, “What can I do to get this up to at least the industry average, if not best in class in this particular area?” Whether that’s servicing the customer or cost efficiencies, it doesn’t really matter. You take a look at the template of the organization and measure it against what you know others have done or what the best in class is, and you spend a good deal of time measuring yourself. Once you decide the area you want to focus on, you’ve got to be really clear about what you’re going to do. So you define the problem and then you’ve got to be able to measure it, and how you measure it is key. Then you determine the steps for improvement. It’s important to only put a few steps in place and focus on what you’re going to do to move that needle upward. I don’t believe in putting a 10-, 12- or 15-step program in place. It’s better to keep it to two, three or four steps in terms of what you’re going to do to drive this and to get right with it. Once you identify, measure and make it a priority inside the organization, how securitysales.com • FEBRUARY 2012 41
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WHY WHALL EXPECTS TO WIN WITH P1
do you communicate where you’re going? You picked your two or three things you’re going to do to move this needle, but how are you going to close the loop by showing if you’re getting what you want out of these changes? If you do it right, you won’t have to reset the deck. Give me the top three opportunities in technology, services and markets. Whall: In technology, the first opportunity is Wi-Fi at the premise, both for consumers and commercial. That’s going to drive services as well. It’s coming and is the natural evolution of the transmission of the panels. Next, cloudbased solutions clearly are prevalent today for video and access, and the move of system design to the edge. DVRs are becoming a medium of the past, similar to what happened with VCRs. A third area would be devices are becom-
Whall says the most exciting new technologies are Wi-Fi at the premise, cloud-based solutions, and smart control panels and devices. These will enable more RMR services.
ing smarter with algorithms and flash drives built in. Control panels are moving toward IP appliances if you will. On the technology side, those are the three things I feel comfortable saying, “Hey, we need to pay attention to these.” The first two are about the customer asking, “Why can’t you …” Anytime you’re in that basket, you need to work with your partners and manufacturers to come back at those customers with solutions. Moving to services, daily reporting and trending has really taken off. Eight or nine years ago, just being able to show people the data of what was going on was new and innovative. Now there is so much information available. You need intelligence built into your reporting mechanism to identify what’s important, what can drive a proactive versus reac-
P1 has increased its visibility at trade shows, such as ASIS. Whall says people are the key to P1’s plans: “We’re recruiting and hiring the people who can push us forward. Do we have the training onboard and in place that will allow them to be successful in the shortest amount of time? If we’re able to do that then I think we’re going to be successful.”
tive response, and what data you want to see daily versus just reporting trends and analysis at maybe a monthly interval. It’s what P1 calls our eSuite services. When customers sign up with a maintenance contract and our proactive service, we go out there and try to whittle down the activity to their sites. We say, “There are 100 sites and these 17 are creating most of the problems, and here is what we’re doing about those.” And then we say, “Once we quiet these down, if we don’t spend the money on maintenance, we can actually give you half back of what you spent with us.” Another thing we’re trying to help with is product inventory. Imagine if you were managing 100 to 1,000 locations, I could provide you reports, and talk about the age of your equipment and its useful life to help you make a budget decision. We can give customers a dashboard of what happened at their sites yesterday. That’s very powerful. It’s the ability to not just show a bunch of transactions, but boil it down to things the end user can act on and find useful for their business. Data reporting is a huge opportunity, and the change is providing actual and intelligent data to them that helps them manage the businesses. As we talked about in technology, cloud storage as a service is also very popular. There is a great demand for letting the end user be done with that whole DVR concept at their premise. The other one we’re seeing a fair amount of movement on is online panel management services. Rather than having somebody in technical support call up to your panel and do a data dump and download, you’ll be able to
do that over the Internet. That’s a very popular service and one people have been paying a fair amount for. In terms of vertical market opportunities, definitely for us retail is huge. It’s not just a growing market in terms of new locations, but it’s a huge opportunity for P1 because we have so little market share. There are dissatisfied end users out there and it is a realm where security is a required business necessity. Quick-serve restaurants are also getting a lot more play with the economic pressures pushing people down and these types of restaurants are also trying to find healthier food choices for people. They are seeing an increase in traffic that’s creating additional security and operational needs that our technology supports. We also like banking as a vertical. This market can upgrade to network communications that enable things like immediate user access, permission changes, as well as eliminating some of the costly phone lines previously required for security. How is the competition leaving money on the table for P1 to grab? Whall: There are two issues that plague most companies in this business. The first I’ll call the financing plan and the leasing opportunities of the low money down approach of bringing customers on. When you do that, at the end of the term the customer is now overpaying F FIND IT ON THE WEB T r of Security Analysts Assess P1 Trio Top T o industry analysts Mike Barnes, Ron Davis and Les Gold evaluate Tim Whall and his P1 stewardship in an exclusive Under Surveillance post at securtysales.com/blog.
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WHY WHALL EXPECTS TO WIN WITH P1
for services because built into their price is a fee that they financed the purchase with. That creates a competitive opportunity and why so often firms take over accounts from other providers. When you’re talking to your customer and your competitor comes in at $15 less, what isn’t said is, “Your price is $15 higher because you financed a system and didn’t put money down, so it was built into the monthly.” But the monthly never goes back down. That’s a problem for everybody in the industry that plays in the finance market on the lower end. The other issue is the math never works for most organizations in this business. Very few companies will actually take the time to staff and say, “I have ‘X’ number of customers; how F FIND IT ON THE WEB Speaking’ Podcast ‘‘Security S Spotlights Whall S Hear what Tim Whall has to say by listening to his recent “Security Speaking” podcast at securitysales.com/podcast_whall.
many people does it take to check in on those folks every six months to just say, ‘Hey, is everything OK? Do you need anything from us?’” For firms to take the time and build that money into their programs is hard to do in tough economic times. What happens is you’ve got thousands of customers but only a few reps and the math doesn’t work. Who is going to stay in contact with that customer for you? I see that as an opportunity for us but it’s a struggle for the competition. Let’s say you’re a public company, attrition doesn’t really hurt your earnings in a given year so if you have a chance to take costs out of the mix and attrition is going to go up a little bit, you’d probably take that trade because quarter-over-quarter you’re still going to show a win. But if you look down five years, you’d be making a short-term decision that is going to hurt you long-term because if you start to deal with that many fewer customers every year all that revenue is gone.
An existing customer paying a recurring stream is where the profit of the business comes from. P1 does a good
Whall on acquisitions: “We’ve been much more actively looking. A good fit for us is a growing client base with low attrition. When we see that we get pretty interested.”
job understanding there is an inherent cost that has to be paid to take care of existing customers. We track it and I can tell you how often I’ve been there for the top 10,000 or 15,000 customers, 20,000 or 50,000. Again, it’s about actually putting the math to it and saying, “This is how many people I have
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Whall has P1 focused on monitoring much more than just alarm activations. “Daily reporting and trending has really taken off. There is so much information available. You need intelligence built into your reporting mechanism to identify what’s important, what can drive a proactive versus reactive response, and what data you want to see daily versus just reporting trends and analysis at maybe a monthly interval.”
to meet. This is how many phone calls I have to make. This is how many letters have to be mailed out.” I have to make sure my customers are tucked in. I don’t believe they are going to leave if they feel they know you. What is your philosophy on balancing value or service with price? Whall: Where in the market are you trying to sell has the biggest impact on the price you’re going to achieve for yourself. You can target things you know are going to be the very lowest price possible and they’re going to fight every dollar with you. You’ve got to find where your niche is and sell into
that niche. For us it’s commercial buyers where you get to design the system with them. If I’m just going to do small businesses, it’s pretty hard to differentiate and show value. The more I’m able to design a system that meets your specific needs, the better I can position myself more as the security expert and a problem solver. As such, price is no longer the guiding principle. Not all buyers are the same. We know when we get into a 1,000-account deal at National Accounts that price is going to be quite a big deal. These guys are working on a budget; they’re working on ROI [return on investment]. We know to ask if there are other little values we can
bring that would give us the nod. So then the customer thinks, “The price is equal but I’m getting better value from P1.” Then there is certain business I like to stay out of because it’s always going to be the lowest price win and it’s going to be the least attractive financial return for us. Knowing where you are in the market and who you’re selling into, and having a strategy consistent with that market is the key to balancing that out for yourself. ■ F FIND IT ON THE WEB Don’t Miss Out on More Whall Wisdom D For much more from this conversation F check out the online version at securitysales. com/whall.
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Δ∇TThe Business Issue BUSINESS MANAGEMENT
10
Ways to Future-Proof
YOUR BUSINESS
G
All photos ©iStockphoto.com/Alexander Kirsch
Whether an owner intends to hold onto a security systems business long-term, pass it down through generations or sell it, a solid plan is critical to build the value necessary to accomplish those goals. Getting down and dirty to implement and execute today can have you smelling like a rose tomorrow. By Dorsie Mosher and Steve Rubin
iven the worldwide economic woes, safeguarding against whatever trials and tribulations the future holds for your business is a welcome concept. Future-proofing involves a strategic plan that ensures your business is positioned today to meet the challenges of tomorrow. Future-proofing involves recognition that business environments are constantly changing, frequently due to external factors, and you need to implement the right strategies now to ensure your business will continue to thrive in the years ahead. While there are numerous strategies that can be employed to hedge against future challenges within the
alarm industry, this article presents 10 critical components to help you future-proof your business.
1. Diversification
The stability of your business is strengthened as you diversify the types of customers and the types of services you offer. This does not mean you attempt to be all things to all people. It does mean you do not focus on builder sales (residential or commercial) to the exclusion of other sources of revenue. Looking at your customer mix, in most cases a good split between residential and commercial systems will serve you well as the future unfolds.
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FUTURE-PROOFING YOUR BUSINESS
Where it comes to service offerings, include a broad spectrum of the security industry (intrusion, fire, access, video, etc.). Doing so greatly enhances your opportunities for continued growth and profitability.
2. Accurate Bookkeeping
Keep good records and books. It is virtually impossible to make sensible management decisions if you don’t have the ability to accurately evaluate the profitability of the various sectors of your business. Proper accounting principles are the key to this. The basic foundation for useable accounting information is the segregation of revenue by product and/or service with the segregation of expenses by product and/or service. This detail will provide you with the input you need to make decisions regarding expanding or reducing the various sectors of your business.
3. Mind Your Compliance
Proper contracts are critical to future-proofing your business. Not only do contracts provide critical limitation of liability to you and to your business in the event of loss of life and/or property where you have provided the alarm system, but they are the dominant value of your company in the event you need to borrow money or decide to sell. In addition to mitigating the day-today risks of being in business in the security industry, proper insurance that is uninterrupted throughout the term of your business is necessary to maintaining top value for your company. At a bare minimum, you need these types: errors and omissions; general liability; vehicle; property; and workers comp. Proper licenses for each of the product and service offerings you bring to market are also an absolute must.
4. RMR Mindset for Every Sale
Many companies are willing to accept just the profit from the installation of an access or video installation. Wellmanaged companies try to extract a recurring monthly revenue (RMR) component by offering service contracts on every sale. While service contracts
Pay close attention to your financials. Your business is all about fiscal responsibility. Produce good financial statements monthly. Read and understand every line item. Everything has a cause and effect, and should be clearly illustrated in these statements. Adjustments never have to be drastic as long as you conduct monthly internal audits.
are never as profitable as monitoring contracts (and consequently sell for a smaller multiple), they are a great stabilizer of company revenue. Rightfully so as they add substantial value to a company. When the concepts of “predictable cost” and “technology refresh” are included in the sales presentation for products like access control and video surveillance, a high percentage of end users will opt for a service contract. The service contract positions the installing company to keep the competition out and create a new sale prior to the end of the contract. The copier industry has perfected this strategy. How many times have you ever gotten to the end of your copier contract before the vendor was there selling you new feature-benefits?
5. Build Up Your Infrastructure
While it may make you feel good to be the “decision maker” at every level in your company, it’s a risky approach. If your company needs you 24/7 to keep things organized, you don’t have many choices for an exit strategy or a succession plan. Build the team. Many buyers look for an “absentee ownership” situation because it is a good indicator that the company can do as well after an acquisition as they
did before even though the owner is no longer there. In contrast, a company whose owner has all of the customer relationships, holds all of the licenses, and manages all of the sales, operations and administration of the business does not have a bright future when the owner leaves. That is unless the new owner has a management team that can be brought to bear. Consequently, there are significantly fewer buyers for ownerdominated companies.
6. Benefit From Legal Status
Which legal business designation is best for you: S corporation, C corporation, limited liability company (LLC) or sole proprietorship? All of them have tax ramifications. Although there may be benefits in being a C corp. while operating your company, when selling it is a definite burden. S and C corp. status is exactly the same with respect to liability protection. The difference is how you are taxed. The C corp. has what is referred to as double taxation. First the corporation itself is taxed on the profits it makes. Then when these profits are distributed to the shareholders as a dividend, they report it as income on their individual tax returns. So essentially you are paying taxes twice on the same money your corporation makes.
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As an alternative, an S corp. is a tax election a C corp. can make in order to eliminate the corporate tax level. This allows the earnings to pass through the corporation to the shareholders. You only pay once on the earnings. This is a great tax advantage, especially when selling, possibly cutting the taxes on a corporation’s profits in half. Talk with your accountant and attorney to ensure you qualify to elect to be taxed as an S corp. A C corp. wishing to switch to an S status should, again, talk with an accountant and attorney. While it can be a viable change, there is a required fiveyear waiting period for it to become effective. C corps. are definitely sellable; however, the buyer must be willing to buy the stock of the corporation. This
Future-proofing involves recognizing business environments are constantly changing. Implement the right strategies now to ensure your business will continue to thrive.
means taking on the seller’s liabilities, which, in turn, usually results in a lower priced offer than if it were a S corp. An LLC is treated the same as an S corp. but with more flexibility. The downside is that the LLC is more costly to set up and maintain. The filing and annual fees are greater than an S corp. Another disadvantage is that a sole owner of an LLC is taxed as if they are self-employed (sole proprietor). That is usually not the best tax position for a business owner. Again, consult your accountant and attorney for the best advice.
7. Retain Monitored Accounts
If you’re not big enough to profitably operate your own central station, you may not want to start one. There’s a
tremendous cost in building and maintaining it properly. Yes, it will give you a sense of satisfaction that if you control it, it will be done right. However, at what cost? Research this thoroughly before jumping in as it could literally drain you. If you are using a third-party central station, make sure you own the phone lines so you control the accounts. If for whatever reason you need to move those accounts (bad service, selling your company, better pricing), if you own the lines it’s very easy to do. It may cost more per month, but then you, not your central station, own the lifeblood of your business — your customers. If the central station owns the lines, it controls your customers. And for those who have done this in the past, you know that reprogramming the accounts is a nightmare. If you are using a third-party central station, be very careful about the terms of your contract with the provider. Try to avoid a “Right of First Refusal” term because it will impede your ability to move quickly if you decide to sell your accounts and/or your company. Buyers are hesitant to expend the time and money to gather enough information to make an official offer if the central station has the opportunity to simply match the buyer’s offer in order to make the purchase. Yet the third-party provider does not have to make an offer until another offer exists. A second precaution regarding thirdparty centrals is not to get into a contract that has a long initial term (e.g. three years) and automatic renewals for the same term. These typically have a 60-day advance notice to terminate requirement. If you decide to sell your company shortly after this deadline passes, you are faced with three years of monitoring fees even though you have sold the accounts and they are being monitored elsewhere.
8. Financial Management
Pay close attention to your financials. Your business is all about fiscal responsibility. Produce good financial statements monthly. Read and understand every line item. Everything has a cause and effect,
and should be clearly illustrated in these statements. Adjustments never have to be drastic as long as you conduct monthly internal audits. The buyers, when they conduct their due diligence on your company, will pore over your financials. After all, they’re about to pay you hundreds of thousands, possibly millions of dollars for your company. They and their bank have to be comfortable that you have been fiscally responsible. Incidentally, raising monitoring rates periodically without overpricing (5% or so every two years) creates more value with some buyers.
9. Watch Attrition
Pay attention to your attrition. Why is it happening? The average attrition rate in our industry is about 6-7% per year for smaller companies. If you had 100 customers at the beginning of a year and 93 of those same customers at the end of that year, that’s a 7% gross attrition. We’ve all heard it’s more costly when you lose an existing customer as opposed to adding a new one. Service is the key. If the service goes down, attrition goes up. This becomes a real warning flag for a potential buyer. High attrition means an unstable customer base.
10.
Keep Up With Market Trends Take time to study market trends. You’re directing your people through myriad changes. To stay ahead of your competition, you have to be on top of current trends. Whether it’s economy related, political, city or state regulation changes, product innovations, competition or industry happenings, it’s better to be ahead of the curve than trying to catch up. Future-proofing is about mitigating or eliminating the impact future events may have on your business. Following the principles outlined in this article can help you make sure your company will prosper in spite of future trials and tribulations. ■ Dorsie Mosher and Steve Rubin are Principals at Davis Mergers and Acquisition Group. They can be reached at: dorsie.mosher@graybeardsrus.com; srubin@ graybeardsrus.com.
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Δ∇TThe Business Issue SALES MANAGEMENT
All photos courtesy G4S Technology
TAKING CONTROL
of
Remote Video Remote video services help clients justify capital investments in security surveillance systems and obtain valuable features unavailable via localized video solutions. Security contractors are in a prime position to generate new recurring revenue streams from this lucrative business opportunity.
I
By Jerry Cordasco
t’s impossible to read a security publication or attend a trade show without encountering the topic of recurring monthly revenue (RMR). That’s because a project-to-project approach based solely on the sale and installation of equipment is survival at best. It results in unavoidable peaks and valleys in cash flow, and does little to build real business value. One of the leading ways to generate RMR is through the sale of managed or hosted services, with remote video monitoring getting the most attention as of late. Known as remote video monitoring, interactive video, video as a service (VaaS), video alarm verification or re-
mote guarding, it all boils down to the same thing — turning a video surveillance system from simply a forensic tool into a proactive countermeasure. It is a service that adds tremendous value for customers and translates into real RMR for dealers that embrace and sell the concept. For the purposes of this article, we’ll call it remote guarding as we discuss how, when and where to apply it, and how much to charge.
How Remote Guarding Works and What’s Required Remote guarding applications can be classified as indoor, outdoor or a combination of both. Each classification has
unique characteristics and will require a specific approach. Services can be categorized as those initiated by some event at the protected site (event based) and those initiated by the remote guarding facility (e.g. video tours). An event initiated at the site could result from the activation of an alarm sensor such as an outdoor motion detector, an alarm contact connected to an intrusion system, an electronic access control (EAC) event such as door propped or even an alarm generated by a camera itself using video analytics or advanced video motion detection. This event is monitored by the remote guarding center, which then (and this is
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REMOTE VIDEO MONITORING
Partner with a reliable, experienced remote guarding provider that will help you apply the services appropriately and win business. Since in many cases your compelling argument for the sale to the customer will be in reducing or possibly eliminating the need for guards, a partner that understands how the guarding business works can be a huge asset.
key) uses cameras at the site to further evaluate the threat and respond. In order to do this effectively several factors must be considered. First and foremost, the event trigger must be reliable. If it is prone to excessive false positives, the workload on the monitoring center becomes prohibitive. If it cannot reliably detect the threat, then the entire purpose of the system and the monitoring is for naught. Second, once the threat has been detected, the monitoring center must be able to quickly access the cameras associated with the event and they must have a clear view to determine the cause. This will require a competent broadband connection, good quality and well positioned cameras, and decent lighting. Because the remote monitoring center will typically only be looking at one or perhaps two cameras at a time, each streaming at something like eight-10 frames per second, a minimum of 1Mbps “up” speed must be available at all times. This is achieved using a basic ISP service. This concept of monitoring by exception is a paradigm shift from the traditional method of a security room of some sort with a person continuously viewing a wall of monitors. With remote guarding, cameras are typically only viewed on demand. This means that if a site has eight cameras it will
not be necessary to provide the bandwidth to stream all of the cameras in real-time. While the cameras may be recording continuously at the site, only one camera will be streaming to the remote monitoring center at any time; even then only when necessary. Once an alarm event is received and the threat evaluated, the response by the monitoring center will be based on predetermined instructions. For example, under certain circumstances the customer can be contacted by phone. Under others, the local authorities can be called, or a roving onsite guard can be directed to the specific location of the event and given detailed information in real-time. Video or photos can be sent directly to handheld devices, and live voice announcements can be made over local speakers.
Event-Based Monitoring Examples Imagine a site where vehicles are stored inside a fenced area. Someone cuts through or jumps the fence with intent to steal catalytic converters and headlights. A video surveillance system incorporating video analytics detects the intruder immediately. The alarm event is sent to the remote monitoring center where it is received along with a video clip showing the intruder. Within seconds, a monitoring center operator
connects directly to a camera at the site and views live video. The operator then makes a voice announcement: “This is the security command center. You are trespassing. The authorities have been notified, given your description and are on their way.” It’s a fair bet the perpetrator will not stick around long enough to damage the vehicles. And video from onsite cameras can be recorded and made available to the authorities. Let’s look at another application. A college, university or municipal athletic field is a big investment and also a prime target for vandalism. These fields are heavily used during the day but often closed after-hours unless there is an event. Fences afford little protection from would-be vandals. Traditional countermeasures such as buried seismic detectors, shock sensors, outdoor beam detectors, etc., are costly to install and prone to false alarms. The cost of posting a guard at the site overnight can be $3,000 per month. What if we install a few cameras looking out onto the field from some central point and incorporate video analytics? We connect those cameras to the Internet and set it all up for remote guarding. If anything breaches the fence (person or vehicle) and approaches the field, it is detected. The alarm is received by the monitoring center. Video is reviewed and within moments an announcement (called voice-downs) is made to the intruders while authorities are notified. Damage that would have perhaps not only been costly to repair but also interrupted normal activities for some time is prevented. In this scenario, the installation price was likely no more than $20,000 and the remote guarding service price less than $1,000 per month. Using technology and remote guarding becomes more cost effective than a human guard in less than one year, including the initial cost of equipment and installation.
Value of Video Tours Instead of Guard Patrols Let’s move on to another service typically provided as a part of the remote
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guarding, video tours. Essentially, video tours accomplish much the same thing a roving guard would while doing rounds. The difference is the tours or rounds are performed from the remote monitoring center using cameras located throughout a customer’s facility. Similar to event monitoring, the cameras are viewed over the Internet, one at a time in a specified sequence and at specified intervals. The operators in the remote guarding center have instructions that tell them what to look for and what to do in the event they see something. Remote guarding operators can look at and react to not only security-related issues but also safety factors such as blocked emergency exits, downed power lines, water leaks, damaged fences, etc. They can also look for compliance-related issues. An added benefit of video tours is they ensure cameras are working properly, their views are clear and lighting is sufficient. This reduces the possibility of recorded video turning out to be poor quality or even worthless. This alone is a valuable service and can be sold separately, perhaps with a periodic check that the onsite recorder is also working properly.
Video Chaperone Adds Personalized Touch An extension of the video tour concept is the video chaperone. This is a service whereby someone at the customer’s
location contacts the remote guarding center and asks them to monitor their activity, for example, leaving an office building and going to their parked vehicle late at night. The monitoring center uses existing cameras to perform this service, perhaps even following the person using a pan/tilt/zoom (p/t/z) camera until they are seen to be safe. As an example of how and where this service might be applied, let’s take a hospital. Most hospitals have both remote parking areas and parking garages or decks, areas prone to assaults and vehicle break-ins. The typical countermeasure is guard patrol. However, these areas can be quite spread out, making it difficult and time consuming for a single guard to protect. Video tours can cover the areas rapidly and cost effectively to act as a “force multiplier.” In the event something is seen, once again, audio announcements can be made and/or onsite security notified. This application is also perfect for the video chaperone service. Hospitals operate round the clock and staff regularly come and go throughout the day and night.
How Best to Win Jobs Early One of the best approaches to getting started with and succeeding in remote guarding services is to pick a limited number of target vertical markets, perhaps ones you are more familiar with and have a good understanding of
◗ 9 Steps to Remote Video Success
1. Understand what remote guarding services are available and how they work. 2. Pick a limited number of target vertical markets. 3. Consider an equipment leasing program or rolling equipment and installation cost into a monthly charge. 4. Partner with a reliable, experienced remote guarding provider who will help you apply the services appropriately. 5. Unlike standard alarm monitoring, remote guarding services pricing is not mature. Often the key is to base it on the savings to the customer. 6. Try to get multiyear contracts by offering an incentive such as a free month or two of service when a customer commits to more than one year. 7. Dedicate sales staff to this service sales function, and develop a good sales incentive plan for remote guarding services. 8. Don’t cut corners on equipment or the Internet connection. 9. Be sure your technical staff understands IT.
their business risks. If generating RMR through remote guarding is new to you, it will help to get a few wins and “reference” projects. Partner with a reliable, experienced remote guarding provider that will help you apply the services appropriately and win business. Since in many cases your compelling argument for the sale to the customer will be in reducing or possibly eliminating the need for guards, a partner that understands how the guarding business works can be a huge asset. Also make sure the remote guarding provider will be around for the long haul. Consider the possibility of working out an equipment leasing program or rolling the cost of the equipment and installation into the monthly charge. Sometimes the biggest customer objection will not be the cost of the service, but rather the initial capital investment they will need to make. Recognize that while this will create substantially greater revenue for you, the expected margins are different than on a typical intrusion or fire monitoring contract. This is important because you don’t want to set your pricing so high that you are not competitive. Unlike standard alarm monitoring, remote guarding services pricing is not mature and it can be difficult to know exactly how much to charge. Often the key is to base it on the savings to the customer. Be sure your technical staff understands IT. Even if the cameras at the customer’s location are analog, the video from them will ultimately need to end up on the Internet. That means routers, firewalls, ports, etc. Also, don’t cut corners on equipment or the Internet connection. Remote guarding is only effective if the quality of the video received is high. Dedicate sales staff to this service sales function if you haven’t already. Frequently, salespeople who are good at selling products and systems have a difficult time making the transition to selling services. Also, develop a good sales incentive plan for remote guarding services. ■ Jerry Cordasco (jerry.cordasco@g4stec.com; 781-4570748) is Vice President of Operations for G4S Technology’s Remote Video Monitoring business in Boston.
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INSTALLATION CASE STUDY
HIGH-RISE Scales Heights An integrator designs a sophisticated security solution for a new, technologically advanced tower in Miami’s financial district. Video and visitor management systems, access control, turnstiles, and floor-specific elevator systems are controlled through software in a single location or in multiple areas on the network.
R
By Rodney Bosch
ising above Miami’s financial district, the new Brickell World Plaza is the Sunshine State’s first commercial real estate tower to be pre-certified platinum under the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED). Also referred to as 600 Brickell, the 40-story structure, which topped out in March 2011, is in fact one of only a handful of buildings like it in the world with a LEED rating of platinum. With a goal to represent a new standard for technology in office development, 600 Brickell’s developer likewise sought to fortify the tower with state-of-the-art electronic security systems. To that end, Security Innovative Solutions (SIS) of Davie, Fla., was commissioned to provide the access control and video surveillance systems based on its advanced integration design philosophy and ample experience with other tower projects. “Many systems are either poorly put together, with many components not talking to each other, or they are overly complicated to use,” says SIS President Ramsey Hasan. “We design and install systems that can be easily used by security staff, property managers and building maintenance.” The Brickell World Plaza job would ultimately put SIS’ high-rise project mettle to the test. A sophisticated design was drafted to seamlessly integrate multiple systems. Yet the success of the undertaking could not have been possible without first forging relationships with vendor partners who together resolved to get their systems to talk to each other. Read on to learn how this unique undertaking came to fruition, and evidences the electronic security industry’s headlong drive to deploy systems built on open platforms.
Tower Specialist Gets the Call
All photos by Richard Hodge
The developer of Brickell World Plaza, Miami-based developer Foram Group, broke ground on the $310 million structure in spring 2007. The tower offers more than 600,000 square feet of leasable office space on 28 floors while levels 2-11 comprise the parking facility. At the ground level, the tower’s 30,000-square-foot public plaza is bedecked with shade trees, garden areas, a 2,050-square-foot pergola with shaded seating, and an outdoor stage area for cultural events and concerts. Among the innovative features that earned Brickell World Plaza its LEED Platinum rating is a “daylight harvesting” control system. Photo sensors located within 15 feet of the perimeter of the building detect daylight levels and automatically adjust the output of electric light54 securitysales.com • FEBRUARY 2012
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of Integration ing to create visual balance. Wireless Internet access is available throughout the building and on the plaza, plus the tower features a rentable meeting center with leading-edge video conference equipment. Brickell World Plaza may have been designed to offer its tenants sustainable, sophisticated environs for decades to come, but initially its electronic security designs were nowhere near on par with its other technological accoutrements. Enter SIS, which was commissioned by the project’s general contractor, John Moriarty & Associates (JMA) of Boston. Among SIS’ previous security work for JMA projects were three Trump towers in Sunny Isles Beach, Fla., and the three towers at Miami’s Icon Brickell, a project inspired by cuttingedge designer Philippe Starck. Following a lull in construction of the Brickell tower during the recession, SIS joined the project in December 2010 when it was back on a fast-track to completion. “JMA brought us in because of the antiquation and the lack of scalability of the original security system,” says SIS Project Executive Maurice Gerovitz. “It was more designed to lasso the building owner and keep them tied down with licensing all different types of things for a long time.” SIS writes specifications for many of its projects through its own in-house CAD and engineering department. Gerovitz was charged with redesigning Brickell’s entire access control and video surveillance systems, which he envisioned to integrate with turnstiles, the visitor management system, and elevator controls. Hence, he selected systems for the building that would allow him to converge open platforms to maximize security and provide the end user with added business efficiencies. “I did a lot of thinking outside the box with this project. Some of the integration was at the manufacturer level and some of it was created just for this job,” he says. “We will only choose a manufacturer that will work with us. We’ll choose a manufacturer that is not too big to where they won’t let their design team work with us to create something that a building owner might want or a project may need.” SIS’ vendor partners in the Brickell project included EasyLobby, Exacq Technologies, Gallagher and Gunnebo. Together, each of the firms played an integral part in demonstrating how separate components of a facility or security management system can be brought together as an integrated solution.
2-Megapixel Cameras Deployed To meet the end user’s desires for a huge security footprint, Gerovitz specified more than 120 IP video surveillance cameras, which are deployed in the basement and up through to the 11th level. (Tenants on levels 12-39 will each be responsi-
Security Innovative Solutions (SIS) designed and installed an integrated access control and video surveillance management system for Brickell World Plaza, a 40-story tower located in Miami’s financial district. Pictured (l-r): SIS Project Executive Maurice Gerovitz; Paris Del Rio, project manager, Foram Group, the project’s developer/owner; SIS President Ramsey Hasan.
ble for installing their own security systems.) Each camera is a 2-megapixel Vivotek model, including mostly fixed domes along with a handful of pan/tilt/zoom (p/t/z) cameras mounted outdoors on the corners of the building. The recording system captures 30 images per second, utilizing H.264 compression and more than 48TB of usable, linked, redundant storage. Live and recorded images are shown on a high-resolution, nine-screen video wall in a security command center. Video is also available for viewing on the building’s network, as well as mobile devices and at remote locations with the proper credential. To provide the necessary bandwidth and scalability for the system to eventually expand to 200 cameras, SIS Chief Technical Officer Scott Shecter designed a separate network infrastructure for the entire security solution. Cisco gigabit switches are placed in IDF closets every three floors up through the 12th level and connected via fiber-optic cable with redundancy links. If a fiber is broken or a switch goes bad, only data at the trouble site will be affected while the rest of the networking will continue uninterrupted. Risers are utilized to connect all the equipment. Gerovitz explains: “The head-end room is located in the master guard control station. And then we have other security rooms in the basement and two on the mezzanine level. We brought [the fisecuritysales.com • FEBRUARY 2012 55
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INTEGRATING MULTIPLE SYSTEMS
ber backbone] up to the elevator machine rooms and then we tie in to the elevator machine rooms toward the top the building. So we create our own loop and [the end user] can tie into their switches if they want as well.”
VMS Provides Digital P/T/Z A big motive for selecting the 2-megapixel cameras was the capability for Exacq’s video management system (VMS) client to provide full digital p/t/z functionality, offering superior clarity for even facial recognition purposes. SIS installed two exacqVision Z-Series servers. These are standard off-the-shelf products; no major modifications were made to the hardware or software. “The Z-Series is designed to meet the performance and storage requirements of enterprise video surveillance deployments and was clearly the right fit for this application,” notes Scott Dennison, senior product manager for Exacq Technologies. “While one of the servers is an IP camera server designed solely for network cameras, the other is a hybrid, which allows them to bring in analog and IP cameras on a single server.” The networked cameras are spread out on the two servers and accessed via the VMS client in the tower’s 24/7 security command center. Since Exacq’s client software is free, the end user can deploy it anywhere to provide easy access for other security personnel and management, provided they have a network connection. Bruno Santos, SIS’ IT director, built a custom computer to power the networked video system’s enormous amount of bandwidth. Built with system scalability in mind, the computer’s guts include dual solid-state drives to process information much faster, and 16GB of RAM. “The exacqVision [VMS client] can be run on pretty much any workstation,” Santos explains. “My main concern from the get-go was to eliminate bottlenecks on the network. The custom computer gives us the flexibility to use up to 12 screens on the video wall. Otherwise, our solution would have to have a video wall controller with at least five different computers managing pieces of information.”
A ‘Truly Integrated System’ Early in the Brickell project, it was well understood that visitor management would be an integral part of the overall security management solution. SIS leveraged its vendor partners to meet the lofty security requirements befitting a high-rise project designed to next-generation standards. Partnership and heavy doses of enterprise ensued. For example, consider: EasyLobby and Gallagher eagerly joined the project even though all parties were aware no integration existed at that time between the two firms’ systems. EasyLobby CEO Howard Marson and Guerry Bruner, director of sales, access control, Gallagher North America, held several planning discussions and soon began exchanging each other’s software development kits (SDKs). “We quickly determined that EasyLobby would drive the integration to Gallagher’s Command Center [formerly branded Cardax]. Once started, it took about four weeks or
An EasyLobby visitor management system was integrated with Gallagher’s access control Command Center solution to allow security attendants to easily and expeditiously process badging for visitors and building tenants. The system also integrates controls for optical turnstiles and elevators.
Live and recorded images are shown on a high-resolution, ninescreen video wall in a security command center. Video is also available for viewing on the building’s network, as well as remote mobile devices and at remote locations with the proper credential.
so for EasyLobby to have a working model of the integration for us to test and evaluate,” Bruner says. A pair of technical experts for Gallagher and EasyLobby then worked closely together to test and tweak the integration. “I know we were all confident, but in the end the integration went smoothly and worked flawlessly between the two systems,” Bruner says. Among the solution’s unique aspects is the use of, and encoding to, Mifare Classic and Mifare Ultralight proximity cards. The integration is real-time, such that when a visitor’s identification is scanned into EasyLobby and “checked in,” the data is sent to Command Center so that the visitor is issued an active badge with the specific clearance needed for that visit. A complete audit trail of the visitor’s movement is recorded in Command Center for historical reporting, and the badge — not the historical data — is removed from the database when the visitor is later “checked out.” Gallagher provided a Mifare encoder with site-specific, unique crypto keys that allow Brickell staff to encode blank Mifare cards for use in their system and their system only. This helped in overcoming a major challenge in creating an integrated visitor management solution that was particularly
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user-friendly and able to expedite the badging process. Success in that endeavor was achieved, in part, by using simple icons — such as a turnstile or an elevator or a floor designation — that a security attendant can simply drag and drop on the badging menu screen. Here’s an illustration of how the process works: A female visitor arrives at the front desk and hands the security guard her driver’s license, which is then placed in a scan shell. The woman’s information flows onto a screen; no typing is required. The guard navigates through simple menu screens to designate the days and times when access is granted to specific turnstiles, elevators, floors, and other areas of the tower, even bathrooms. All told, the visitor’s check-in is completed and a badge is issued in less than 40 seconds; the card automatically expires per programming. An additional feature of the Brickell solution is the ability for tenants to utilize a “partitioned” segment of the system to provide security and access control to their specific floor space. Alternately, tenants can elect to go with a complete standalone deployment of Gallagher’s Command Center so that they may take advantage of using the same system as the base building. In either case, identity credentials issued by Brickell can be used in the base building and the tenant space as well. In an industry once notorious for being stubbornly proprietary, Brickell is a shining example of how separate components of a facility or security management system can be brought together as an integrated solution. As Bruner observes, the industry is progressing beyond the convergence phase into the collaboration phase, which places end users, integrators and manufacturers in a position where collaborating with each other benefits everyone and provides total system solutions. Bruner continues: “If you take into account that Brickell has a Gallagher access control system, an EasyLobby visitor management system, an ExacqVision video management solution, all integrated together with the [Gunnebo] optical turnstiles, [Thyssen Krupp] floor-by-floor elevator control, E-mail and SMS text notification, and photo ID badging, it is truly an integrated system.”
Security Helps Attract Tenants During the first week in December, Brickell World Plaza celebrated its official unveiling, declaring itself open for business and actively recruiting tenants. Shortly thereafter, in preparation for handing over the reins of the integrated systems, SIS conducted training sessions for members of Foram Group and security personnel. To say the end user is satisfied with Brickell World Plaza’s integrated security solution is an understatement the size of the building itself. Foram Group is counting a great deal on luring progressive-minded companies that welcome the tower’s sustainable and technological features. The electronic security systems will play a significant role in that attraction. Post 9/11, there has been an increased awareness to the security and life-safety features offered by buildings, says Tracy Story, Foram Group’s president of management and leasing. And while no building can ever be 100% secure, tenants
Networked cameras are spread out on a pair of Exacq Technologies servers, shown here in the security control room. The exacqVision Z-Series devices are designed to meet the performance and storage requirements of enterprise video surveillance deployments. The visitor management system integrates Gunnebo optical turnstiles, along with Thyssen Krupp floor-by-floor elevator control, among other features of the access control solution.
want assurances that a landlord is doing everything within reason to keep employees safe. “While once considered an inconvenience, enhanced security features such as the optical turnstiles and card access-controlled elevators are now welcomed by tenants and corporations,” Story says. “Tenants today want to be able to determine who is in the building at any given time and want to restrict access from solicitors, office creepers and unwanted visitors. The security system at 600 Brickell allows us to do that very easily,” she says. Although greatly improved security measures are becoming commonplace in cities such as New York and Washington D.C., Brickell World Plaza is one of the first nongovernment buildings to put such enhanced security controls in place in Florida. The tower’s integrated system is an important differentiator between it and other buildings in Miami’s high-rise market, which continues to recover following prolonged economic adversity. “Given the condition of the market, everything that we do to set ourselves apart from our competitors contributes to a tenant’s decision to come to 600 Brickell,” Story says. ■ Rodney Bosch is Managing Editor for SECURITY SALES & INTEGRATION. He can be reached at (310) 533-2426 or rodney.bosch@securitysales.com.
F FIND IT ON THE WEB The online version of this story includes a partial list of equipment T installed at 600 Brickell, as well as additional photos. Visit security in sales.com/600Brickell.
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E X C L U S I V E
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The Essentials Silent Knight IntelliKnight 5600 Fire Alarm
Silent Knight by Honeywell of Northford, Conn., has upgraded the IntelliKnight 5600, a 25-point fire alarm control panel, to simplify installation and operation. Designed for small applications where electronic security contractors install two- to five-zone conventional fire alarms, the product has a built-in browser that allows installers to perform customized programming, eliminating the need to download any software. The product also features detector drift compensation and maintenance alerts to help reduce nuisance alarms and repeat service calls. securitysales.com/FREEInfo/12400
EE Systems Group EE977DMC Micro PIR Detector The EE977DMC by EE Systems Group of Temple City, Calif., is a digital passive infrared (PIR) detector based on the company’s patented ePIR technology. The detector embeds Sigma Delta (SD), auto-LED sensing and digital verification control technologies on a complete single chip solution. The EE977DMC-W has a preset wide-angle lens, while the EE977DMC-C has preset curtain lens, which is capable for standard detecting profile or directional (one-way) sensing. securitysales.com/FREEInfo/12401
American Dynamics Illustra 600 Series HD Cameras
American Dynamics of Westford, Mass., part of Tyco Security Products, releases the Illustra 600 Series of high definition (HD) IP cameras. Available in both indoor and outdoor models, the cameras offer resolutions of either 720p or 1,080p. Each camera features an infrared (IR) illuminator with anti-reflection technology, which keeps light from shooting into the lens where visual distortions occur, according to the company. The products also feature face detection and onboard motion-detection technology. securitysales.com/FREEInfo/12402
T3 Innovation Snap Shot TDR
The Snap Shot fault-finding time domain reflectometer (TDR) by T3 Innovation of Camarillo, Calif., detects, locates and identifies fault conditions such as opens, shorts and arc faults on energized cable of all types up to 3,000 feet in length, according to the company. Featuring a large, backlit LCD display, the product uses an advanced form of TDR technology that allows its use over energized cables. Dual internal memory allows users to store cable parameters for easy reference, while a built-in tone generator with multiple tone capability traces and finds faults. securitysales.com/FREEInfo/12403
Detex EAX-300 BatteryPowered Door-Propped Alarm
Detex Corp. of New Braunfels, Texas, releases the EAX-300, a battery-powered door-propped alarm that sounds an alert when a secured door is propped open. Powered by a 9V battery, the alarm can be field-set for door-open times ranging from one second to two minutes, with a 15-second default. A 100dB alarm alerts users, then silences when the door closes. A patented plastic template indicates alignment with the internal magnetic door contact for accurate installation, according to the company. securitysales.com/FREEInfo/12404
NAPCO Gemini P1664DK1PK Alpha Door Keypad Pak
The Gemini P1664DK1PK custom alpha door keypad pak by NAPCO Security of Amityville, N.Y., features the company’s GEM-P1664 hybrid control panel, which expands to 64 zones with multiplexing and offers a built-in four-zone expander into the keypad. For installer convenience, it comes in an oversized locking enclosure measuring 12.5 inches X 14 inches X 3.75 inches, with eight hybrid zones including two 2-wire fire zones, according to the company. The system also features four areas and 64 user codes, plus easy keypad menudriven programming. securitysales.com/FREEInfo/12405
For the latest products, sign up for SSI’s Security Equipment E-lert at securitysales.com. 60 securitysales.com • FEBRUARY 2012
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Bosch VEZ-400 Mini Dome P/T/Z Camera
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Bosch Security Systems of Fairport, N.Y., releases the VEZ-400 mini dome pan/tilt/zoom (p/t/z), an addition to the (p ccompany’s Advantage line. The camera offers a 26x optical zoom for aan increased monitoring in range and easier identification of objects ide and people, according to company. the co Providing d 360° rotation, 600 TVL high-resolution images and wide dynamic range (WDR), the camera is 4.4 inches in diameter. Designed for indoor and outdoor applications, the IP 66-rated product features a built-in heater to enable reliable operation no matter the conditions. securitysales.com/FREEInfo/12408
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The Nation’s Most Trusted Security Door Hardware Wholesaler Panasonic i-PRO SmartHD NVR & Expansion Kit
Panasonic System Networks of Secaucus, N.J., releases the i-PRO SmartHD WJ-NVF20 advanced intelligence expansion kit, which enables the company’s WJ-NV200 NVR to estimate age and gender, capture visit times and count visitors.
The ONVIF-compliant WJ-NV200 uses H.264/MPEG-4 and JPEG formats and can simultaneously display live images from up to 16 cameras. The NVR also provides a real-time face matching function to match registered face images with live video. The new WJ-NVF20 expansion kit compiles age and gender estimations, visit times, and visitor count information as color-coded demographics, with weekly reports generated as charts or graphs. www.securitysales.com/FREEInfo/12409
Fluidmesh 3100MHW IP Backhauling System
Fluidmesh Networks of Boston releases lea the FM3100M-HW IP backhauling system, an enhancement to its FM3100 MITO. enha Designed for medium and large point-to-multipoint m deployments with uup to 150 clients, the product multiple-input and multiple-output (MIMO) mounts a 2 X 2 multip sector antenna. It also provides an enclosure that protects the unit from changes in weather. The product is capable of creating point-to-point, point-to-multipoint, mesh and mixed architectures, and can be used for applications such as video surveillance, enterprise backhauling, VoIP backhauling, supervisory control and data acquisition (SCADA), and smart grids. securitysales.com/FREEInfo/12410
DMP ePAD 5.0 Mobile Keypad
Digital Monitoring Products (DMP) of Springfield, Mo., releases the ePAD 5.0 mobile keypad, which provides users with the full functionality of their physical keypad via a virtual one accessed from any Internet-connected computer. The ePAD 5.0 module can be installed in the panel enclosure and is compatible with all DMP Command Processor panels. Integrators can customize the product with their company logos and a link to their Web sites. Companies can also add other links to give customers one-click access to their IP cameras, Wi-Fi and thermostats. www.securitysales.com/FREEInfo/12411
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Building Your Business
What a True Investment in Success Requires
D
©iStockphoto.com/Stigur Karlsson
Installing security contractors can stimulate their firms to be financially sound, but many fall well short of providing sufficient preparation to achieve maximum success. Find out how to evaluate if your team’s abilities are being fully realized. By Bob Harris
oes your value proposition still rest on low price as the significant differentiator? If so, do you offer the lowest price in your market? If not, how can you expect to profitably grow when there are other security providers out there cheaper than you? If you refuse to price yourself among the lowest providers perhaps it’s because you believe in your service, your team and the products you represent. You don’t cut corners on security and this is why your service is worth more than the lowest price. That is well and good, but how are you stirring the pot to create and intensify a value proposition? The goal is to be more in control of your own economy, as opposed to the out of control frustration associated with unyielding excuses laying blame for lost sales on price. Harvested from working with a number of other recurring revenue model industries during the past few years, I’d like to offer you some thoughts and also ask some tough questions. Some of this may hurt a little, but there’s rarely any growth without some pain. Let’s begin with the most important priority.
Open Wallet to Land Top Talent “Where can I find great salespeople?” I’m asked this question almost every day by installing security firm owners and managers. My blunt answer is the best way to find great talent is to go out and buy it! That’s how market leaders in just about every industry get there and stay there. Just about every great company ascended to the top by spending money on recruitment. How else do you honestly expect to attract top talent with a track record of knowing how to make money and also knowing how to pitch, promote and get past the objections? Talented professionals are not afraid of higher prices and possess the skill and confidence to close big deals. So are you truly recruiting top talent or are you looking for people looking for a job? Nearly every well run security company, regardless of size, can easily afford to invest in talent but typically do not. Why? Because the owner refuses
to wipe some dust off his/her wallet. Perhaps he or she has been “burned” in previous years by a vendor or by employees who failed to perform. Very often I hear owners say, “I would give anything to improve our profit and performance!” In reality they mean everything but the money it would cost to do so. Make no mistake, far more money has been lost to procrastination than has ever been lost to determination. Today, owners who embrace proactive change can reap purpose-driven growth by employing top sales talent together with technology, which is now typically only available through third-party central stations or other third-party vendors. The world is in constant flux! People who refuse to change the way they view control over new technology will no longer be able to compete with those who recognize that a piece of the pie tastes much better than none of the pie.
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Some Tough Questions to Ponder
©iStockphoto.com/KEMAL BAS
tough objections or becoming better equipped to hand a prospect the proverbial pen. Once you invest in firstA considerable amount of rate talent, how is your comavailable training coursework pany equipped to promote, lacks professional education support and drive them? It that imparts meaningful takeis utterly astonishing to me away on specific tools to save how many companies in our more customers from canindustry make absolutely no celing, defusing and redirectcommitment to any sales or ing angry ones. You need to customer service training create value and differentiawhatsoever. In this economy tion as opposed to just delivwe should be investing not in ering the lowest price. What a little but in massive trainwe must demand is education ing that stimulates constant on specifics that help us exprogress, thereby reinvigoMany installing security contractors are failing to provide their teams ceed customer service expecrating our teams to deliver the educational coursework that could help their firms exceed cusmuch more than they curtomer service expectations and excel in sales training, among other tations, valuable communication competencies and ways rently do. organizational imperatives. to restore organizational enWhat happened to sharpthusiasm from the top down. ening the skills associated with ef• Are your managers being inspired Vendor-based education has become fective cold call and referral strateso they can pour back into the their the rule rather than the exception at gies, exciting closing approaches, and team and win? our large industry and association conworkshops on overcoming tough ob• What have you invested in customferences. However, a handful of state jections? Have we really become a er service training to help shore up alarm associations, equipment distrib“sales-driven” industry that no longer your frontline to restore their enutors and third-party centrals have betrains, develops or stimulates our talthusiasm and capability to save gun to invest in extraordinary educaent to continually improve? more subscribers from canceling? tional opportunities for their dealers. Please tell me we haven’t become so • Are they capable of more? They understand the importance of exceedingly arrogant about our RMR • How do they get better at defusing helping businesses grow and become that we no longer need sales or cusangry customers rather than simply more competitive. Some of them have tomer service training. If so, perhaps passing problems up the ladder for even made sales and customer service the perception of being “burned” by others to deal with? education a large part of their own valthe talent you bought way back when • How can you honestly expect to ue proposition because they underwas in reality your own fault by failing passionately stimulate growth stand that when their dealers grow, to invest in ongoing training to build throughout your organization when they’ll grow right along with them. them up, encourage and ultimately you refuse to invest in such decisive Perhaps 2012 will be the year we propel them to greatness. requisites as talent and training? start picking up much more of the How do you support the talent you • What is your value proposition to low-hanging fruit that goes unrealized have on your team right now? Are you create growth in 2012 and what catso much of the time. You can motivate training or motivating your sales and alysts will you employ to stimulate your team to become completely incustomer service managers to get in continuous improvement throughdependent and financially successful the game and bring it? A sales managout your organization? regardless of a bad economy, but you er must show their team they not only must be willing to embrace change still know how to sell, but that they also know how to push, inspire, motiWhat’s Missing in Training Choices and commit to training the team. Progress or procrastination, how pasvate, drive and lead by example with Major industry conferences and assionate is your pursuit? new levels of possibilities. sociation events offer education on ev■ Many managers have been beaterything from trends to technology and Bob Harris is President of Los en up for a long time in this low-price on selling your business to finding new Angeles-based Attrition Busters, market we have created for ourselves, offering seminars, workshops, and products to sell. What you typically canconsulting services for recurring and they’re drained of energy and not find are seminars and workshops revenue model businesses. He can be reached at (818) 730-4690 or ideas. Consequently, there is much to on invigorating sales-closing techniques bobh@attritionbusters.com. Visit consider: and exercises on working through attritionbusters.com. securitysales.com • FEBRUARY 2012 65
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Ad Index
Go to www.securitysales.com/freeinfo to request FREE product info.
PAGE
FREEInfo#
PAGE
AES Corporation ..............................................................................35
12199
NVT .....................................................................................................3
12184
Affiliated Central, Inc. ..................................................................... C2
12272
OT Systems.......................................................................................57
12322
All American Monitoring .................................................................51
12204
Panasonic System Solutions Company ..........................................19
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Altronix .............................................................................................62
12245
Security Door Controls ......................................................................6
12198
Arlington Industries, Inc. ................................................................24
12104
Speco Technologies.......................................................... CoverSnipe
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Axis Communications......................................................................14
12308
Speco Technologies............................................................................1
12142
Bolide Technology Group ..................................................................7
12193
SSI.....................................................................................................62
—
Chamberlain Group, Inc..................................................................39
12194
SSI -eControl Panel..........................................................................59
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DSX Access Systems, Inc.................................................................11
12231
SSI -Hall of Fame .............................................................................71
—
EasyLobby, Inc. ................................................................................47
12185
SSI -PDQ...........................................................................................73
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EMERgency24 ................................................................................ C3
12136
SSI -Web ...........................................................................................66
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HID Global .........................................................................................5
12234
T3 INNOVATION .............................................................................25
12149
HIKVISION ..................................................................................... 17
12233
T3 INNOVATION .............................................................................44
12191
Honeywell Security ......................................................................... C4
12103
Telular Corporation .........................................................................27
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ISC West ...........................................................................................61
12163
Telular Corporation .........................................................................29
12172
JLM Wholesale, Inc. ........................................................................63
12249
Tyco Security Products (Kantech) ..................................................33
12180
KABA Access Control.......................................................................43
12289
Tyco Security Products (DSC) .........................................................13
12120
Kirshenbaum & Kirshenbaum, PC .................................................66
12253
UTC Interlogix..................................................................................23
12273
MISSION 500 ...................................................................................69
—
Visonic, Inc. ......................................................................................45
12216
National Monitoring Center (NMC) ...............................................21
12314
FREEInfo#
Company listings are provided as a courtesy — publisher assumes no responsibility for errors or omissions.
TM
Sales.......................................Residential/Commercial............................................$200.00 Monitoring .............................Residential/Commercial............................................$200.00 Service....................................Residential/Commercial............................................$200.00 Lease.......................................................................................................................$200.00 Commercial: includes supplemental rider for add ons and to increase limitation of liability All-in-One (Not available in all states)......................................................................$600.00 Sales, Monitoring , Service Contracts (one contract) Residential/Commercial Disclaimer Notice....................................................................................................$175.00 (Additional Equipment Systems & Service, VOIP Disclaimer Notice) Access Control Administration & Service Contract................................................ $375.00 Audio/Video ............................................................................................................ $375.00 Fire Alarm Sale & Installation - Commercial ........................................................$375.00 Fire Alarm Monitoring Commercial fire alarm monitoring.....................................$375.00 Fire Inspection Service .......................................................................................... $375.00 Contract For Fire Equipment/Extinguisher/Smoke Detector/Sprinkler & CO Inspection Fire Alarm All-in-One Combines Sales, Installation, Monitoring, Service & Inspection ...............................................................................................$850.00 Fire Alarm Lease - Commercial .............................................................................$375.00 Includes supplemental rider for add ons & to increase limitation liability Standard Fire Alarm Sales /Fire Suppression .......................................................$375.00 Sprinkler Equipment Contract CCTV Sale Sale, Service and Monitoring/Data storage & Monitoring…...................$375.00 ....... .................$$375 375.00 .00 CCTV Lease Supervisory Equipment Lease..............................................................$375.00 st ................... ......... ...... . ...$37 $3 5.000 NAPCO I See Video® Sales & Installation Contract................................................$375.00 ito tori r Contract..................................................... ................. ...... ......... .. ... .. ........ . ... .. ........ $375.00 $375 3 .00 Remote Video Monitoring Monitoring ugh cen centra trall stat sstation) tation ion)) (through internet access - not throu through central sponse nse Le Lease ase/Sa /Sale le - Con Consum sumer er Use Use.. ............................ .........$20 $200.00 Personal Emergency Respo Response Lease/Sale Consumer Use.................................$200.00 e Ins Instal tallat latio ion, serv r ice,, monitoring.................................................$200.00 monitor moni toring ing.............................. ............................ ....$2 $200. 0 00 Residential Lease Installation, service, ntractor or Agreem Agr eement For sub sub or or gene ggeneral n ral contr t act actor or..................... r ........................$20 $2 0.00 Sub-Contractor Agreement contractor.......................................$200.00 letio tion n Cert C ertifi ificat cate e........................... ...................... . ................. .......................................$ ..$40.00 Completion Certifi cate...............................................................................................$40.00 mmer mercia ciall & ResidentialRe Residenttial ial-- use use after afte installation instal talla tal lation & every lat eve ev ry service servicce call se Commercial ploy oymen mentt Agre A greeme em ntt Wit W h Rest estric r tivve C Coven nantt............................................. .. ..... $200.00 $2200.00 Employment Agreement With Restrictive Covenant.............................................. C-1 Form For FFinancial in nci ina ncial a S tatemen nt .............................................................................. .............................................................................. ........ $50.00 $50.0 $50.0 0 0 UCC-1 Statement ntra ral Sta ation ion Contr Co raccts ........................................................................................ ..................................................................................... .. ...... ...... .. . $375.00 $3375. 5.00 00 Central Station Contracts wayy con ntra ract be bet weenn c/o wee /o ins stalleer & sub bscribber, separate separaate form form where wheere wher 3-way contract between installer subscriber, /o is ssue UL ce ertific rt cate forr inst tallerr c/o issue certificate installer nstal ta lerr C Co ntrrac act............... ...... .................................... . .......... .. .............................................$$375 375.00 00 Installer Contract.....................................................................................................$375.00 Sta atio t nar aryy Guard Guar ua d “Rent-A-Cop”..............................................................................$375.00 “Reent-A -A-Co -Cop”....................................................... . ...................... ...... .. ... ...... .......$37 375.000 Stationary Tel eleph ephone on Sales.…................Commercial Sale Sa les.…..................Comm mmeerciaal or Residential R sideential Re al ...................................... ......................... .. .......... ........... ...... ... $200.00 $200.0 $20 0.000 Telephone Tel e eph ephone one Service Servicce ..................Commercial Se ..................Com Commer me cia ial or or Residential Reside dentia iall ...................................... ............................................ $200.00 $$200. 00 000 Telephone
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66 securitysales.com • FEBRUARY 2012
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In the Know
Making Clients’ Data Compute a Golden Opportunity
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By Jay Hauhn ash will always be king, but data can be golden. Most companies have jhauhn@adt.com considerable proprietary data at their disposal, spread across their enterprise. To make that data golden, an ever-increasing number of firms are deploying business intelligence (BI) systems. What is a BI system? Wikipedia defines it as “computertion. It is a given that large volumes of data, from all availbased techniques used in identifying, extracting and anaable sources, increases a BI system’s impact. So, it is not a lyzing business data.” Two other terms common in the BI large leap of faith to appreciate that physical security sysworld are data warehouse and data mining. A data waretems have greater value once a BI system has access to house is basically a central repository used to store data their data. from a company’s varied business systems. Data mining, in The possibilities go much further. Businesses of all types an overly simplified description, is a method of examining are subjected to audits, be them regulatory, compliance or data from a plethora of sourcinternal business practices, searching for nuggets of es. Investigations of failed As data from security systems audits identify the circumvaluable information that unleads to measurable business stances that led to the failder normal processes would efficiencies, the ability to show a ure. BI systems excel at taknot likely be revealed. So, you real ROI emerges. This is made ing data from a forensic may ask, what does all this possible by data-mining techniques review and automating the have to do with physical secuand their ability to delve deep into process of looking for indirity systems? disparate databases, looking for cators that predict a future Systems integrators install those nuggets of valuable business card access, video and intrufailure, enabling preventive information. measure to be taken proacsion detection systems. All of those systems are large nettively. Physical security senworks of sensors that are continually collecting data. One sors can be a valuable data source when a failed audit is of the most valuable data-capture capabilities involves the the result of business associates not being present and permovement of employees and customers. The value of the forming a required task. people tracking data increases as you add other statistics Video analytic technology adds even more value to the such as time and date, and job title. Video analytics availequation. Analytic systems generate metadata, or data able today can tell how many people are currently at a locaabout data. The underlying technology of video analytics tion, as well as how many people passed or loitered at a sesystems is the processing of metadata. Give a BI system aclected spot. cess to that metadata and a video system transforms from A measureable return on investment (ROI) based on an a forensic tool to a system that has a positive impact on the intangible metric such as “preventing bad things from hapbottom line. That will be the Holy Grail. pening” can be a challenge to calculate. That is because seBI systems need to get access to physical security datacurity systems are historically implemented as a physical bases, databases that are not known for being open. Given or psychological deterrent to hinder those with bad intent. their growing list of interfaces, physical security informaHow often an access, intrusion or video system actually tion management systems (PSIMs) will serve as valuable prevented a mishap is subjective at best. middleware to accomplish this. Looking forward further, However, as data from security systems leads to meaonce radio frequency identification (RFID) proliferates, the surable business efficiencies, the ability to show a real ROI data available to business managers will explode. Savvy emerges. This is made possible by BI data-mining techsystems integrators will be right in the middle of it. ■ niques and their unique ability to delve deep into disparate Jay Hauhn, Chief Technology Officer at ADT Security Services, has more than 30 databases, looking for those nuggets of valuable informayears’ industry experience and is a member of SSI’s Hall of Fame.
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Invitation to Attend
If you can join us on March 27th, please send an e-mail to: abril.calderon@bobit.com
The staff of SECURITY SALES & INTEGRATION Magazine invites all of our devoted readers to the Industry Hall of Fame & SAMMY (Sales & Marketing) Awards Presentation! Since 2005, the Hall of Fame has honored outstanding lifetime achievements. For 16 years, the SAMMYs has recognized dealers/integrators for sales, marketing, installation & business excellence. Tuesday, March 27, 2012 at 4:30pm
FOR MORE INFORMATION VISIT WWW.THESAMMYAWARDS.COM WWW.SECURITYSALES.COM/HALLOFFAME
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Please RSVP to: abril.calderon@bobit.com Sands Expo and Convention Center, Casanova Room 502 Las Vegas (Evening before ISC Exhibits open)
1/30/12 2:18 PM
The Big Idea
Bang Your Business’ Drum to Brand and Expand IDEA of the Month If you had just one really great idea you could share with the alarm industry, what would it be? This month’s great idea comes from Scott Goldfine, editorin-chief of SECURITY SALES & INTEGRATION.
Goldfine’s great idea: You may be running a great company, but unless you let your customers and prospective customers know that through actively marketing and branding your business, you’ve only done half the job.
T
his month’s Big Idea contributor might seem a little unconventional. After all, it’s not every day a chief editor is featured in his own publication, let alone in a column by the very columnist he selected to publish each month. But know this: If anyone has been a more diligent observer of the electronic security industry, I don’t know who it is. Although Goldfine has never owned or operated an installing alarm company, he has been responsible for shaping much of the thinking in the alarm industry. From SSI’s industryleading original research to the industry’s only sales and marketing awards program (SAMMYs), to SSI’s industry Hall of Fame, to the Police Dispatch Quality (PDQ) award, each of these endeavors have all occurred under Goldfine’s leadership. Who better to have a really big idea? Unquestionably, Goldfine’s great idea is spot on. The more I considered it the more convinced I became that it is truly insightful. If all we do is sit in a car — and know how everything works, but never drive anywhere — can we call ourselves drivers? Of
course not. What Goldfine wants dealers and integrators to be deeply aware of is there are ways of telling your story. There are cost-effective methods to inform your clientele about your firm’s unique qualities that separate you from the rest of the pack. Consider what this industry’s top installing security contractors all share in common: • Professional-looking Web sites, many of them with interactive features • Constant dissemination of press releases, touting accomplishments • A unique and memorable graphic image utilized on all communications, marketing collateral, etc. • Company vehicles that serve as rolling advertisements, emphasizing the quality of the business and brand • Salespeople, service people and technicians all dressed in identifiable attire that is easily recognizable • Client hotlines that are answered immediately; staffers who are empowered to make quick decisions • CEO or one of the top three executives is also the head cheerleader, giving speeches, seminars, accepting awards and recognition
By Ron Davis rdavis@graybeardsrus.com
Toot Your Own Horn Where do you start, and where do you end? Let’s face it, the majority of owners and operators of companies in our industry come from law enforcement, technical and a wide range of other backgrounds. For these folks, even those well versed in business management, marketing can be a relatively foreign pursuit. If it is outside your comfort zone and expertise, hire an expert or outsource it. There are many firms that provide marketing services for the industry, including: Art Romero Imaginist (imaginist.com); Eclipse Media Group (eclipsemediagroup.net); Brigham Scully (brighamscully. com); Daum Weigle (daumweigle. com); LRG Marketing Communications (lrgmarketing.com); Syncomm Management Group (snnonline.com); CompassPR (compasspublicrelations. com); and Eclipse Marketing (eclipsemarketing.net). Now let’s circle back to Goldfine’s great idea. Put another way, you can have the best mousetrap in the world, but if the world doesn’t know about it, you’re not going to sell many mousetraps. The great news is you don’t have to have a huge marketing budget to be successful. With the Web and social media there are more avenues than ever to get your message and branding out there, many times at little to no cost. All it takes is some focus, creativity and action. ■ Ron Davis is a SSI Hall of Fame inductee and President of Davis Mergers and Acquisitions Group Inc. Also known as The Graybeards, the company is active in acquisitions and mergers exclusively in the alarm business.
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Custom Alarm accepts the 2011 PDQ award. Past winners include: Alarm Detection Systems, Altronic Alarms, Brink’s Home Security, Broadview Security, and Vector Security.
Call for Entries “Promoting Partnerships in Public Safety”
S
ecurity companies and law enforcement agencies work together as partners, sharing information and communicating frequently to protect public safety and serve their communities. The Security Industry Alarm Coalition (SIAC), False Alarm Reduction Association (FARA), and SECURITY SALES & INTEGRATION created the POLICE DISPATCH QUALITY (PDQ) program to promote cooperative best practices, reduce unnecessary dispatches and give officers the most complete information when responding to alarms. We are looking for companies that exemplify an all-out effort to reduce false alarms from implementing ECV (Enhanced Call Verification, a.k.a. two-call verification) to utilizing ANSI CP01-compliant control panels, training customers and working closely with law enforcement. The best overall collaboration will be honored with the 7th Annual North American PDQ Award, which is also endorsed by the Installation Quality (IQ) Certification Program.
• The winning security company will receive $1,000
for hotel and airfare to attend June’s Electronic Security Expo (ESX) in Nashville,Tenn., and will participate in the award ceremony. • Installing and /or monitoring alarm dealers in the U.S. and Canada must mail an application to SIAC postmarked by Feb. 28, 2012.
• Outstanding program ideas will be featured in SECURITY SALES & INTEGRATION magazine, in security association publications and their Web sites, and at ESX 2012.
• Security companies and local police officials should meet now to form partnerships in public safety.
WORKING TOGETHER FOR PUBLIC SAFETY
The SECURITY INDUSTRY ALARM COALITION and the FALSE ALARM REDUCTION ASSOCIATION Co-Sponsored by: SECURITY SALES & INTEGRATION Magazine, IQ Certification Program and Honeywell Security
Download an application and the judging criteria package at
siacinc.org • faraonline.org iqcertification.org • securitysales.com
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Cover Your Assets When Selling Your Business
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ypically, in a commercial buy-sell transaction the buyer’s lawyer gets to draft the contract. Of course, the seller should be on guard. The buyer’s lawyer could simply not be knowledgeable about appropriate terms in an alarm transaction, or could be experienced, unfair and hoping to take advantage of a seller with a less experienced attorney. What should the seller be most concerned about? Certainly the paramount concern is getting paid, and the amount agreed upon and expected. Almost all deals fall into two categories: 1) most of the purchase price paid at closing, the balance held back for a period of time so that the buyer can deduct post-closing adjustments; 2) some money paid at closing and the seller holding the buyer’s promissory note or obligation to pay off the purchase price during an agreed-upon term. Let’s address the first scenario, a cash deal with a holdback. The seller should watch for the following:
1.
Buyer’s agreement of confidentiality between contract and closing, and restrictive covenants if the transaction does not close for any reason.
5. 6.
Assurance that buyer will in good faith do everything reasonable to maintain accounts during the guarantee period.
7.
Buyer’s agreement to collect pre-closing receivables if still property of seller.
8.
Buyer’s agreement to indemnify seller from any damage, including legal fees, for post-closing claims. For the second scenario, where the seller gets paid over time, all of the above except No. 3 apply. The seller in this scenario additionally needs to be concerned with the following:
1.
Buyer’s ability to continue servicing not only seller’s accounts but all accounts serviced by buyer.
2.
Seller should have a security interest in at least the assets sold, and in all buyer’s assets if that can be negotiated.
Bank check or wire at closing.
3.
Holdback held in attorney escrow account.
4.
2. 3. 4.
Guarantee terms clearly specified, particularly identifying buyer’s post-closing conduct or actions that void the guarantee for particular or all accounts.
Simple procedure to challenge claims under the guarantee.
Seller should be concerned with buyer’s finances, outstanding debt service and operational services.
No further encumbering of secured collateral should be permitted without seller’s consent.
5.
Strong security agreement and promissory note, which are drafted by seller’s, not buyer’s, attorney.
By Ken Kirschenbaum ken@kirschenbaumesq.com
6. 7.
Make sure you file the UCC-1 to perfect the security interest.
Seller should have backup plan in case of buyer’s default and seller is compelled to take back the collateral (the accounts) rather than recover the balance of the money that’s owed. While the cash at closing may appear to be less complicated and risky, the payout may offer an opportunity to ultimately get a higher multiple. It also may be the only option if selling to family, employees or in some markets where buyers are not knocking on seller’s doors. You should not enter into a buysell transaction without a knowledgeable attorney to assist you. When do you bring the attorney in? Before you start negotiations. You don’t want to agree to terms you later have to try to renege on because they turned out not to be in your best interest. The sale of your business may very well be a once-in-a-lifetime matter. You certainly don’t want it to end up causing you regret and aggravation. Your attorney can educate you in these transactions before you shake on a deal. ■ Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. (www.kirschenbaumesq.com). His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.
SECURITY SALES & INTEGRATION (ISSN 1539-0071) (USPS 511-590) is published monthly by Bobit Business Media, 3520 Challenger Street, Torrance, California 90503-1640. Periodicals postage paid at Torrance, California 90503-9998 and additional mailing offices. POSTMASTER: Send address changes to Security Sales, P.O. Box 1068 Skokie, IL 60076-8068. Please allow 4 to 6 weeks for address changes to take effect. Subscription Prices - United States $96 per year; Canada $96 per year; Foreign $140 per year. Single copy price - $8; Fact Book - $35. Please allow 4 to 6 weeks to receive your first issue. Please address Editorial and Advertising correspondence to the Executive Offices at 3520 Challenger Street, Torrance, California 90503-1640. The contents of this publication may not be reproduced either in whole or in part without consent of Bobit Business Media. All statements made, although based on information believed to be reliable and accurate, cannot be guaranteed and no fault or liability can be accepted for error or omission.
Legal Briefing
The opinions expressed in this column are not necessarily those of SSI, and not intended as legal advice.
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Fire & Burg
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Security integrator Service Works, Inc. chooses open technology to provide flexibility for its end users. When Jersey Shore University Medical Center turned to Service Works, Inc. for a security system to protect its $300 million expansion, SWI chose an open access control solution that would integrate with the CCTV and infant abduction systems already in place. After examining all the options available from various security providers, they chose Honeywellâ&#x20AC;&#x2122;s Pro-WatchÂŽ security management system because it works seamlessly with third party systems. â&#x20AC;&#x153;We were looking for a non-proprietary system because we wanted to avoid the problem of having to call a different vendor every time we needed something.â&#x20AC;? Honeywellâ&#x20AC;&#x2122;s Open Technology Alliance (HOTA) enables open exchange of technology between manufacturersâ&#x20AC;&#x201D;making an end userâ&#x20AC;&#x2122;s investment in existing security infrastructure go a long way. SWI and Jersey Shore choose open â&#x20AC;&#x201C; wonâ&#x20AC;&#x2122;t you?
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Š 2012 Honeywell International Inc. All rights reserved.
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