Integrator Roundtable: Emerging Markets

healthcare and government. Security Business recently turned to its exclusive expert integrator panel for their advice on entering a new market and views on promising emerging new verticals. The panel includes John Nemerofsky, the chief operating officer of SAGE Integration, Michael Ruddo, Integrated Security Technologies (IST) chief strategy officer, and Shaun Castillo, president of Preferred Technologies.

New Markets

The integrators are currently pursuing very different emerging markets. Castillo says Preferred Technologies is interested in securing robotic operations used for 3D printing of single-family homes. “We are developing a relationship with a customer in that space now,” he says. “We are starting to understand the needs and how we can support that customer.”

With acres of solar panels or windmills, remote green energy farms represent another emerging market that intrigues Castillo.

SAGE recently began working with a nationwide chain of rapid automotive lubrication centers. Nemerofsky admits it is a very different type of business than most of SAGE’s Fortune 50 clients; however, he says his team did its essential homework before working with “an interesting vertical.”

“The goal is to get customers in and out within 15 minutes,” he says. “But with such rapid service, we want them to know they are getting what they paid for. We installed cameras above and underneath each bay and added monitors so people sitting in their cars could watch the process. We also created an analytic that uses an electronic display board mounted in front to show the expected wait time for service.”

SAGE is also working with stadium and arena operators and vendor partners to introduce weapons detection systems to eliminate the need for fans to empty their pockets as they pass through airport-like checkpoints.

Sometimes, nationally reported events help create new or expanded markets. Ruddo says IST has been working with houses of worship in recent years, including several in the Mid-Atlantic region, following well-documented shootings across the country. “Many of these institutions have onsite schools, and education is a vertical we are very involved in. As funding becomes available to protect congregations, we see this market as a good fit.”

Research: Step One

Although the targets may vary, the integrators strongly agree on the need to carefully research a vertical or specific market before making an expensive leap into a new business model.

Ruddo says IST uses an outside vendor to compile competitive data, vertical associations and regulations and related compliance issues.

“Being well informed is critical, as you need an educated technical staff to deal with a new market,” Ruddo says. “You want to be immediate experts in whatever vertical you are targeting – that keeps your reputation intact and could lead to more related business. I would never advise jumping into a new market quickly to see what it is about and learning the ropes as you go.”

IST also conducts annual strategy meetings in which new and emerging markets are discussed. Ruddo says these sessions activate research into the markets deemed a potentially good fit. One idea from those meetings is to bring more residential-oriented services to commercial markets.

“Clients say they have an app on their phone to open their door or turn off lights at home and ask why they cannot do that at work...it is a good question,” Ruddo says. “We know a number of our solution partners provide this type of functionality, which can be deployed to satisfy these requirements of our client base. We see solutions driving verticals and creating new markets.”

Nemerofsky says potential clients will spot those integrators just dipping their toes into a new market. “If you do not

know about their market and feel confident about what you want to provide, you will be seen as a low-voltage installer and should be prepared to be the low bid on projects. If you have studied those areas, you can offer value from your experience and become a trusted client advisor.”

He says one of SAGE’s major manufacturing vendors compiles a detailed annual report on activity within 13 various markets. That report, with its profound insights, is shared with the vendor’s major customers. SAGE uses it to help create its internal new market plans.

Castillo says he considered expanding last year – not into a different market, but new geographical territory. He followed many of the same research processes used for further market expansion. “We put the brakes on the move to give us time to fix some things first so that it does not hinder our current business.”

Costs: A Major Factor

Before pulling the trigger on a new market, Castillo asks himself many questions, and unsurprisingly, many involve money. “Getting into [a new] market is going to take cash,” he says. “Do we have it? Can we get started and have new

business fund continued growth or will there be a need for more cash? The big question for me is, do we have what it takes to go after this vertical market correctly?”

If a new effort requires an extra shot of capital from a bank loan, Castillo advises integrators to go to their bankers with a detailed market plan. “Show you have done the analysis and identified the market’s potential. Also, include how you intend to pay back the money. You may not get the loan, but you will be remembered for doing things the right way.”  

Ruddo warns about the cost of regulations and requirements that may apply to a new or emerging vertical market. For example, rules may require hiring new employees and additional training for existing staff.

“Stay on top of regulations,” Ruddo says. “You want to be experts in whatever market you are targeting. That keeps your reputation intact and leads to more business within the new vertical.”

Sell your Capabilities

An integrator’s lack of direct experience in an emerging market may be unsettling to potential clients. That’s when it is time to point to experience using solutions and services from similar markets. “You have got to draw on your strengths,” Ruddo says. “One advantage may be years working with the same access control system; however, if you are not certified to work with the target’s system, you are probably on the outside looking in. Taking on a new vertical with different solutions raises the risks of mediocre performance – or failure. Those risks are why you put your A team on new projects.”

Nemerofsky urges integrators with experience working in highly regulated markets to play that up when pitching new targets also facing government oversight.

“Regulation compliance often requires higher levels of security and reporting,” Nemerofsky says. “Show a potential new client you have the proven ability to cut through the red tape to get the job done.”

Have an Exit Strategy

Thoroughly researching a new market offers no guarantee of eliminating all risks. The three panel members say even the best integrators get involved in new projects where they wish they had done more homework or skipped it altogether.

Earlier in his career, Nemerofsky says his team missed a cost incurred working with correctional facilities. Getting into a prison to replace a camera required the techs to remove most of their clothing and walk through a metal detector before getting redressed. They repeated the same process if they needed to use a restroom. “How much time did we lose each day? If you do not fully understand your new market, you will be challenged to make money,” he says.

A new SAGE sales representative recently sold a security package to a chain of hair salons in Texas. “I do not know how many locations there are today, but we have done eight of them,” Nemerofsky says. “The managers wanted to automatically use their access systems to start an audio device or other AV equipment. We build networks; we do not work in the AV world.”

Castillo says his firm once tried securing multi-family housing projects. “We were in a tough financial situation, so we dove in and gave it our best shot, but it just did not fit us,” he says. “Luckily, we learned that quickly and did not make a big investment.”

Casinos are becoming commonplace in many states. They came to Maryland a few years back, and IST, with no gaming security experience, wanted to get into the exciting new business. The IST team made a tremendous effort to learn the casino environment and created detailed security proposals. “We could not break into it the way we had hoped,” Ruddo says. “Casinos are high-volume, low-margin work. It did not take long to realize this market was not for us. It is important to do your homework and learn when to bow out – otherwise, you are just wasting time and money.”

Castillo adds that any new market plan requires an upfront exit strategy should the effort not go well. “We set goals and if we do not reach them, we need the courage to cut our losses and stop,” he explains. “That is hard to do when you have made big investments in people, training and other expenses.”

Manufacturers as Gateways to New Verticals

Castillo says working as a subcontractor for larger national integrators is a way for integrators to enter new and emerging markets. “Many times, these big integrators do not want to send resources to areas we serve around Houston and Austin,” Castillo explains. “We are here and happy to subcontract. We are doing that now with a couple of financial institutions, which is not a vertical we pursue. We will never take over those customers, but we are gaining institutional

knowledge about the industry that might prove useful later.”

The panel says new market clients might come via introductions from an integrator’s service vendors and equipment manufacturers.

Nemerofsky says one SAGE vendor has more than 90,000 systems deployed in almost every vertical. “Walking into a new business meeting with them means something to an end-user,” he says. “This is a good reason for maintaining strong manufacturer relationships as you approach new verticals.”

Castillo recommends strong manufacturer relationships when approaching an enterprise organization. He says big customers often bypass integrators and go straight to the manufacturer for advice. However, Castillo warns against vendors looking to expand their reach into new markets using integrators as the vehicle.

“Manufacturers will tell you of great opportunities in a market and urge you to get involved, hoping you will increase their business,” Castillo says. “Do not listen to them without ensuring it is a fit for you. Begin by checking with potential customers. End users give you the right information, and, ultimately, they are the buyers.”

Finally, Ruddo advises measuring current client perspectives before accepting business in a new or emerging market. As an example, he stays away from the cannabis vertical because the federal government – IST’s largest client – does not condone the use of marijuana. “We have to be careful, or we could create a conflict with our existing client base, and that is not an option for us,” he says.

Jon Daum of security-centric PR firm Daum Weigle (www.daumweigle.com) contributed to the writing of this article.