How integrators face the recession

Integrators need to ramp up service, focus on training, look to alternative revenue streams

With the recent economic downturn and the fact that the nation is now officially in a recession, systems integrators of all sizes are trying to determine what steps they're going to have to take to remain profitable when many of their traditional customers are financially hamstrung.

While many like to view the industry as "recession proof," others say that that notion just simply isn't true and that integrators need to prepare for tough times ahead, even if they're not immediately feeling the effects of the sour economy.

"The integration business tends to lag the general economy. So, if the general economy goes into a recession, we don't' feel it for a while because we're doing projects that extend out for several quarters," said Jim Coleman, president of Atlanta-based integrator Operational Security Systems. "Of course, the other side of that is when things start to get better; we don't see it for a while. We are late getting to a recession and we're late leaving it."

The result, said Coleman, is that eventually there will be fewer and fewer opportunities in the market for integrators and that more and more companies will be competing for the same jobs. Subsequently, profit margins will suffer, which will make it difficult for smaller integrators to stay afloat.

According to Coleman, companies with large embedded customer bases may well be able to sustain the hit by performing maintenance, additions and upgrades on existing accounts, but he indicated that other companies are going to have to do things to differentiate themselves from the competition such as providing superior customer service.

Another way that integrators are exploring as a means of making through the recession is to change their service offerings.

Bill Bozeman, President and CEO of PSA Security Network, which is an organization that includes over 200 systems integrators, said that many companies are now looking into managed service offerings to help them manage their cash flow.

"When you live from job to job, if the job's doing well, you're doing well; if you have one bad job, it can ruin what was otherwise a very good quarter or very good year," he said.

New technology, however, is paving the way for them to take advantage of this recurring revenue model. Bozeman added that a managed service offering is also beneficial to the end-user because they will no longer have to pay a large installation contract upfront because the integrator will spread the costs out on a monthly basis in system management fees. End-users would also have their equipment regularly upgraded and wouldn't be stuck with outdated technology.

The PSA president estimated that a managed service could save end-users as much as $200,000 a year in what it would cost them to hire a security guard to monitor their security system around-the-clock.

Still other integrators are venturing out into unchartered territory, looking for projects that are still within the realm of surveillance, but which may not be related to security.

A recent report from UK-based IMS Research predicts that the worldwide CCTV market will grow by over 10 percent next year, and that emerging surveillance markets in Eastern Europe, Russia, the Middle East, and Latin America will grow at a rate of over 20 percent. But not all of that CCTV growth is going to be specific to security.

More and more, Bozeman said that his organization has found that surveillance solutions are being used for such analytical purposes as enforcement of traffic laws, as well as analyzing customer behavior patterns and organizational effectiveness, and that integrators are finding work on these types of projects.

"Video surveillance is exploding and security video surveillance is an important part, but it is just a part. The issue that the physical security community has is that they're stuck in physical security mind mode," he said. "They're all about protection and security, so it's a stretch for them to think beyond that. But certainly there is a huge market in video surveillance that is not even related to security."

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