Managed services is still the buzz, with everyone banging the drum about recurring revenue. Yet a lot of integrators have been slow to adopt RMR models. Where is your company concerning RMR and where do you want it to be?

LYNCH: Almost 90% of our client base is large enterprise organizations, so they don’t find remote cyber-managed service appealing. They have their own datacenters and IT staff. They tend to resist that kind of outsourcing. We don’t do a lot of cloud-based services because we don’t have a lot of those small one- to three-door, three- to five-camera systems. That sort of model fits well for a monthly fee.

Where we are seeing some interest and other companies that have been successful is in providing a network operations center as a managed service. That may be a potential attractive managed service for our clients in the transportation sector, for example.

If you do move in that direction, do you see the need to bring on people dedicated to that initiative?

That’s one of the reasons we avoided it. Our enterprise base and the type of people required to sell and support that ongoing is a very different base of employees than would be for burglar alarms and small access control systems or small fire systems. It definitely requires a different salesforce, a different sell approach, and certainly the ongoing installation technicians and so forth to support that. Our enterprise services model is growing very well right now, so it doesn’t make sense to be diluted into another direction.

Do you tie recurring revenue to some of those contracts, in terms of maintenance?

Absolutely. We have a software support and onsite support for all those enterprise customers. They expect that and need it. That’s a big part our business. We don’t have to provide managed or cloud services, per se, to have strong recurring revenue.

KRISTENSEN: We’re still picking up some managed services, but it’s not where it should be. It’s my feeling it’s a different salesperson that does that. We have our technology group and our engineering group now looking at some of the smaller products out there, the lower-end products we feel we can stand behind. It’s going to be a challenge to put together small systems that are four cameras-, two readers-type systems, an alarm panel. It’s a cookie-cutter-type system, so you can hire young people to basically bang on doors and run around on a regional basis.

We do maintenance contracts as well. We do the remote support from the help desk, billing hours per month type of things. We always had recurring revenue but we know we’re missing out on the RMR from that small to midsize market. Once you make these packages, it doesn’t take a lot of resources.

PATTERSON: We have a strong RMR business philosophy. It’s tough to continue to make money just on selling product.

When we start talking small- to medium-size businesses, and even down to the residential market, consumers are getting smarter. They don’t want to wait for information; it’s right there on their phone. When you start talking about managed access control, which we are just starting to get into, managed door locks, managed cameras, managed alarms, we see that recurring revenue as a great way to gap cash flow.

I see a focus for us moving forward to increase managed services as the technology comes out. Sometimes small- to medium-size customers are more interested in getting into a system at a lesser cost and being able to spread that out over time on a monthly or quarterly basis, and pay for that service.

FERRIAN: Our company starts on the high end of medium-sized businesses and most of our clients are enterprise level. So the cost to invest trying to go after a market that’s foreign to us doesn’t make sense. It’s almost going in two different directions. Like others here we do generate recurring revenue through support contracts.

Another thing we have done to try capturing recurring revenue is looking into offering technology lifecycle management, which enterprise-level clients need. Are the camera replacements on a four-, five-, six- or, hopefully not, seven-year cycle? Rather than letting the support contract dictate that the camera lasts 11 years, we could have replaced that camera at least once in that time, had we had a program that did that. We’re in the initial stages of offering a technology lifecycle management program that could include server upgrades, camera upgrades, etc. The challenge is separating out what a support contract is versus what that is, making sure there’s a clear delineation.

KRISTENSEN: I’d like to add that, quite honestly, I encourage my salespeople not to push the RMR piece because you don’t know where that client sits. Sometimes clients will say, “I was locked into this contract and couldn’t get out. I was in it for five years and I didn’t want it.” I educate our salespeople to say we have that in our bag of tricks, but not to go out wi
th the agenda of pushing it.

Listen to the client and understand their needs. Make sure you’re giving them a solution they want rather than just looking to drive RMR. Some companies get in this situation where their salespeople’s commission plans are really high on the RMR side, because that’s what they want. I think they’re handling it wrong and ultimately losing business.

FERRIAN: That’s a good point. I’d say probably 20% of the clients we acquire each year reach out because they’re in the RMR model and don’t want to get the bill every month. And on the sales side, because those commission checks come in every month, complacency can slip in since it automatically renews. It doesn’t require effort on the salesperson’s part to go out and re-present, update and maintain that relationship. The relationship can dwindle so you have to be aware of these things.

LYNCH: We view RMR a bit differently. For our enterprise customers, our RMR is the adds, moves, changes, software updates and other support. It never ends. You get into a big enterprise customer and they’re knocking down a wall, building a building, moving a lab or just growing as an organization. I’d rather have those all day long than a $29.95 account. It’s hundreds of thousands of dollars. If you as a company can provide that level of support to maintain that customer over the long haul, you can make a lot of money.

Sometimes in this industry the managed services model is really driven by the manufacturers and companies providing those services. They want you to do that, but realistically, for a larger client, they’re not interested. It doesn’t make sense, so we’re not going to retool to go after that market.

Let’s say you’re a consultant, mentor or advisor for a security integrator. What would be your top pieces of advice?

LYNCH: Secure your manufacturer brands. Make sure you pay your vendors on time so you can attract more manufacturers. Manufacturers don’t want to bring on deadbeats. Pay your bills and keep your credit good. All the manufacturers want to be fed. If they’re fed, you have leverage over keeping other people out of your particular market area. And more important, you don’t get fired by the manufacturer of a very good product line.

Also maintain employee training, so everybody is trained and you don’t have one individual as the only one. You have to crosstrain. We have specialists in the company but we don’t have anybody that’s absolutely invaluable and we couldn’t live without. That’s very important because you become too vulnerable.

KRISTENSEN: Having good customer-facing project managers is very important. When we get into different markets and open up an office, the first person on the ground has to be the project manager. You need a strong project manager, and a good customer-facing salesman and sales engineer. If you have those three people you can pretty much do whatever you need. You can always hire technicians and people to pull cable. But to be a trusted advisor and own that relationship, you have to have smart people that understand the business, ones you can bring into a meeting and know when to say something and when not to say something.

PATTERSON: We try to cultivate a company culture with the understanding that customers pay our salaries. It’s about customer service and customer attention. If we’re not going to make them happy and help them to succeed and mitigate their risks, they’re going to go someplace else.

FERRIAN: We all sell the major brands, but what is that client getting that’s different? It’s all the extra things. It’s about defining the experience internally so all your employees understand what is different about you versus your competition, and then making sure people can convey that message to clients. It’s important even from the service standpoint. Service people are often in front of clients more often than salespeople. It’s important that message is conveyed throughout the company.

Another thing is investing in manufacturer relationships, and also relationships with your employees. It’s a good employee retention tool. So get personal. I think people are attracted to it. People need that connection, whether it’s your employees or clients.

The last thing is being deliberate about your culture as an organization. We have a slide we go through that talks about the Pro-Tec culture. If I see somebody in on a Saturday at 10 a.m., I tell them they should bug out early on a Friday. Or I tell them it’s good to take some time off because they’ve been working hard. Recognizing that, and investing in the culture and making sure it’s defined for everyone is vital.

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