Susan Brady: Homeland Security encompasses a great deal more than obtaining a federal government contract. Please share your views on what homeland security means to your company.

Jim Henry, Chairman and CEO of Henry Bros. Electronics, Inc.: T he majority of revenue for most security systems integrators has (and is) NOT coming directly from Homeland Security (DHS) funding.

Companies (both manufacturers and integrators alike) that rely heavily on DHS funded projects have to be extremely well financed as well as patient due to the sporadic nature of the funding and the long sales cycle. In addition, many of the DHS funded projects run in excess of $100 million in value with a large amount of general construction bundled with the electronic security systems to be installed. Therefore, that is why “billion dollar companies” have entered the security market in the aftermath of 9/11 and the creation of DHS.

What that means to Henry Bros. Electronics, Inc. (HBE) is that there are opportunities created to team with those “billion dollar companies” as they most often lack specific expertise in required products and relationships with the customers that are the beneficiary of the DHS funding, as well as a maintenance organization to support the systems after deployment.

There are also indirect impacts of DHS funding that have positive and negative elements. The positive impacts are an increased awareness of the requirements for effective electronic security in both the public and private sector, as well as an increase in technological development broadening the products available for systems integrators to utilize to create an ergonomic solution. The negative impact is delay in spending by both the public and private sector driven by the hope that their project costs can be all or partially paid for by money yet to come from DHS; and by expectations that some “standards” will be defined to identify “minimum requirements” for electronic security systems.

Daniel Weiss, President and CEO of Infrastruct Security: The Department of Homeland Security represents an opportunity for our company to be the compliance facilitator between the private sector and the government. Our goals are the same—becoming a safer and ready America . Essential to achieving this is an effective and lasting relationship between the Federal government and the private sector.

We are focused on the segments of Homeland Security that impact the private sector. Critical Infrastructure in the U.S. is 90% owned and controlled by the private sector, not the government. We have found that the non –government based contracts have better margins and pay quicker. Many industries segments are now being required to ramp up security in response to Homeland Security regulations.

Brady: Describe some of the projects you are involved in that can be classified as Homeland Security.

Henry: HBE has projects in both the public and private sector that are funded by DHS. So far, more public sector projects have received DHS funding than the private sector but we expect that funding to the private sector will increase over the next 5 years. HBE's public sector DHS funded projects are with mass transit agencies (rail, bus and aviation). Our private sector DHS funded projects have also been in the transportation vertical market but for privately owned container shipping companies operating at seaports.

Weiss: We work with companies that are impacted by Homeland Security regulations, such as the Maritime Security Act and the soon to pass Chemical Security Act. Chemical plants, critical production facilities, etc.

One project that Infrastruct Security is currently working on is with a pharmaceutical manufacturer. Due to the nature of their business and the unique resources and process involved in the production side of their business, they fall into one of the critical infrastructure sectors identified by the Department of Homeland Security. On this particular project, Infrastruct Security is in the final stages of completing a security audit and vulnerability assessment, so they will be better able to meet certain and specific regulatory compliance standards.

Brady: What would you suggest to security dealer integrators on how to approach this market?

Henry: HBE's approach to DHS funding and the changes it has caused in the security industry is to adapt to it and find niches to be able to participate. I think that approach applies to all incumbent security systems integrators.

Weiss: To get started you will need to identify what unique qualifications your company brings to the table. Your depth of experience in this market is essential. It boils down to a few key considerations.

• Are you willing to invest in licensed and experienced personnel?

• What industry specific methodologies have you invested in and been trained extensively on?

• Have you established strong relationships with leading suppliers within vertical markets, as well as through supply chains, regulatory channels and with companies that provide peripheral support services?

• Finally, are you flexible enough in your business plan to shift resources to this more conceptual approach while you wait for the seeds of your investment to grow?

I would think twice before getting a federal project. Can you afford it? Can you bond the job? Can you afford the time it will take to get paid? Be careful of taking a thin margin job with long pay outs. Lead times in this market can be very long, so building the right relationships is key.

Brady: What role does the private sector play and how should they be marketed to for business?

Henry: One role the private sector has and is playing is in making their case that DHS funding can, in many cases, be more efficiently and effectively spent on the deployment of security systems than if directly implemented by the Federal Government.

The other role that we are starting to see is a lobbying effort by the private sector for “minimum standards” for physical electronic security systems. There are many private sector companies that want to increase the capability of their electronic security systems but are reluctant to do so for fear of not being compliant to a set of standards that may be defined in the near future. Also, if there are no minimum standards, they fear their competition will not spend money on security putting them at a financial disadvantage in their industry.