The commodity section of the video surveillance business is certainly a crowded one, with IP cameras that cost $30; 10-megapixel cameras that run $199; eight-camera kits from Costco and Sam’s Club that include a TB of storage and remote access for the price of a Honey Baked Ham; free storage in the cloud; free remote video monitoring via your smartphone — the list goes on and on. Low-cost video offerings from the big box houses are here to stay, and as is the case with most security technology issues, it is adapt or perish for your integration company.
If you find yourself competing in this commodity section of the video security surveillance market, you have choices to make — and the sooner you make these tough decisions, the better off your company and your customers will be.
The choice most PSA integrators have chosen is not to participate in the low-end, DIY, commodity-based segment of the video surveillance space. They have chosen to kick it up a notch or two and forego offering the same or similar products offered at major discount retailers as noted above.
Another option is to adjust your business model and make microscopic profit on the equipment while making reasonable profits on the design, installation, monitoring and maintenance services provided by your company.
It is really not that complicated, yet many of the security surveillance integrators I speak with seem to be very frustrated with the marketplace and they continue to complain that their equipment profits are eroding and the sky is falling.
Learning from Alarm Providers
If you can adapt to change, you need not worry. The burglar alarm industry is a great example of a security niche adapting and thriving in a low-margin equipment environment. Although many high-end alarm companies have chosen not play in the $99 alarm market, those who do have figured out a way to survive.
Many of those alarm companies thrive on low equipment margins by selling a host of other high-margin offerings. Of course, this has been going on for decades and is the accepted model for many successful alarm companies; however, the majority of physical security integrators seem to struggle changing their model of dependence on hardware profit.
For the integrator community, the solution is not as scary as it seems. Step one is to accept change in your existing model — you will not survive unless you are willing to adapt.
The second step is to decide where you feel most likely to survive and thrive in the video surveillance marketplace. Very few integrators have been successful serving all aspects of the video surveillance marketplace. Where is your company best suited to serve a particular market? Is it government projects, healthcare installations, or smaller retail ones? Is it commercial real estate or high-end residential? The list obviously goes on, but you are best off to choose two or three verticals and become the “go-to expert” in them. If you operate in a small market or area, you may have to choose as many as four verticals.
Our friends in the alarm business have evolved to a predictable cash flow model by adapting and focusing on what is best for their customer and what works best for their business. It is not a sin to make a profit, and business history shows that profitable companies are the ones who the end-users really appreciate as they offer the service and the features the non-profitable companies are not capable of offering.
Nobody chooses to perish — it is all about adjusting to make the marketplace work for you.
Bill Bozeman, CPP, is President & CEO of PSA Security Network. To request more information about PSA, please visit www.securityinfowatch.com/10214742.