On Oct. 6, 2010, Kratos Defense and Security Solutions Inc., a national security solutions provider based in San Diego, Calif., announced its intention to acquire Henry Bros. Electronics Inc. for approximately $45 million in cash. This purchase will take Henry Brothers into a new phase of growth and I believe sends a clear message to the traditional physical security market about (a) how to build an attractive company (Henry Brothers), and (b) where the market is heading through security convergence.

Henry Brothers (HBE) has focused part of its business on the Homeland Security market (critical infrastructure) and designs and integrates a range of leading-edge surveillance and security products. HBE will be folded into the Kratos Public Safety & Security Division, believed to be the nation’s second largest independent systems integrator focusing on solutions ranging from access control and surveillance to fire safety and building automation.

Kratos corporation is an interesting firm and describes its vision as a provider of advanced engineering, IT services, war fighter solutions and security and surveillance systems. The CEO since 2003 is Eric DeMarco, who has transformed the firm’s direction into the federal government and security markets. He is the former president and COO of Titan Corporation, a $1.5 billion government IT company. HBE is being integrated into an aggressive, well-run and strategically diversified security and defense operation. The future looks bright.

The message to security integrators is to follow the HBE lead and focus on the Homeland Security market. I have mentioned this in numerous articles and suggested industry venues to attend. Smart innovators will seek out partnerships with defense and homeland security related companies that can complement their skill sets. The mid range defense contractor and homeland security integrator are excellent prospects for business partners with traditional physical security providers. These markets are converging over IP and solutions like PSIM (Physical Security Information Management) are perfect to integrate surveillance, access control and building automation in critical infrastructure facilities from seaports to military bases.

WashingtonTechnology (www.washingtontechnology.com) is billed as the online authority for government contractors and partners. The Top 100 is a valuable resource list of the largest defense contractors and the composition of their business operations. Perhaps the best option is the recently released “Fast 50,” an excellent listing of potential partners, many of which have the status of being small disadvantaged businesses and provide advantages when pursuing government bids and are on the radar of the large defense contractors, many of whom want these firms in their delivery portfolio. Given the popularity and continued deployments of all things security, the integration of various solutions over IP networks, an integrator’s skill set in the services area could be blended with the specific expertise of many of these firms.

What the HBE acquisition by Kratos tells me is that the aggressive firms focused on the defense and homeland security markets are interested in expanding their businesses by integrating traditional physical security capabilities into their product and services portfolio. This is a trend and clearly in the wheelhouse of where the majority of the revenue opportunities are going to be over the next several years. Take a page from the Henry Brothers playbook and expand your market opportunities by getting outside of your traditional comfort zone. Seek new partners with security convergence strategies focused on this explosive market in homeland security. Congratulations to Kratos and HBE; great move!