State of Commercial Security 2020: Execs on RMR, Challenges & Competition
Leaders from four successful security companies discuss the commercial market in this industry roundtable, including what’s working and what needs work.
Let’s discuss the huge issue of talent recruitment in security. How do you draw the line between bringing someone in that you can mold to what you’re going after, versus somebody who’s been around the block and maybe has habits you’re not crazy about?
Ricucci: It’s a question of your need at that moment in time. There are a lot of applications we see from the telecom in the cable industries, and they’re decent with wire, they’re decent in the home and the businesses, but they don’t know our products. If I’ve got a little bit more lead time and I’ve got somebody I compare that individual with then we can make that decision. If you unfortunately lose somebody that’s a higher level of tech three or something like that, then you have to start looking for somebody a little bit more talented.
As far as bad habits go, that’s really a concern that rests within the purview of your management function and if you’ve got lead techs that are also managers, it’s a little tricky versus an overhead piece that’s just an ops manager to check that stuff. If you have protocols and you have processes in place, if you’re a key process-driven company, you can usually identify and retrain some of that and sometimes you get a dog that won’t hurt.
Dillard: We’re fortunate with the tiny company that we are; we’re five full-time employees but we still gross over $1 million a year. We have nice projects, our newest employee has over five years and our longest is over 11. You need to treat them right; we do quarterly bonuses. Some of them are quite substantial with a Christmas bonus at the end. The 401Ks, the insurance, you treat them like family. If they need off for an appointment, sometimes I don’t even document it.
We’re tossing around the idea now if we can get a few more employees in trying out four 10-hour days as the workweek. A lot of corporate companies are way more productive with that and you find on the commercial projects by the time you unloaded all the tools, get on the job, you’ve worked for good five or six hours, it’s time to load all the tools back up again. Maybe if they got two more hours on that job before they head to load up the tools again, I think we could probably be more profitable.
Sweeney: The biggest mistake organizations make is that they compromise their core beliefs and core values. We really try to make sure everyone in our organization understands what our core focus is, what our core values are and any team member we add has to embody those values. Whether they’ve got 20 years in the industry or they’re fresh out of tech school, because those are things you can’t teach. That’s a deal-breaker for us.
In our business, we have a very strong customer service focus. That really makes or breaks us on a daily basis. It only takes one mistake in a customer service-oriented business to really have a big challenge. Sometimes the biggest mistake people make is they sacrifice or they give a little on who they are as an organization to hire that one person. Then they wait too long to make the correction.
Let’s talk a little bit about technology. What are one or two technologies that are just arriving or maybe right on the horizon that you’re excited about and why?
Camarillo: One that we’ve seen a lot of growth in is face detection. What excites me about the technology is we were able to see real and direct impact in our customers. Not to get too terribly philosophical, but when you see all of the substance abuse challenges that are out there today and all the horrific health consequences that are occurring from some of these folks utilizing vape or vaping, to be able to make a difference is pretty cool. We don’t get to say that every day and it’s been nice.
The second I’m really intrigued about is this whole physical credential question; do we still need one? With the improvement and advent of facial recognition technology and the price-point reduction of all these new biometric technologies, and even mobile credentials at that point, I’m not sure where the little piece of plastic with our picture on it is going to be in the next couple of years. I’m really curious to see how that transition, how that competition, plays out in the market, because I’m not convinced who’s going to win.
Are you sold on the phone as credential model?
Camarillo: I think today the phone as a credential is very convenient, but I don’t think the price-point that it currently offers is a sustainable model to replace the physical credentials today. To be honest, the challenge with the phone credentials, it’s making the reader now proprietary again.
Whereas, we actually got away from the readers being proprietary and being a little bit more interoperable with proximity and smart card technology. Now in the mobile credential world, you really have to have the right app and the right reader. You can almost say it’s taken a step back, as it relates to open architecture reader technology.
Brandt: What excites me the most in concept is that the electronic security world has gone from strictly reactionary to more real-time. Now with AI and advanced analytics, it’s actually moving toward a model of predictability. So knowing in advance where to allocate resources to try and prevent a circumstance, versus in the past only having a tool to go back and recreate what happened.
We’re actually starting to adopt more layers of technology that will help us define where to allocate resources, because it can predict where you’ve got vulnerability. As the industry makes more and more strides in that direction it will become even better and more exciting.
Ricucci: The main technology we’re excited about is the video verification and remote video model. About 15 years ago, cellular radios communicating with signals was not really that common. Now it’s prolific. All the value-add points with regard to video verification and remote video will probably have three-quarters market penetration, if not higher, of some sort of video verification component in it in every alarm that goes in. That’s what we want to be on the leading edge of.
I also like the idea of analytics. I have not seen it be worth anything more than sizzle at this point in a more expansive application. Facial recognition, predictive indices and things like that, they’re coming. But I don’t think, at this point, it’s better than a judicious use of devices with video, if you know what you’re designing.
It will get there and I’m excited about when it gets there. I’m just not going to push the technology past what it can do in an application. We always start with the application, the customer, the comprehensive understanding. Is this going to work for a customer? Is it going to be worth what we’re going to have to charge? I think analytics is coming, but it’s not near in my mind yet.
Digging deeper into RMR, what role does it play for you today, tomorrow?
Brandt: We’re still very much project-driven. I’m not focused on that particular aspect of business because most of our accounts are large commercial accounts, hospitals, colleges, utility companies, pharmaceutical. The large corporate world still doesn’t want data to leave their property. They still want to own it, manage it, be responsible for it. Right now, the only type of recurring revenue we have are maintenance contracts and software support agreements.
Sweeney: About 20% of our topline revenue is RMR-driven. We’ve had a good run the last 18 months adding new recurring services that our customers have latched onto. We offer the traditional services that you would expect, central station monitoring, test and inspect on the buyer side, traditional software support, great plans for our larger enterprise customers, the service plans that were also mentioned. Pretty strong growth has come recently from managed access control. We are reselling not just a subscription to a Cloud offering, we’re actually reselling the service.
Our customers don’t know the name of the platform we use. It’s the Advantech access control system, because they just send us an email and with the white-glove treatment we try to provide, we make the adjustments for them. What we really envisioned at the onset of that offering was an SMB-focused kind of tool.
We were wrong. We have been surprised at the size of customer that is intrigued by this model. Customers I would have always expected to be on-premise traditional PACS only are gravitating and intrigued by this model, not only of Cloud, but service. We’re providing the same thing in the health monitoring space with success.
We’ve had a lot of customers who have been forced to provide reports, detail verification, justification that their systems are up and working. Unfortunately in today’s day and age, every time a terrible current event happens, many customers say, “Is my system working? I’ve got to prove it to my boss.” And we can say, “Yes.” The ability to provide real-time health monitoring that we can generate reports off of, we can send along to our customers and give them a piece of mind, it’s been pretty powerful.
How do you sell it, do you show them a menu of offerings?
Sweeney: All the services I referenced would be subscription-based or have associated costs. We have internal menus, but what we really do is stress to our team, our folks in front of the customer, to listen first, to help understand what the customer’s needs are and then offer the appropriate menu. We don’t want to offer a steak to a vegetarian.
Camarillo: For access control, it has absolutely taken off. Every time a customer gets tired of training that one person, they do it and then when that person leaves they don’t know the passwords or the logins. Instead now they can just send us an email, “Please delete these people. Please change this timeframe to this, to that.” They also have the ability to do it, but the fact they don’t have to they like.
Then there are RMR services on the cameras; the only one we currently have in place right now is an annual inspection and cleaning. The health monitoring and the I-View Now or video verification from any platform, is something we’re going to dive into wholeheartedly. It’s something you’ve got to commit to 100%.
To show customers what is available, on the back page of our proposal they can see exactly what the cost is with it all. One dealer we know throws those features in for free for the first year and as part of the agreement and after that they pay for it. That allows for very little pushback because it has already been included.
Dillard: We’re fortunate, 43 years in business, 50% of our income is RMR. I want even more. I want 70%, I want 80%. It positions you to withstand those rainy days. Like when 9/11 hit, we didn’t do anything for three months. I can still pay my full-time guys to organize the vans, clean the shop, do annual inspection battery checks.
Ricucci: We’re about two-thirds RMR. We are paying for our operating and administrative arms and salaries with revenue from that side. I bifurcated my financials, so I’ve got an OPs admin that all that recurring revenue flows to separate from the sales function. I also don’t itemize or list the services. We are the consultants, based on the comprehensive understanding of their needs. We’re going to tell you what we believe is the best option for you. We’re going to also give you some additional options, but you’re going to get one number. I don’t want them plucking away pieces of it.
I also don’t want to fight whether or not fire inspections are the same margin as monitoring.With a maintenance agreement, instead of giving them the first year free we take the four years price point that you would pay if I had to come back in a year. We’ll divide that over 60 months and then I’ll discount it 25%. Any way you cut it, RMR is a good boat anchor to base your business metrics on.
Let’s talk competition. Concerned about new entrants, nationals, DIY?
Camarillo: If you look at the big boys like Tyco or Siemens, any of those big companies, most of their stuff is proprietary. A lot of customers are getting sick and tired of them. They’ll be paying $400 a month, hands down. They have no options, because they’re stuck. A lot of people are like, “OK, this is how much we got to pay them, how much is it to replace it all? Yank it all out, get rid of it.” That’s a good feeling.
Dillard: On the residential side, a lot of people want to price shop on Amazon or the Internet as a whole. They want to tell you what you should be selling your product for, but I don’t think a lot of people realize how there’s often a consumer version and a pro version. There may be a difference in the quality and what it can do. We have to show the value, show we have the warranty, and that we’re going to come back and service it.
Sweeney: The first thing that popped into my mind from a competition perspective is when there’s a new business leader or a team member within an existing organization we work with. We have very long, mature, mutually beneficial relationships with organizations and sometimes a new person, new facility manager, new IT director, new business leader brings in their own thoughts and/or relationships. That can create chaos in our world. We then have to spend a lot of time building a new relationship with that person.
The other competitive element is losing to in-house IT folks. It’s not uncommon to have maybe a young, more progressive IT person who feels they can buy the camera off the Internet and put it in themselves. It can be hard to convince some of them otherwise. Sometimes you have to let the customer take some bumps and figure out that maybe there’s a little bit of value in a professional organization that knows what they’re doing.
Brandt: I don’t disagree with Dave, but I find the opposite true more often in my world. I’ll give you an example. We’ve been doing work with one of the largest financial organizations in the world for many years. A lot of the facilities management for that customer was outsourced to us. They had an account manager who I worked with very closely. That person moved on to a pharmaceutical account that was using one of the large national integration companies.
About six months after putting up with what she referred to as ridiculous B.S. — not being able to contact the same person twice or get an accurate invoice on time or get service issues resolved or create a path to move forward — she said, “I don’t know why we’re doing this.” She called me and asked if I would be willing to take over the account. So while those transitions can affect and interrupt business, they can also create opportunities.
Ricucci: We’ve been hearing about the self-monitoring alarm for 20 years now. It’s like with the proliferation of ATMs and in-store banks, brick-and-mortar banks were going to be a thing of the past. Well, there are twice as many brick-and-mortar banks as there were 20 years ago, because people want more and more. With DIY, we get a lot of those calls, “Hey, I bought this, could you put it in?” I’m not really that concerned about the DIY component, because it is, I think, niche. If you do what you do well and you can show the value of what your expertise brings to the client, there is value.
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