Wise Men Lead the Northland Controls Star

You have told me you believe Northland approaches the security world differently from industry peers. How so?

Thomas: Our approach is very holistic versus opportunistic. We look at a system or design criteria not in the moment of now and what the customer is asking for but in a much deeper way. We want to know if that’s going to serve them well five years from now, seven years from now. We want to have those discussions about and help them understand the technology or design constraints they may be putting themselves into. That goes through our whole culture at Northland, versus the customer who calls and says, “I need two readers added.” We may then need to say, “It’s not that simple. Your panel only has two ports left. If you do that, you’re not going to be able to add readers next week.” So it’s a deeper look at everything.

We also add a level of simplicity and elegance to our designs. Instead of just doing it the same old way, we challenge to try to simplify and make the solution either more transparent to the customer or much easier so they don’t have to go thro
ugh seven steps to do something. We simplify that process for them to make it more instinctive or intuitive.

Trapanese: Our industry is not rocket science. We simplify things because we can simplify things. We find a lot of times that clients have been con-fused from unnecessary overcomplication. By ensuring their understanding of what we’re doing, it’s simple, it’s straight-forward, we’re not making it proprietary and we’re very open with them. Thus, we gain their trust, which is not all that common in the industry. It takes us about 12 to 18 months to gain their trust. They’ve been burned so many times they don’t really believe we’re going to do what we say we’re going to do.

Let’s step back to 2008, you had told me Northland was growing at 60% to 100% a year and it almost ran the company into the ground. What happened, how did you right the ship and how do you manage growth today?

Trapanese: It’s fairly well accepted in business that growing fast is not always a good thing. It’s where the cost of running the business outruns the cash. With us, it wasn’t just the finance but also finding the people to do the work. We almost doubled in size for three straight years. In those earlier years, we were taking on one customer at a time, adopting them, meeting their needs, and then getting another customer, and growing with their needs.

Going from $2.5 million to $5 million, it’s 100% growth. Then from $5 million to $10 million, the volume of business is quite a bit. I think we then went from $10 to $14, and then $14 to $21. The absolute terms are $5 million to $7 million a year, which is a lot of people that need to be hired. The problem is finding those people in a certain amount of time.

We almost killed the business in two ways. One is that we were trying to get the work done while trying to find people and train them. What happens there is the reputation might suffer. We were killing our-selves trying to live up to our reputation. It burns people out. In 2008, our new customers included Symantec, Stanford and Apple. We had to try to adapt to their culture and adopt them as customers.

Then there’s the cash involved. We were billing like crazy but incurring all kinds of cost. We were getting paid in 90 to 120 days, so there was a cash gap. It was in the midst of the recession, so suppliers were extraordinarily tight with their credit. The banks, even looking at our numbers, could not give us loans. They were not lending lines of credit. We had to self-finance through that. It was very hard to do.

The flipside is we got really good at managing those things. We’re actually now pretty good at growth, cash management and recruiting, hiring and training people. It’s worked out, but it was rather stressful.

Managed services is an area of focus for Northland. Why are you so bullish on it?

Thomas: Managed services is obviously the RMR of today. It’s not just recurring revenue off of alarm panels anymore. As the industry moves to cloud-based services, the whole RMR model starts to change for everybody. I believe the economies of scale for anybody offering man-aged services becomes a real big force multiplier. Where for a customer it might cost them $1 million to start up something, whatever it is, their cloud-based services, their operation centers, we’re able to give them a piece of that because we’re doing it for multiple people.

As experts, we’re also much smarter, have many more tools available for customers than they could develop on their own. Customers are kind of leaning for-ward a bit into that model, whether it’s ours or anybody else’s managed services. If you’re really good at the managed service model, the customer stands to benefit a lot more than if they were to do it on their own.

Many of your clients are quite technologically sophisticated. How does that affect the relationship and how you have to elevate your game? Do you run into tug-of-wars where they think they know more than you?

Thomas: For almost most of our major enterprise customers we have an embedded staff that is actually part of their team. Our customers have come to realize that that’s really not their forte or scope. Their employees are much better program managers at making sure we’re getting things done around the world for them, and managing that component of it. But when it comes down to expertise, it’s usually our engineers that are sitting on staff. Not to say they don’t have smart people in-house, but we really do supplement that.

When it comes down to it our customers really hire us to challenge them, kind of at all levels. They would expect we would present challenges to whatever they brought to us. At the end of the day, we’re going to do whatever the customer wants to do. In most cases they kind of just go with what our recommendations are. But we do challenge them at times on what their thought processes are, and that tug-of-war sometimes is where we go with them or they go with us.

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