How PSA’s Managed Services Program Seeks to Prime Providers
Leading integrator group PSA expects managed security services to power a major industry shift and opportunity.
It’s been said that one of most people’s greatest fears, even beyond death, is public speaking. For security integrators, change may top them both. Ironically, not changing can lead to the death of a security integration business.
There’s no doubt change is hard. Change is messy. Change is uncomfortable. Change also flies in the face of the stoic posture of security itself. However, due to recent years’ exponential advances in technology, change can stimulate new revenues. And in the case of managed services, what’s at stake is not pocket change but transformative change that generates dollars — potentially lots of them.
While the security alarm industry has long championed a business model centered around monitoring services that produce recurring monthly revenue (RMR), some commercial dealers and most systems integrators have concentrated on more complex project-based work that can offer sizeable payoffs but little to no consistent cash flow.
That has made them more vulnerable to economic downturns and inhibited their ability to build the kind of predictable revenues and books of business coveted by creditors, investors and company buyers.
Leading-edge integrators are increasingly realizing how breakthroughs in Cloud-architected security-as-a-service (SaaS) solutions such as video surveillance and access control offer a means by which they can adapt and grow their businesses based on an RMR model.
Furthermore, end users are getting accustomed to subscription-style services and can gain many benefits in the bargain. However, awareness and action are two different things and most integrators need assistance and guidance to make this type of transition.
PSA Security Network, the world’s largest integrator consortium, has stepped up by unveiling its new Managed Security Service Provider (MSSP) program.
“PSA’s role is to be our integrators’ most valuable partner and empower our integrators to be the best in the markets they serve,” says PSA President and CEO Bill Bozeman, an SSI Industry Hall Famer. “It is impossible to meet our vision and mission without embracing and deploying an MSSP program. From a financial perspective, the MSSP model not only improves and stabilizes long-term cash flow but also significantly increases the long-term valuation of the security integrator. The subscription model is the future.”
As part of the MSSP program, PSA has partnered with several industry-leading solutions providers to help integrators reshape their businesses to deliver Cloud-based video management, remote video monitoring, access control and cybersecurity solutions to new and existing clientele.
In addition to product offerings and financing options, PSA is also providing virtual and in-person training opportunities to counsel integrators on their path to becoming managed security service providers.
To find out more about this exciting program, its participants and the larger looming market opportunity — which Bozeman is calling the biggest game-changer the security industry has ever seen — SSI also spoke with key stakeholders and integrators. One thing seems clear; it is not a question of if managed services will take hold but how quickly the evolution will occur.
Makings of an MSSP Program
The roots of PSA’s MSSP program can be traced back at least five years, to when Bozeman attended a technology-focused conference outside the physical security industry that dwelled on cybersecurity threats and what organizations were best positioned to counter those threats.
It got him thinking of not only the opportunities in cyber but also how the emerging fields of Cloud-based access control and video surveillance were a natural fit for physical security integrators.
In the ensuing years the concept remained prominent in his mind and he discussed the possibilities with many of security’s thought leaders before PSA began laying the program’s groundwork in 2017.
“Key industry leaders I shared ideas with and learned from,” says Bozeman, “include a host of my old connections in the traditional alarm business as well as folks like Dean Drako, Steve Van Till, John Mack, Bill Polk, Sandy Jones and Dan Dunkel,” who has been named managing director of PSA’s MSSP program. “Our internal management team has also been great considering the magnitude of the changes I have been pushing.”
Dunkel’s responsibilities include recruiting solution providers to join the program, developing go-to-market strategies and coordinating ongoing efforts to increase MSSP adoption among PSA’s integrators. He brings to that role more than 22 years of sales, management and executive level experience in the high-tech sector. His most recent posts were with Cyber adAPT, a provider of network threat and cyber-breach detection services, and Cloud-based video and access security solutions specialist Eagle Eye Networks.
“Integrators need to understand that the digital transformation has redefined risk across all market sectors,” says Dunkel. “It’s about having an open mind to new opportunities, the ability to work with new partners in market segments that are new to them, and embracing the Cloud model and RMR.”
To that end, one of the tools he has been working on is a quick-start sales guide and program playbook.
PSA officially launched the MSSP program at its annual TEC event this past March, and while it is too early to report its success stories the initial reaction and reception was more enthusiastic than anticipated.
Sessions like “PSA Managed Services Committee: A Roadmap of Transition — Building a Managed Services Business” were standing-room only. The next step, says Dunkel, is a roadshow to educate the top 20 sales/support teams and their customers.
Shift Happening in Stages
A sampling of PSA member company leaders lends insight as to the current mindset of security integration companies insofar as the Cloud and managed services are concerned. Take Mansfield, Ohio-based Schmidt Security Pro for example, which is just beginning to emphasize service over products.
“I see it evolving very quickly. More and more it’s less about the camera that’s in the ceiling, the type of card reader that’s fastened to the wall and more about service and support for the customer,” says company President Brian Schmidt. “So we’ve been leading with service and support during our sales presentations recently rather than the product and its capabilities, and the Cloud is a big piece of that. Through things like health-check monitoring and proactive service visits we can maintain uptime and make sure the system works when it needs to.”
Alliance Security of New York, on the other hand, began down the road of adopting an MSSP model three years ago.
“Every technology we provide — such as video, access or cyber — has a Cloud-hosted option for the customer. It’s been a long road to get where we are, but up to 35% of our revenue this year will come from the service side,” says the firm’s vice president, Paul Schmick. “The top challenge is the ideology change with customers. We have to educate them how managed services can bring down their upfront costs and shift security from a capital to an operational expenditure. I call it security as a utility.”
Still other integrators, such as Versar Security Systems of Springfield, Va., have yet to dip their toes into the MSSP waters. As company Vice President Sean MacCarthy shares, making that shift can be as much about the application or vertical market as it is about the technological capabilities or desire to take the services plunge.
“We’re looking at the MSSP model, but for us being primarily federally focused, they’re not pushing to that right now,” he says. “We see the trend and know that’s where things are migrating. We want to start adjusting how we operate, but it’s not very impactful for us because of our vertical. I believe there’s going to be more of that in the future with the federal government, but right now it’s not the big push. There will need to be a change in that culture.”
The Helpful 8
Eight initial rollout vendor partners have been announced in support of the PSA MSSP program. Brivo, 3xLOGIC, Eagle Eye Networks, Netwatch Group, OpenEye, Viakoo, Esentire and Panda Security have committed to providing Cloud-based security solutions, training, certifications and financing options to help systems integrators diversify and realize the full potential of a managed services business model.
“Our due diligence process was divided into the three segments of finance and subscription-based variables, technical/feature sets and channel management,” Bozeman says. “The process was lengthy as many procedures are new to our segment of the security integration business. Both vendors and integrators who chose to participate in PSA’s MSSP program agree to terms and conditions that best position participants for success.”
Those vendors represent a mix of the three targeted MSSP areas of concentration with two from access control, four from video surveillance and two from cybersecurity. The weighting is in line with Dunkel’s assertion that video is the easiest transition for integrators because it is a “clean upsell.”
He points out an enormous opportunity in cybersecurity for the small- to mid-sized business (SMB) market. These prospects typically can’t afford to hire resources to defend their businesses and customers. This huge problem encompasses insurance, financial planning, legal and intellectual property considerations.
“The first step is you sold it, you secure it — in other words upsell the base,” says Dunkel. “SMB and mid-enterprise companies are sitting ducks. All endpoint devices need to be secured in the age of IoT and simultaneous 5G network performance. This one-two punch is a hacker’s dream. Breaches will get worse moving forward, and regulation is coming. Expect all RFPs to demand endpoint security and PII protections. Physical security integrators who cannot provide these requirements will be gone very quickly.”
Aiming For 80-20 Blend
How much of a security integrator’s business should consist of managed services revenues? Initially, PSA is urging its member companies to strive for 20% subscription-oriented offerings and 80% traditional project-based income.
“We understand that financing an MSSP business model is both an art and a science, consequently we anticipate slow but steady adaptation,” says Bozeman. “We are projecting 20% participation from our base of integrators in the first 12-18 months and 50% participation in 36 months. End users will play an important part in the change dynamics as they will increasingly opt for subscription-based offerings. I anticipate that within five years 75% of physical security deployments will be impacted by the MSSP model.”
Whether enlisting in the PSA MSSP program or partnering with other vendors and/or technology firms, security integrators need to embrace the movement now if they hope to ride on the crest of the Cloud services wave.
Viakoo’s Vision of Managed Services
One of the PSA MSSP program’s vendor partners, Viakoo’s software product automatically detects physical security system failures, diagnoses them and provides fix-it plans for integrators.
Below, Vice President of Marketing John Gallagher assesses the market opportunity…
Why did Viakoo partner with the PSA MSSP program?
John Gallagher: PSA is a leader in the physical security industry, especially when it comes to managed services. Some of PSA’s members have deep experience in these offerings, some are just getting started and others are looking to join in. We can help some integrators deliver a broader set of managed services and we’ll enable others to first get into it.
How do you view the managed services opportunity?
Gallagher: We are all moving toward a services economy. Managed services are a way for physical security to be delivered in a form that organizations want to consume solutions these days. For many SMB organizations turning to managed services is an alternative to having dedicated internal resources. The power of a security integrator with their deep domain and local experience, combined with proven solutions and services, is what many organizations are looking for. And over the long run the RMR from such services can grow an integrator faster and more predictably than equipment sales.
What are tips for integrators new to managed services?
Gallagher: Services are continuous, 24/7. Don’t treat it like traditional equipment sales; don’t “set it and forget it.” That will not yield long-term success. Dedicate specific people to focus on managed services and develop a customer success process to “check in” on customers during their use of the service.
What are tips for integrators already into it to grow and succeed?
Gallagher: Dedicate time to developing a strategy around managed services. It can be a different sale and ongoing relationship than equipment sales, so it’s worth dedicating effort to managing those differences. Also call in your solution providers to help and get their perspectives on sales approach, lead generation and typical customer engagements.
What is the long-term opportunity?
Gallagher: Positioning the integrator as a strategic partner and not just a vendor. Creating a digital relationship through managed services provides continuous insight and knowledge on that customer’s situation.
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