As a business manager, you fight every day for sustainable profitability. You spend much of your time devising ways to stay profitable on shrinking product margins and rising labor costs. Blended gross margin on your installation work is likely somewhere between 20 and 30 percent. After making payroll, paying suppliers and normal business expenses, your net profit can be 10 percent or less. Sound familiar?
Many integrators have concluded that product and installation revenues are not sufficient to support a healthy organization in the long term. Following the lead of IT integrators, smart integrators are moving from an installation to a service focus. Services offer several advantages over simple installation revenue. Services provide for higher gross margins, less risk, higher perceived value, more impact on your company’s valuation and increased chances for repeat business —all great reasons to be focused on building service revenue.
Moving towards building a stronger base of recurring monthly revenue (RMR) is a great first step to achieving higher revenue and profitability goals; however, you need to make some tactical decisions on which services to offer and how to deliver and support those services. For years, the primary security industry service has been alarm monitoring. It is the most basic type of service — simple to install, clear value proposition and well-defined service parameters. Some integrators choose to invest in their own central station; others create partnerships to outsource this function, but both models work. Individual businesses usually decide on internal vs. outsourced by analyzing how their resources could be deployed to provide the best ROI for the least risk.
The Next Generation of Services
Integrators looking for a next-generation service to offer will likely hit on access control and video. Here, you are faced with the same choices as in the alarm business — build it or outsource it. Again, both models work, but building it still requires a significant commitment of time and resources.
Another difference with hosted access control is the business model is less defined than alarm monitoring. Some companies offer self-service hosting, where the customer uses a remote application, but essentially operates the system as if it were on site. Other companies offer “managed services,” which rolls up hosting of the software with other common access control functions such as cardholder administration and report generation. The services you offer can be customized to fit the markets you target, what your customers want to buy, and the resources you have to deliver those services.
Hosted Access Control Options
Search for hosted access control, and you will see results from a variety of companies. The primary manufacturers that turned up in my search were Kantech, AMT and Brivo, and all three are interesting because each offering differs. Kantech offers a solution that integrators host themselves; AMT offers both self-hosted and AMT-hosted solutions; and Brivo is exclusively an outsourced services provider. These are only three — many more are bound to enter this market. Let’s take a deep dive into the pros and cons of self-hosted vs. outsourced solutions.
Self-hosted: With self-hosted, the access control manufacturer provides software that you install in your data center and establish as a shared hosting infrastructure among your clients. Acquisition costs for hosted access software can range from $5-$50K, depending on the system. The integrator will then need to add the data center environment, broadband network, computers, UPS and, of course, the IT resources required to operate the system.