Recurring monthly revenue (RMR) is the lifeblood of every security system integrator’s business. The challenge has always been how to build ever higher RMR to keep the business growing. For the longest time, integrators focused all their RMR resources on monitoring intrusion alarms and servicing hardware. As electronic access control and video systems became more commonplace, RMR strategies expanded to include servicing and maintaining those security systems and their associated software.
Now with the convergence of IT and physical security systems, another host of possibilities are opening up for integrators to generate additional RMR.
Look Outside our Industry for Inspiration
Sometimes, the best ideas for generating RMR lie outside our own industry. Just look at how differently the mobile phone market operates today compared to 10 years ago. It used to be all about the technology; now, the business is all about the cellular service. Originally, the mobile phone stores subsidized the third-party hardware (cell phones) as long as you signed a two-year contract.
As "no-contract" options started hitting the market, phone stores adapted by instituting a new RMR model of operation. Nowadays, the consumer does not buy the phone up front unless they want to pay the full price; instead they pay the company a monthly fee until the purchase price has been collected. Only then does the consumer actually own the phone. If the customer decides to cancel the contract before the phone is bought, they are legally obligated to pay for the phone at the full market price.
Adaptability is the key — to stay competitive in an evolving market, you need to think creatively about ways you can piggyback on the latest security innovations to increase your RMR. While intrusion and service continue to be the core RMR for many security integrators, emerging technologies and services provide the opportunity to branch out into new revenue streams.
Video Hosting and Verification
The market shift to IP video technology has changed the way integrators provide service. In lieu of onsite calls, integrators can remotely troubleshoot and perform maintenance via secure Internet connection. With the advent of video hosting and video verification, integrators have the option of adding another layer of service to their portfolios.
Hosted video: Providing customers with a hosted video platform enables them to benefit from advanced surveillance technology without the huge up-front cost. Based on the same distribution model as software-as-a-service, the customer owns the security cameras but streams the video to a service provider’s secure storage system in the cloud. Surveillance moves from a capital expense to an operating expense with a monthly fee to the integrator for storage and bandwidth usage, system upgrades, software updates and other services. Some integrators have already taken a page from the mobile phone industry and have bundled the camera cost into the monthly service fee.
Video verification: Integrating a customer’s video cameras with their other physical security systems, such as fire and intrusion detection, helps them visually verify incidents and minimize costly false alarms. The monthly fee for video verification can be added to the other subscription services provided by the central monitoring station.
Access-Control as a Service
IP-based access control systems can be another RMR generator. Managing the access control platform as a service gives customers all the benefit of the technology without all the headaches.
The value-added service would include such activity as adding and deleting authorized users, replacing lost cards, modifying rules for specific entry points, and upgrading software to protect the system against breaches.
Consulting Services
A decade ago, when people in the security industry spoke of “convergence” they referred to IP technology making its way into the analog security world; or, they spoke of how IT integrators were coming into the physical security space and taking over. Ten years later, convergence has come to mean a powerful synergy between the two camps — and this has led to even more opportunities for RMR.
For example, I recently met with three major integrators who now own managed services organizations that not only provide traditional support services, but can also design, deploy and support wired and wireless infrastructures. These integrators are not only expanding their security practices and expertise, but are also expanding their IT knowledge and expertise. What does this have to do with RMR? It goes back to adaptability — the shift to IP-based systems opened their eyes to new RMR opportunity, but they needed to adapt their skill set to take advantage of them.
While the continuing decline of hardware prices have many lamenting the margin erosion, those adapting to the times are quickly realizing that subscription services are becoming the real money-makers. To fully capitalize on this opportunity, however, integrators will need to redefine their roles and proficiencies to carry them forward.
Many leaders in the field believe expertise in IT as well as physical security is going be the key differentiators. Integrators withbroad-based business acumen, who can effectively and efficiently deliver a range of cloud-based managed services, will be a force to be reckoned with for years to come.
Become a trusted advisor. Many leading integrators speak of taking the concept of a “trusted advisor” to a whole new level. They recommend to their colleagues that they should not limit themselves to just meeting their customer’s physical security needs but should also be actively involved in their infrastructure, services and business operations. In the IT industry, it is not unusual to have agreements that provide for ongoing “consulting services” where integrators are paid monthly fees over multi-year contracts to provide expertise as part of a company’s security or business leadership teams. The same business model could easily be applied to the physical security world — imagine the possibilities. Achieving trusted advisor status not only cements long-term customer relations but also bolsters long-term recurring revenue streams.
Bundle technology with technical support and consulting services. Another strategy that can boost RMR and differentiate an integrator from the competition is bundling technology with consultant services. In the IT industry, it is common in the planning phase to offer infrastructure design services for a fee. If the end-user selects the vendor’s product offering and installation services, many providers will discount or waive the design fee entirely. Numerous physical security integrators have taken the same approach to design and integration work and met with great success. As their customers continue to grow and expand their facilities, they continue to consume both recurring services for design and for maintenance.
Cultivate Partnerships
It is important to acknowledge that many physical security integrators are not in a position to acquire IT staff to help them gain consulting expertise in infrastructure design and delivery; so how can they compete and win business? In those situations, the best strategy is to seek out companies that possess the necessary expertise and are willing to partner with the physical security side in a win-win relationship. Manufacturer partners should be able to assist with finding other integrators in the ecosystem that would be a good fit.
Customers benefit from having several trusted companies willing to pool their expertise to design and install the best possible solution. The partners benefit from the shared RMR for services and maintenance. Once a solid working relationship has been established, it increases the likelihood that partners will refer the services of each other on future projects.
Capitalize on Emerging Trends
As the security industry continues to evolve, new opportunities for generating RMR will evolve as well. Savvy integrators can anticipate potential revenue streams by watching general business and technology trends. Whether you train, acquire or partner to take advantage of those opportunities is up to you. The important thing is to always strive to demonstrate your expertise and get a seat at the table as a trusted advisor for the business, not just the security department. Once you do, amazing things are bound to happen. I look forward to hearing your stories at the next industry event.
Scott Dunn is Director of Business Development for Axis Communications and has spent nearly 20 years on the manufacturing side of the security industry. To request more info about Axis, visit www.securityinfowatch.com/10212966.
