CEOs Promote New Paths to Prosperity
Tim Feury: Overall, our sales are flat. We’re not shrinking but we’re not growing. You see a lot of projects being delayed. There are more pricing pressures from some of our better customers than I’m accustomed to. But I agree that there are also opportunities.
You have to be more focused, the managed services thing and service in general I think present opportunities. We’ve increased our marketing efforts. Some of the projects that maybe we wouldn’t have gotten a sniff at perhaps now we will thanks to some more proactive marketing things we’re doing. I have guarded optimism.
Let’s talk about services and technology, such as managed access control and remote video. What opportunities do you see?
Venable: We have been doing online access control, sold several systems. We have several opportunities where we’re pursuing remote video monitoring. We’re optimistic because that offers a lot of opportunity for clients to increase their efficiency and effectiveness, and do it without major capital investments. So we can take customers’ expenses from one area and move them to another.
We are looking at services business because all the clients we talk to are looking for ways to reduce their expenses. And a lot of these services can actually reduce their expenses so their net cash flow improves. Rather than making a capital investment, they’re making an expense reduction investment.
Feury: The margins on our products are dropping. That’s just a fact of life. Especially with IP cameras, you go on Google and find a price. That has made us look more at managed services such as hosted applications. I happen to be a big fan of those and I think there’s a big market for that. There’s also, obviously, conventional service contracts. We’re looking at things like that and also IT network monitoring.
Henry: We don’t have to reinvent the wheel here. The IT integration industry has shown us this. There is an industry that lives very happily with single-digit margins, making more money than we are as an industry. It’s not voodoo economics. If you really look at it, it’s all about the back end they get from both services and residuals. At the end of the day, what matters is: What’s your revenue vs. your costs? How much money are you making? Don’t get hung up on that 1970s perfect model of 50-percent markups on hardware. It’s not there, but the profit is still there. It’s just distributed in a different way. Forget about that fictitious world that nobody lives in anymore wher
e materials margins carried the burden of all your overhead and selling expenses.
Lesnewski: I think it’s also important for companies to grow, and realize that means going into the differentiation mode. What makes us different, not only in our industry but from the guys coming over from the IT environment, are simple things. For example, I just spent $100,000 last year on a generator so our building can operate when hurricanes take everybody else out. Another simple thing is looking after your financials. We’ve been invited to partner the past couple of months because the guys who have gotten the work can’t get the bonding. Right now, we’re looking at establishing our own remote video monitoring center.
I think the hardest question I’ve ever had to answer in my life, and I know it’s the same for you guys, is, ‘What do you do?’ Well, we’re integrators, but what’s an integrator? I think we need to become more and more service providers and solutions sellers, if you will. It’s come to where the box is no longer the important component of what we take to market. You also want to do things that market your company. For the retail market, we are introducing a green public view monitor, which we worked with one of our vendors to develop. Basically it’s a low-energy, motion-seeking device. Are we going to make a whole lot of money on it? No, but we’ve established ourselves in that particular vertical.
We’re going into the sound business. Why? Because with Muzak in Chapter 11 right now, there’s an awful lot of locations out there that will need somebody with an alternative. I think it’s more than just losing the 1970s thinking. We’ve got to take advantage of the models that are working, and I think there’s an awful lot to be learned from the IT guys.
Henry: We can’t get hung up on patting ourselves on the back as integrators because we know all this technology. It all comes down to: ‘Are you providing a solution for your customer to make his life easier, or give him a return on his investment and improve his operation?’ We have to foresee, we have to know where the industry is going, we have to know where the technologies are, we have to have the trained and certified people ready in advance, and we have to demonstrate our differentiation from the competition.
Perception is reality. If customers don’t understand your value differentiation from another contractor that’s just in there to squeeze the margin out of the project on the front end and is willing to take liberties with what they’re promising because their business won’t be around very long to support the system, then you’re in danger.
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