Culture Drives Convergint’s Conquests
In a year in which industry M&A activity has soared, no security integrator has made more moves than Convergint Technologies. Yet inquisitive minds may be surprised to learn what makes this acquisitive company tick.
So then there are opportunities for integrators to partner with or subcontract for Convergint, rather than being acquired, through the Connect program?
MOCERI: Absolutely. We have those in place today. We have companies and “competitors” that will call us. Sometimes they’re even minority based, women owned. We welcome all of them, especially in those places where we don’t have the bandwidth, the brick and mortar. We would absolutely welcome them and encourage them to contact us. We enjoy the relationship we have with them, and mostly because it strengthens our ability to serve our customers from a service standpoint.
LOCHIATTO: Corporate Security is a perfect example. The year leading up to it, even before they knew we were going to acquire them, we were supporting them in a couple of projects there, and a couple of other places. As those partners get to know Convergint more they understand we’re not there to take their business. We work with them and support them, and help them extend their reach.
Overall, how is this year shaping up for the business? What’s going well and how is it meshing with projections?
LOCHIATTO: This year is shaping up extremely well. We will likely be knocking on the door, if not exceeding $600 million in revenue, up from more than $470 million in 2015. It’s a combination of the acquisition growth we’ve had and organic growth. Most importantly to us is as great as the acquisition growth is, the core underlying business continues to do exceedingly well. The core underlying business will end up being somewhere between 10% and 14% growth when all is said and done for the year.
That’s overcoming the impact of the fires in Fort McMurray. For a month-and-a-half the oil sands wildfires kept our teams from being able to go to work because facilities were shut down, homes were burned down. That was a meaningful interruption to our business in Canada, and our customers’ businesses. Thankfully, they’re back to work but it’s going to be a long-term rebuilding process. Every day we send about 100 colleagues to work in the oil sands for Suncor Energy and other companies. We continue to support our colleagues and customers through a very tough time with the impact of those terrible fires.
What’s really gone well for us this year is couple-fold. The global accounts continue to drive a lot of growth. There are a number of companies we have picked up that we’ve either brought on board or customers are looking to move to us. They see the global reach we have. They see the focus on service, and that we’re working together.
The other thing is we continue to invest significantly in technologies to better enable our team. We’ve recently completed an upgrade of our financial system, which can be pretty hairy, but thankfully has gone very well. We looked a year ago to find a new quoting tool to take the next step forward, and there wasn’t anything that met our needs. So our team was able to internally develop that. We’ve rolled it out, and it’s incredibly important when you look to drive consistency across 70+ locations, from a pricing standpoint and accounting for all the variables that could impact that based on local labor rates, taxes, currency, and so on. Then there’s our tool called iCare, which is the underlying backbone of our service offering, which was developed to make how we are doing from a service standpoint transparent to our customers and colleagues.
Those improvements are exceeding our expectations and are an enabler of the underlying growth we need to support our organization.
Let’s shift to technology. Obviously, vi
deo is huge but maybe you go into more detail about that. What two or three technologies jump out at you as having great opportunities right now?
VARCO: You’re right; right now everything is IP video, video management, and analytics. Those three things work together to be our top revenue-producing technologies for Convergint. It’s interesting though there’s been a bit of transformation of what’s causing some of that. Part of it is they’re using video in so many different ways now.
I went to a customer’s site a few months ago. We sold them a couple hundred cameras; happened to be an airline. What I found was astounding. They really weren’t using those cameras for physical security. It was process related. It was tarmac and safety training. They were using video in some very unique ways. It got me thinking how interesting and big the video market and video space is when we’re now getting into the process side of our customers’ business.
The other area that’s interesting is physical security information management, or PSIM. It’s become an overused term these days, but we look at it as a very significant piece of our success. It fits in nicely with our enterprise integration strategy for larger clients. Within these enterprise-level integrations, we’re working with customers to solve bigger issues and create what they would consider business outcomes and a return on investment. That business outcome may include process improvement, risk mitigation, adherence to some compliance regulations. We see this space as very interesting for us moving forward. But we need to continue to work with our partners to bring down the cost of ownership of some of those solutions. That’s one of the pushbacks we get.
What about concern with cybersecurity and the cloud? What’s your stance on these technologies and issues?
MOCERI: Cyber is more than a buzzword. It’s very much on the forefront of everybody’s mind, all of our clients’ minds. We looked at the whole cyberspace, we asked ourselves some fundamental questions. Do we go out and buy this? Do we build this? Do we partner with this? The latter is what we landed on.
We ended up creating a joint venture with an organization called Orbis Operations to create Cybis, which is our cyber offering. It combines the technology challenges side of the equation with the people and process side of the equation. In this case, we’re working with Orbis. They bring that people process side and teaching and ferreting out good practices. We combine it with all of the technology implications of cyber. We are in the very early stages of rolling that out to our clients and think it’s going to continue to grow for us.
LOCHIATTO: Even before we did that we hired Orbis to look at Convergint to understand what some of our weaknesses might be. We spent a lot of time with our specialists and all of our company training around cybersecurity. Undoubtedly, if there was one thing that worries us the most, it’s that. We spend a lot of time thinking about and working with our customers as they naturally become more and more concerned the security systems could be vectors into their businesses. We’re definitely invested in it and concerned about it.
Let’s talk about services. I’m sure Convergint has significant service and maintenance agreements. Are there other recurring revenue aspects to the business?
LOCHIATTO: We’re different than an ADT for example, that is obviously very much driven from an RMR standpoint. We have a surprisingly small amount of core monitoring business, but fully 25% to as much as a third of our business is service related from customer service programs. Inspecting, doing typical plan maintenance, that drives a huge portion of our business from a work order standpoint, whether it be move, add, change sort of work. We don’t track RMR on a day-in/day-out business. It’s not a driver of our business similar to others.
MOCERI: Our service business is repeatable. We don’t call it RMR but these are three-to-five-year contracts normally, or relationships we continually renew with our clients. We’re just not a month-to- month business. That’s really the only differentiation. What we do is anywhere from embedded personnel to the normal maintenance, test and inspection kind of stuff. But really, our claim to fame is in the value-added services we provide. What you’re seeing today is also an evolution to cloud-based managed solutions. We’re on the low end of a very steep and interesting service curve there, when it comes to managed services and managed solutions for our clients. That’s exciting as well.
We’ve talked about how your service and consistency of service is a differentiator for Convergint. Is there anything else you can point to as the secret sauce that really sets you apart?
LOCHIATTO: We’re blessed with our culture. That’s eminently critical. As much as I thought I understood it coming into Convergint, until you’re inside and see it working is only when you fully get it. Inevitably, there are leadership challenges, problems and customer issues; we screw stuff up all the time. What’s great about our company is we get in there. We don’t walk away from it. We fix it. We do the right thing, whether it costs you a bit of money in the short term, it pays for itself in the long term. And it just reverberates.
Yes, we’re a global company now but three-quarters of our business is still done locally. We’re competing with these companies that we’re acquiring or others that are there locally. The owner or proprietor is there locally and takes those calls from their customers. We do the same exact thing. At the end of the day, we attract the very best people because we train them, we have the right culture. They like coming to work. They like the stability and have confidence in Convergint.
We’re not the cheapest guys out there, but we are competitive every day with those people from a local basis. When you have an incredibly strong culture, when you have that focus on service, when you have the broadest product offering, scale versus some of our competitors and then when you invest as much as we do in training, that’s what differentiates us. Then you back it all up with a suite of appropriate IT investments that enable you to be more transparent with your customers around service. I think it’s a pretty good, winning model.
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