2022 Commercial Dealer Executive Roundtable: Talking Tech, Talent & Tactics
SSI picked the brains of three of the security industry’s top integrators during the recent Honeywell Integrated Security conference. Discover the issues impacting their organizations and the highest priorities on their to-do lists.
With costs rising across the board, how are you balancing passing that on to customers versus absorbing it?
Nemerofsky: All integrators look at their burden rates. You’re paying a technician $38 an hour, but you also have their benefits. You also have a laptop or an iPad, a phone, a truck, insurance and a plethora of other costs that go into that technician. Then integrators add in some inefficiencies for that tech because nobody’s 100% utilized or efficient. As you package that number together and it’s $60 an hour, and then fuel costs jump up a dollar and you didn’t calculate that. But if you do your burden cost right, your labor, unless gas goes up $2 a gallon, it will flow pretty well for you through the year.
The bigger challenge is if manufacturers increase prices. You have to communicate that to the customer. When you get a note in June that prices are valid until July 4, and then they’re going up 14%. Well, I’ve just put quotes out there where I told my client we were valid for 30 days. I could get caught in the middle. Some manufacturers have made their quotes now valid for only six days.
That means if I get a manufacturer quote today and give it to the client tomorrow, I’ve only got four days left to get the purchase order for me to place it with that manufacturer. Now my team’s got to go back and get new pricing on the seventh day to see if it’s still valid. That volatility can be challenging. You have to create urgency to do the best thing for the customer by letting them know there may be a price increase.
Some of the shipping and handling charges have been crazy. We had one manufacturer that tried to put a 6% shipping handling charge on a $300,000 software update. You’re going to send me a link to download software and you’re trying to charge me $18,000 of shipping and handling for emailing me a link?! Obviously, we didn’t pay it. You’ve really got to be on top of all your invoices. Your project manager can’t just sign off on everything.
Stark: The best relationships we have with our end users are that in which we work with our strategic partner, Honeywell, and the three of us sit down regularly to talk about that stuff. When there’s a cost increase coming, the three of us are sitting together and talking about it. Everybody understands what the dynamic is and what the challenges are and how we’re going to overcome this together. Sometimes we have to pass on that added expense.
The other area where the integrator feels the pinch is you’re not only getting increases from suppliers, gas prices and insurance, but also your employees. They are consumers who are now paying higher gas prices personally, more for food at the grocery store, etc.
They’re saying, “Hey, are you going to do any type of costs of living adjustments?” A field leader representing our staff said to me, “We see this as a 9% to 10% adjustment.” I said, “Are you OK that when things level back out that I take back 9% or 10%?” I said, “That’s why cost of living increases are never 9% or 10%. You’ll get 2% or 3% and keep it long after this thing comes back to center.” Of course, not everybody understands that math. But you had to increase everybody’s salary, not because it was performance-based but because it was economy based.
Haught: If I go into a customer and that customer is just shopping me for price, I don’t want their business because that’s never going to be a sustainable relationship. You’ve got to make sure that you keep your margin within range. You can’t gouge it, but then you’re looking at your burden costs on a backside that are increasing and how do you manage that? You’re managing the expectation of your employees. You’re managing the expectation of your customer. Again, I just roll back to everything being overcommunicated. Overcommunicate until somebody tells you to be quiet because they understand.
We put an efficiency model in, through our software, where we have somebody who reviews every single ticket. We are looking right now to do some type of incentive to those folks able to increase their efficiencies. Because really, when your margins are shrinking down and your costs are going up, the customers aren’t going to pay that much more. The only way you can maintain decent margins is to increase your efficiency. You truly have to work smarter than harder.
Stark: We’re in year three of a program like that. We bonus our field people in four areas. One is customer satisfaction rates, with surveys after each project. Quarterly for service calls to a client otherwise they’d be getting a survey every day, and nobody wants that. Two is utilization and you don’t want to manage utilization without managing efficiency. Then the fourth is inventory. You want the inventories to be right on their trucks. They can make 10% more if they hit those four categories, and they get that check quarterly.
What other new technology areas are you excited about or seeing traction?
Stark: With the pandemic, everybody started to adopt biometrics, even for touchless exiting. The other big thing I’ve seen, and obviously it has to do with the state of active shooter activity in our culture, is weapons and shooter detection. We’re doing a pilot program in a healthcare environment. There’s not a lot of hospitals that have weapons detection capabilities. We see that as an ongoing trend.
Haught: Gunshot detection is coming into its own. I got involved with a project years ago for gunshot detection where we spent a lot of time, energy, effort and money going through that process. It didn’t pan out like everybody anticipated it would. Now you’re dealing with air pressures or sound for the gunshot side of it. It’s still an evolving technology. Whoever is able to combine two or three different technologies will win. We’re getting pretty close to seeing some of these things finally come to maturity.
Nemerofsky: With one of our largest clients, as you drive into their corporate campus, they’re capturing your license plate. As you get out of your car, they’re using a product called ZeroEyes to see if you’ve got a weapon drawn already. As you get to the front door, you’re walking through a full height bullet-resistant turnstile and then through an Evolv weapons detection platform, where now if you’ve got a concealed weapon, we’re going to detect that. Then you can finally get to the visitor’s desk to check in for the day or go to your office. Weapons detection’s a hot tech area for sure.
Another is anti-drone detection. We sold drones to one client, and then we sold them anti-drone detection. It wasn’t to detect the drones we sold them as some have joked, but rather to detect other people’s drones on their property. With biometrics, many people wanted frictionless deployments. We’ve done a lot of work with Alcatraz AI to provide a frictionless experience. Analyzing systems trends to discern patterns in a predictive posture is also a hot trend.
We’ve used software packages like Secure Visual that started out as an advance reporting tool but became really a trend analysis thing. For example, we usually get eight door-propped alarms on this door. That means we’ve got some smokers going out there, while today we got 30 so we better post some security out there. Or we usually get 4,000 card reads coming in between 8 a.m. and 8:30 a.m. We got 8,000 so we better alert the cafeteria in that building there’s twice as many people there so we might need more food. We see some of the tools being used for business, not just security decisions.
Let’s close with how 2022 panned out, and what 2023 may bring.
Nemerofsky: We are at a run rate of 36% up year over year. We expect to finish at about that. We see 2023 with some continued growth, maybe not a 36% growth rate, but some strong continued growth. Our big focus for 2023 will be to continue to build out an organic effort, bringing in new logos to de-risk 2024. If they don’t spend like they did in 2023 and 2024, that’s why we have the effort to bring in more enterprise logos to de-risk the big spenders.
Stark: We’re healthy as an organization, up about 26% year over year. We have a great backlog. Even some of our larger clients that have put projects on hold, that activity is coming. Proposal activity has not diminished at all. We’re seeing a tremendous amount of requests from our clients. Some are struggling with supply chain but some aren’t. We’re four to six weeks out minimum in just about every one of our offices right now, just because of the amount of activity despite the challenges. We’re going into 2023 with a very positive outlook.
Haught: Our goal is about 25% and I’m sure we’ll be around that over last year. We manage our growth because in my size company the worst thing I can do is overgrow. That puts me into a situation where I’m overpromising and underdelivering, and that’s detrimental to the overall business. I’m very optimistic as to what 2023 is going to bring. We have opportunities with clientele that are going to bring some really interesting challenges that could be monetized to a level we’ve not done before.
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