There is good money to be made providing managed security services such as access control and video. Profiting from that business sector is no cake walk, however. Both the sales model and the sales person require a whole new mindset. For those who approach managed services thoughtfully, the recurring monthly revenue (RMR) stream can be a winner.
“Managed services—Software as a Service (SaaS)—is the future of our company,” said Rueben Orr, CPP, principal and co-owner of Security Install Solutions Inc.(SIS), Denver. He describes SIS as a small integration company that does a fair amount of government access control. “The recurring revenue model has proven itself time and again,” he noted. “SaaS offers a company like ours a good business model for the future.”
There are challenges. “With managed services, you are doing a lot more for the customer beyond what usual alarm services require,” Orr said. The integrator’s own people have to be available around the clock.
“Advanced services are the wave of the future,” agreed Tom Szell, senior vice president of Sales at ADS Security, Nashville.
Most alarm sales and installation jobs are one-and-done. The salesperson ferrets out what the customer requires, offers a system to meet that need and the company installs the system. Only if there is a problem does the company get a call-back from the customer. Those encounters tend to be negative experiences for the customer—not good selling opportunities.
Not so with managed services. Integrators offering managed services expect to touch their customers at least a couple of times a month, if not more frequently.
“Managed services get you more tightly linked to the customer,” Orr said.
While that is true, Rajeev Dubey, director of Marketing at Brivo Systems LLC, Bethesda, Md., warned that not every company is suited to this kind of effort. “Can everyone succeed in this business? I don’t think so. You need to craft a business model that will succeed. Your goal must be relationship building, over a long term, with less attrition. You need to staff accordingly,” he said.
The upside for those who succeed, Dubey said, is that providing the customer complete access to the service offerings eventually lowers the total cost of operation to the dealer.
The typical target customer for a managed service sale is a small to midsized company. They might have a one-person IT department but that individual’s focus is not on security and making key cards. Small firms probably do not have the cash to hire any IT staff full-time.
Who’s in control?
In many such cases, that responsibility falls on an office manager or the head of human resources. While they might be responsible for adding cards or controlling access, the focus of their job is far removed from both IT and security.
An integrator with the right staffing can take a lot of hassle out of the human resources department and do a better job of securing the premises.
But don’t write off the big company. Larger organizations often focus on their own core competencies and are interested in automating other responsibilities like security.
“The person you are selling the service to must see the benefit and value of paying someone else to do the job right,” Orr said.
The right people for the task
Despite what the pundits say, it can be tough to teach an old dog new tricks. That is especially true for alarm system salespeople. Just because a salesperson has a track record with basic alarms does not mean he or she should be turned out on the street to sell managed services.
That traditional salesperson sells hardware and turns operation of the device or product over to the customer.
“It is a different type of sale,” Orr emphasized. “There is much more touching the customer. It is a service business. Traditional service representatives have a tough time grasping that concept.”
“You really should have someone who understands the concept of total cost of ownership and can talk to the benefits of managed services,” Orr said.
His goal is to have the managed services team touch the customer every day. “We should be integrated into the customer’s organization, having them request a service or stating something they need from us,” Orr said. Key cards might be an example, he stated. It is a small task but reminds the customer that the integrator is always around to help.
Not everyone has a separate managed-services sales team. “We do not have a separate sales force,” Szell said. ADS trains all 80 of its sales team members on both managed entry and managed video.
“Sales reps have to be trained on advanced services,” Szell said. “It is not an easy process. It is a lengthy process. You have to train, re-train and train again. Then do it over.”
Many observers note that sales reps, especially industry veterans, are used to selling standalone systems. In the crunch, they revert to what they know best.
“Managed services is a different animal since you are selling the value and benefit to the customer,” Szell said. That results in steady RMR. However, it is not an easy process.
When he looks for a salesperson, Orr wants someone with an IT background, preferably with experience at an organization that provided IT services to other companies.
For one thing, the rep has to understand the nuances of the system being offered. That, in fact, is the basis of SaaS—the vendor understands all of the system’s intricacies better than the customer.
“This is all a technology play on the back end,” Dubey noted. “On the front end is how you sell it.”
Security Install Solutions uses Brivo and DMP for their offering. Orr is impressed with the training and flexibility of both. “Having a manufacturer who ‘gets’ support is critical,” Orr stated.
“To go after this part of the market, you need someone who understands that sale,” Orr said. “It is easier to make that person a ‘true believer’ than it is to have someone who is reluctant to change their ways doing the job.
“You need a salesperson who sees why it is a better value for the customer,” Orr added.
At the initial sale, the sales person should not get too technical. Rather, the rep needs to realize the customer probably does not understand the technical side and doesn’t want to learn it. All they need to know is that they simply need to pick up their phone and the integrator’s rep will come running.
Still, the rep needs to understand and communicate the basics of the technology. But the overriding need is to assure the person on the other side of the desk that the integrator is a real partner. That is the sale.
Sales plans tied to RMR
Expect to compensate that sales person well. Many managers say sales incentives should be tied to RMR.
“That account rep has the opportunity to touch the system, expand it, add services,” Orr noted. For that reason, he believes sales people dealing with managed services should get incentives based on month-over-month or year-over-year sales and not one-time successes.
Szell noted that their sales compensation plan is based on value generated to the company. “A high RMR generates a high commission. Sales people get excited,” he said.
In the case of managed services, a call-back is usually a good thing—an opportunity to convert the trip into a positive sale. Even if the call only requires adding some new pass-card holders to the system, the rep has turned the contact into a rewarding service for the client.
The managed services pitch
“We are in the central station business,” Szell tells customers. “Our business is event and database management. We are here 24/7. We are available at 2 a.m. Saturday so your problem doesn’t have to wait for someone to get into the office on Monday morning.”
It is a compelling argument that results in $100 to $200 a month in RMR.
Szell said an integrator needs to go into managed services with eyes wide open. “It takes time for sales to understand and embrace it,” he said. “It takes time before they present it to the customer.”
He cautioned that it will be at least a couple of months before even the best-planned managed security services rollout begins to blossom. But when it happens, the RMR is rewarding both to the sales rep and to the company.
“There is no instant payout,” Dubey stated. Many dealers will need other business to keep the lights on between moving to SaaS or managed services and seeing that increased revenue stream. Since cloud technology has caught up with access control, integrators have the ability to manage several facilities or campuses under one umbrella.
“The ultimate, real question for dealers is whether they can provide their customers complete access,” Dubey said. “The sale is a long-term relationship. If you prove to your customer that you provide lower cost of ownership there will be more opportunities to sell to them and you will be more profitable over the long haul.”
Curt Harler is a freelance writer and a regular contributor to SD&I magazine. He specializes in security and IT technology and can be reached at email@example.com.