Luis Ortiz, part of Fire-Lite’s Technical Services Department, tests an ACC-25/50ZS voice evacuation panel.
For the second year in a row, the confidence level fell among SDM’s subscribers about the vigor of the fire protection market. The majority of dealers who participated in SDM’s 2009 Forecast Study believe the fire market this year will range from “good” to “fair.” Only 11 percent of respondents feel confident about the industry’s ability to perform “excellently,” compared with 24 percent two years ago.
In comparison with other segments of the security industry, the fire alarm market has been hit particularly hard by the current economic downturn. Sales of fire systems are closely tied with new construction, and with new construction down dramatically, many security and fire businesses interviewed for this article say fire system sales are down or flat. Even some of those who haven’t seen a downturn yet admit that’s simply because they had numerous jobs in the pipeline already, and they expect new installations to drop later in 2009.
Despite these challenges, many of the fire protection companies SDM spoke with are discovering new sources of revenue within the fire alarm market. In this fourth installment of SDM’s State of the Market series, we look more closely at trends in the fire alarm business and explore some of these opportunities.
The retrofit market is giving building owners and managers a way to reduce risk, while giving dealers a chance to keep their fire alarm sales from declining too seriously.
Despite these challenges, many of the fire protection companies SDM spoke with are discovering new sources of revenue within the fire alarm market. In this fourth installment of SDM’s State of the Market series, we look more closely at trends in the fire alarm business and explore some of these opportunities.
The retrofit market is giving building owners and managers a way to reduce risk, while giving dealers a chance to keep their fire alarm sales from declining too seriously.
Of dealers’ total annual revenue, an average of 18 percent is derived from the sale of fire alarm systems, according to SDM’s Industry Forecast Study. The remainder comes from burglar alarms (28 percent), video surveillance (23 percent), access control (13 percent), integrated security systems (10 percent), and residential systems such as audio/video (5 percent).
RETROFIT OPPORTUNITIES
The phones at Custom Alarm, a Rochester, Minn.-based dealer/integrator used to ring all the time, but today incoming calls are down between 35 and 40 percent. Nevertheless, the company’s fire sales are equal to or slightly up from the same period a year ago. “We kick our salespeople out and say, ‘Go out and see people,’” comments Custom Alarm CEO Leigh J. Johnson.
Depending on the local authority, pre-existing buildings or fire systems may not be required to comply with the latest fire codes. But that needn’t stop dealers from pitching the benefits of the newer systems.
“Our retrofit business is good,” comments Johnson. The key to success, he says, is to emphasize the risks involved with not having an up-to-date system. “If you have a school built in 1958 and there’s no fire system, that’s a life safety issue,” he says.
Ken Webster, president of Allied General Fire & Security, based in Boise, Idaho, agrees. “We’re finding building owners dusting off projects and moving ahead with them,” he says. “Some companies, because of the down economy, are taking risk management strategies a bit more seriously. When the economy is up, companies are willing to absorb more risk than when the economy is down. And they’re willing to take steps to mitigate that risk.”
Briscoe Protective Systems, a Centereach, N.Y.-based dealer, is finding success in the retrofit market by targeting landlords of office buildings. As companies downsize, they may seek to move to a smaller facility, and landlords are trying hard to keep them. “Many landlords will make a deal to modify or upgrade a tenant space to prevent them from moving,” comments Briscoe president Bob Williams.
In a tight real estate market, an up-to-date fire system also can help sell a building, notes Peter Ebersold, director of marketing for Notifier of Northford, Conn., a unit of equipment manufacturer Honeywell.
All fire systems have to be regularly inspected — and several dealers, including Custom Alarm and Safeguard Security & Communications of Scottsdale, Ariz., are getting substantial revenue streams from conducting those inspections.
“Companies that embrace the service side of the business will weather this,” predicts Charles Davis, product marketing manager for Fairport, N.Y.-based equipment manufacturer Bosch Security Systems. Dealers should consider servicing their own systems, as well as those installed by other companies, Davis advises. He adds that challenges involved in servicing systems installed by other companies typically can be addressed by contacting the manufacturer of any unfamiliar equipment.
Dealers that have the financial strength to offer leases should also consider that option as a means of selling more fire system upgrades, which may be viewed as a discretionary purchase. Alarm Detection Systems of Aurora, Ill., has seen its lease business pick up as customers have become increasingly reluctant to pay for a new installation up front, but often encounter difficulties in obtaining traditional bank financing. A lease option may be the perfect solution for those customers, notes ADS vice president Ed Bonifas. “It’s a good conversation to have to help in getting the system sold,” he says. “A lot of people will pull the trigger if they realize they don’t have to pay for it now.”
New developments in fire system technology also offer opportunities in the retrofit market. Several dealers interviewed for this article noted strong sales of mass notification systems resulting from several high-profile incidents such as the 2007 shootings at Virginia Technical University. Mass notification systems enable emergency information and instructions to be broadcast throughout a facility. Because the audio capability built into a fire system can share many common elements with the mass notification system, end-user organizations can reduce their overall expenses and maximize efficiencies by operating a single system that handles fire alerts and mass notification. Interest in mass notification also has grown as a result of a new National Fire Protection Association (NFPA) standard that is expected to go into effect in 2010 (see related article, “New Regulations Could Drive System Upgrades”).
Some end users are finding that they can save ongoing operating costs by upgrading to a system that uses an alternative form of communications – such as two-way radio or Internet protocol (IP) – to meet UL requirements, thereby eliminating the need to pay for two dedicated phone lines every month. “End users are looking for fast return on investment,” comments Mike Venoit, director of sales for Honeywell’s Northford, Conn.-based Fire-Lite Alarms unit. Fire-Lite manufactures an IP-based system that can pay for itself in phone-line cost savings “not in five years, but in a year,” Venoit says.
Networked fire systems also can help end users reduce ongoing operating costs. Honeywell’s Maple Grove, Minn.-based Silent Knight unit offers an IP-networked fire panel that can handle communications for systems in several different buildings. In the past, each building might have required two phone lines. “But with the networkable control panel, you could have eight systems on the network all dialing through one panel,” explains Jim Spooner, product manager for Silent Knight.
Carbon monoxide (CO) detection is another technology-based opportunity. “We’re seeing strong growth in CO detection,” comments Roger Graf, president of Alarmax, a Pittsburgh-based alarm equipment distributor. Recognizing that CO detection can enhance life safety, end users may be willing to make the investment for retrofit situations, even in cases where the technology isn’t code-mandated.
Although CO detection traditionally has been used primarily in residential applications, the technology is beginning to play more of a role in the commercial setting, notes Davis. “The biggest challenge is egress time,” he explains. “When you have synthetic materials used in buildings, fire flashover occurs faster.” As a result, the fire protection industry is looking at ways of providing earlier warning of a fire condition, and CO detection can help fill that need, Davis of Bosch Security says.
Davis also sees opportunities to add video to fire systems. “After 9/11, the NFPA did a study about what could have been done differently, and one suggestion was to use integrated video monitoring at egress points,” he explains. “The idea is to have technology monitoring the status and condition of the buildings so when an event occurs it is centrally monitored and operators can determine what’s going on and dispatch and respond appropriately.”
Selling more advanced systems also can help dealers maintain margins on fire systems — and that’s one financial metric that has deteriorated for nearly every dealer interviewed. Because installing companies are competing for a smaller pool of fire alarm business, many have resorted to lower margins in order to get the business. But because there should be less competition for more advanced projects, fire protection dealers should be able to maintain a higher profit level on those jobs.
Depending on the local authority, pre-existing buildings or fire systems may not be required to comply with the latest fire codes. But that needn’t stop dealers from pitching the benefits of the newer systems.
“Our retrofit business is good,” comments Johnson. The key to success, he says, is to emphasize the risks involved with not having an up-to-date system. “If you have a school built in 1958 and there’s no fire system, that’s a life safety issue,” he says.
Ken Webster, president of Allied General Fire & Security, based in Boise, Idaho, agrees. “We’re finding building owners dusting off projects and moving ahead with them,” he says. “Some companies, because of the down economy, are taking risk management strategies a bit more seriously. When the economy is up, companies are willing to absorb more risk than when the economy is down. And they’re willing to take steps to mitigate that risk.”
Briscoe Protective Systems, a Centereach, N.Y.-based dealer, is finding success in the retrofit market by targeting landlords of office buildings. As companies downsize, they may seek to move to a smaller facility, and landlords are trying hard to keep them. “Many landlords will make a deal to modify or upgrade a tenant space to prevent them from moving,” comments Briscoe president Bob Williams.
In a tight real estate market, an up-to-date fire system also can help sell a building, notes Peter Ebersold, director of marketing for Notifier of Northford, Conn., a unit of equipment manufacturer Honeywell.
All fire systems have to be regularly inspected — and several dealers, including Custom Alarm and Safeguard Security & Communications of Scottsdale, Ariz., are getting substantial revenue streams from conducting those inspections.
“Companies that embrace the service side of the business will weather this,” predicts Charles Davis, product marketing manager for Fairport, N.Y.-based equipment manufacturer Bosch Security Systems. Dealers should consider servicing their own systems, as well as those installed by other companies, Davis advises. He adds that challenges involved in servicing systems installed by other companies typically can be addressed by contacting the manufacturer of any unfamiliar equipment.
Dealers that have the financial strength to offer leases should also consider that option as a means of selling more fire system upgrades, which may be viewed as a discretionary purchase. Alarm Detection Systems of Aurora, Ill., has seen its lease business pick up as customers have become increasingly reluctant to pay for a new installation up front, but often encounter difficulties in obtaining traditional bank financing. A lease option may be the perfect solution for those customers, notes ADS vice president Ed Bonifas. “It’s a good conversation to have to help in getting the system sold,” he says. “A lot of people will pull the trigger if they realize they don’t have to pay for it now.”
New developments in fire system technology also offer opportunities in the retrofit market. Several dealers interviewed for this article noted strong sales of mass notification systems resulting from several high-profile incidents such as the 2007 shootings at Virginia Technical University. Mass notification systems enable emergency information and instructions to be broadcast throughout a facility. Because the audio capability built into a fire system can share many common elements with the mass notification system, end-user organizations can reduce their overall expenses and maximize efficiencies by operating a single system that handles fire alerts and mass notification. Interest in mass notification also has grown as a result of a new National Fire Protection Association (NFPA) standard that is expected to go into effect in 2010 (see related article, “New Regulations Could Drive System Upgrades”).
Some end users are finding that they can save ongoing operating costs by upgrading to a system that uses an alternative form of communications – such as two-way radio or Internet protocol (IP) – to meet UL requirements, thereby eliminating the need to pay for two dedicated phone lines every month. “End users are looking for fast return on investment,” comments Mike Venoit, director of sales for Honeywell’s Northford, Conn.-based Fire-Lite Alarms unit. Fire-Lite manufactures an IP-based system that can pay for itself in phone-line cost savings “not in five years, but in a year,” Venoit says.
Networked fire systems also can help end users reduce ongoing operating costs. Honeywell’s Maple Grove, Minn.-based Silent Knight unit offers an IP-networked fire panel that can handle communications for systems in several different buildings. In the past, each building might have required two phone lines. “But with the networkable control panel, you could have eight systems on the network all dialing through one panel,” explains Jim Spooner, product manager for Silent Knight.
Carbon monoxide (CO) detection is another technology-based opportunity. “We’re seeing strong growth in CO detection,” comments Roger Graf, president of Alarmax, a Pittsburgh-based alarm equipment distributor. Recognizing that CO detection can enhance life safety, end users may be willing to make the investment for retrofit situations, even in cases where the technology isn’t code-mandated.
Although CO detection traditionally has been used primarily in residential applications, the technology is beginning to play more of a role in the commercial setting, notes Davis. “The biggest challenge is egress time,” he explains. “When you have synthetic materials used in buildings, fire flashover occurs faster.” As a result, the fire protection industry is looking at ways of providing earlier warning of a fire condition, and CO detection can help fill that need, Davis of Bosch Security says.
Davis also sees opportunities to add video to fire systems. “After 9/11, the NFPA did a study about what could have been done differently, and one suggestion was to use integrated video monitoring at egress points,” he explains. “The idea is to have technology monitoring the status and condition of the buildings so when an event occurs it is centrally monitored and operators can determine what’s going on and dispatch and respond appropriately.”
Selling more advanced systems also can help dealers maintain margins on fire systems — and that’s one financial metric that has deteriorated for nearly every dealer interviewed. Because installing companies are competing for a smaller pool of fire alarm business, many have resorted to lower margins in order to get the business. But because there should be less competition for more advanced projects, fire protection dealers should be able to maintain a higher profit level on those jobs.
Just two years ago, as many as three-fourths of dealers expected their spending on fire alarm equipment to be greater than in the previous year. However, that figure has dramatically decreased most recently, as just 47 percent of dealers expect increased spending in 2009.
RELATIONSHIPS
There has never been a better time for dealers to build relationships with other stakeholders who can help them gain work in both the retrofit and new construction markets. A & A Fire and Security of Green Bay, Wis., for example, has been working closely with architect and engineering (A & E) firms with the goal of generating new business.
“The regional A & E firms that are active in the fire market are well known and receptive to a learning experience,” comments Tom Binish, owner of A & A. “Security dealers should be assisting A & E engineers in spec writing, system design and product knowledge, and getting the word out.”
In a similar vein, Custom Alarm has been working closely with electrical contractors. “There is some building going on, and the fire system doesn’t always go out for bid,” Johnson notes. “They may ask the electrical guys to do that for them.” In such situations, a dealer that has a strong relationship with the electrical contractor is a logical choice to act as a subcontractor.
The stimulus programs put in place by the U.S. government earlier this year are expected to generate new construction in key industries such as health care and education — and that, in turn, should help generate fire system sales. Confident dealers already are building relationships that should help them win some of that business.
“We’re looking at people who could be in line for federal stimulus, such as different divisions of government and schools, and we’re sowing the seeds,” Bonifas comments. “The trick is that projects have to be shovel-ready. The government wants projects that are all designed and ready to go, so we’re promoting the idea, ‘Let’s get it designed and ready to go.’”
Dealers also should not overlook local economic development organizations. “Even smaller cities put together a master plan,” Davis observes. By getting involved with the local economic development organization, dealers can identify the “money people,” Davis says, adding, “To succeed, you have to align your abilities and what you offer to the strategy of the town you work in.”
Davis also advocates working with local fire authorities on education and practice fire drills, which provide opportunities to distribute literature about your company. “This is not a business you sit back and wait for — and if you’re involved in the industry and the promotion of fire safety, the authorities have a lot of respect for that,” Davis believes.
A strong local profile also may be helpful in picking up business that might otherwise have gone to a competitor. In today’s economy, everyone seems to be keeping a close eye on expenses, and as a result, Williams at Briscoe believes end users are more willing to consider a regional company as an alternative to a national company. “Many people are pricing out their services and we’re getting a lot of calls in venues we wouldn’t have gotten before,” he says.
John Lombardi, president of Fishkill, N.Y.-based CIA Security, notes a similar trend. “We’re seeing clients with multiple locations rebidding their monitoring to ensure they’re getting the best prices,” he says.<p>
Aside from increased price competition, however, the fire monitoring business seems to be holding up well. “Even if a business goes bankrupt, whoever owns the building has to keep it monitored,” says Bonifas of ADS.
The experiences of ADS also illustrate the role that good communications between different departments within a company can play. Through its central station operations ADS is able to identify customers that may need service or a system upgrade to solve an equipment problem that is generating trouble alerts. “The beauty of having monitoring is that you know when something breaks and can push for a repair to be made,” Bonifas says.
Internal communications are also key to generating sales leads at Safeguard Security & Communications, where service technicians routinely let salespeople know when they see an opportunity to upgrade a customer, notes Safeguard vice president Mike Cain.
Last but not least, the international market may hold strong growth opportunities for companies that can support business outside the U.S. “We’re seeing more adoption from Latin America from companies that were not using fire at all before,” says Dick Eisenlauer, president of Harrington Signal, a Moline, Ill.-based fire equipment manufacturer.
“The regional A & E firms that are active in the fire market are well known and receptive to a learning experience,” comments Tom Binish, owner of A & A. “Security dealers should be assisting A & E engineers in spec writing, system design and product knowledge, and getting the word out.”
In a similar vein, Custom Alarm has been working closely with electrical contractors. “There is some building going on, and the fire system doesn’t always go out for bid,” Johnson notes. “They may ask the electrical guys to do that for them.” In such situations, a dealer that has a strong relationship with the electrical contractor is a logical choice to act as a subcontractor.
The stimulus programs put in place by the U.S. government earlier this year are expected to generate new construction in key industries such as health care and education — and that, in turn, should help generate fire system sales. Confident dealers already are building relationships that should help them win some of that business.
“We’re looking at people who could be in line for federal stimulus, such as different divisions of government and schools, and we’re sowing the seeds,” Bonifas comments. “The trick is that projects have to be shovel-ready. The government wants projects that are all designed and ready to go, so we’re promoting the idea, ‘Let’s get it designed and ready to go.’”
Dealers also should not overlook local economic development organizations. “Even smaller cities put together a master plan,” Davis observes. By getting involved with the local economic development organization, dealers can identify the “money people,” Davis says, adding, “To succeed, you have to align your abilities and what you offer to the strategy of the town you work in.”
Davis also advocates working with local fire authorities on education and practice fire drills, which provide opportunities to distribute literature about your company. “This is not a business you sit back and wait for — and if you’re involved in the industry and the promotion of fire safety, the authorities have a lot of respect for that,” Davis believes.
A strong local profile also may be helpful in picking up business that might otherwise have gone to a competitor. In today’s economy, everyone seems to be keeping a close eye on expenses, and as a result, Williams at Briscoe believes end users are more willing to consider a regional company as an alternative to a national company. “Many people are pricing out their services and we’re getting a lot of calls in venues we wouldn’t have gotten before,” he says.
John Lombardi, president of Fishkill, N.Y.-based CIA Security, notes a similar trend. “We’re seeing clients with multiple locations rebidding their monitoring to ensure they’re getting the best prices,” he says.<p>
Aside from increased price competition, however, the fire monitoring business seems to be holding up well. “Even if a business goes bankrupt, whoever owns the building has to keep it monitored,” says Bonifas of ADS.
The experiences of ADS also illustrate the role that good communications between different departments within a company can play. Through its central station operations ADS is able to identify customers that may need service or a system upgrade to solve an equipment problem that is generating trouble alerts. “The beauty of having monitoring is that you know when something breaks and can push for a repair to be made,” Bonifas says.
Internal communications are also key to generating sales leads at Safeguard Security & Communications, where service technicians routinely let salespeople know when they see an opportunity to upgrade a customer, notes Safeguard vice president Mike Cain.
Last but not least, the international market may hold strong growth opportunities for companies that can support business outside the U.S. “We’re seeing more adoption from Latin America from companies that were not using fire at all before,” says Dick Eisenlauer, president of Harrington Signal, a Moline, Ill.-based fire equipment manufacturer.
SIDEBAR: New Regulations Could Drive System Upgrades
The fire protection business is driven, to a large degree, by state and local codes — and several new developments on that front could impact both the retrofit and new construction markets.
The National Fire Protection Association is expected to release a new version of NFPA 72, its fire system standard, in 2010. State and local municipalities are not required to adopt the new standard, but many of them are likely to do so.
Although the new version of the standard has not yet been finalized, some information about it is already known. A key change will be a requirement for mass notification capability to enable information and instructions to be communicated throughout a facility during an emergency — and some end user organizations are already adding or have plans to add that capability.
“We’ve done a lot of voice communication systems in buildings that didn’t require it in anticipation of the changes coming in 2010,” describes Ed Bonifas, vice president of Alarm Detection Systems, an Aurora, Ill.-based dealer.
The ninth edition of Underwriters Laboratories’ 864 standard for fire panels went into effect at the end of 2008. Since then, manufacturers have not been allowed to build equipment unless it meets that standard. Although there is no prohibition on installing panels manufactured previously, the new standard is expected to drive some panel upgrades, as obtaining replacements for earlier edition equipment will become increasingly difficult.
Changes to some local codes also could generate some new opportunities. Beginning July 1, dealers installing fire systems in New York City will have to meet more stringent requirements, notes Bob Williams, president of Briscoe Protective Systems, Centereach, N.Y. “The new code went into effect a year ago but there was a one-year grace period,” Williams explains. Several provisions of the new code could generate additional sales for dealers, he says, including a requirement to provide smoke detection in a wider range of building types.
More and more local codes are allowing combination systems that provide both intrusion and fire protection, says Roger Graf, president of Pittsburgh-based distributor Alarmax. “A number of vendors have product into UL that are combination systems and are waiting for a listing,” Graf says.
When those products are approved, Graf foresees new opportunities for dealers. Some sources say the poor economy is making some AHJs more lenient because they may be reluctant to put any additional financial burden on local businesses during these difficult times. But other sources say AHJs are scrutinizing installations more closely because, with new construction down, they have more time on their hands.
John Lombardi, president of Fishkill, N.Y.-based CIA Security, notes a perhaps more disturbing trend. “In some towns, you have to apply for a permit to have an inspection done,” he says. In an era when local municipalities are feeling the impact of the economy, Lombardi explains, some municipalities are adding the permit requirement as a source of revenue.
SDM Asked: “What Is Your Greatest Challenge in the Fire Systems Market and How Are You Addressing It?”
“Lowering margins enough to be able to be competitive. We’re being very proactive in our market. We’re giving seminars on mass notification and on new technologies in fire alarms to get our name in front of building owners and management associations.” — Bob Williams, Briscoe Protective Systems
“The slowdown in new construction. We’re going out and finding the retrofits.” — Leigh J. Johnson, Custom Alarm
The National Fire Protection Association is expected to release a new version of NFPA 72, its fire system standard, in 2010. State and local municipalities are not required to adopt the new standard, but many of them are likely to do so.
Although the new version of the standard has not yet been finalized, some information about it is already known. A key change will be a requirement for mass notification capability to enable information and instructions to be communicated throughout a facility during an emergency — and some end user organizations are already adding or have plans to add that capability.
“We’ve done a lot of voice communication systems in buildings that didn’t require it in anticipation of the changes coming in 2010,” describes Ed Bonifas, vice president of Alarm Detection Systems, an Aurora, Ill.-based dealer.
The ninth edition of Underwriters Laboratories’ 864 standard for fire panels went into effect at the end of 2008. Since then, manufacturers have not been allowed to build equipment unless it meets that standard. Although there is no prohibition on installing panels manufactured previously, the new standard is expected to drive some panel upgrades, as obtaining replacements for earlier edition equipment will become increasingly difficult.
Changes to some local codes also could generate some new opportunities. Beginning July 1, dealers installing fire systems in New York City will have to meet more stringent requirements, notes Bob Williams, president of Briscoe Protective Systems, Centereach, N.Y. “The new code went into effect a year ago but there was a one-year grace period,” Williams explains. Several provisions of the new code could generate additional sales for dealers, he says, including a requirement to provide smoke detection in a wider range of building types.
More and more local codes are allowing combination systems that provide both intrusion and fire protection, says Roger Graf, president of Pittsburgh-based distributor Alarmax. “A number of vendors have product into UL that are combination systems and are waiting for a listing,” Graf says.
When those products are approved, Graf foresees new opportunities for dealers. Some sources say the poor economy is making some AHJs more lenient because they may be reluctant to put any additional financial burden on local businesses during these difficult times. But other sources say AHJs are scrutinizing installations more closely because, with new construction down, they have more time on their hands.
John Lombardi, president of Fishkill, N.Y.-based CIA Security, notes a perhaps more disturbing trend. “In some towns, you have to apply for a permit to have an inspection done,” he says. In an era when local municipalities are feeling the impact of the economy, Lombardi explains, some municipalities are adding the permit requirement as a source of revenue.
SDM Asked: “What Is Your Greatest Challenge in the Fire Systems Market and How Are You Addressing It?”
“Lowering margins enough to be able to be competitive. We’re being very proactive in our market. We’re giving seminars on mass notification and on new technologies in fire alarms to get our name in front of building owners and management associations.” — Bob Williams, Briscoe Protective Systems
“The slowdown in new construction. We’re going out and finding the retrofits.” — Leigh J. Johnson, Custom Alarm
