Too Little Profit from So Much Demand
You can be almost sure they will have video systems installed now – or request that more cameras be added to their existing infrastructure.
A security systems integrator in the Chicago area confirmed for me recently that his company was contracted to install a video surveillance system at the high school my daughter attends. The contract followed a recent incident in which a written threat with references to Virginia Tech was found in one of the school’s restrooms. You can imagine how uneasy I felt sending my child to school during a week in which helicopters had circled the campus and federal agents and their dogs dodged students in the hallways between classes.
The demand for video security is not in question. Security cameras are ubiquitous â€” from public streets to private classrooms. What is in question is the profitability of security dealers and systems integrators. Pressure on prices comes from a variety of sources â€” as you well know â€” including prices of cameras sold directly to end users; an influx of new competitors; and more end-user buyers coming from the IT side of the organization and expecting commodity-like pricing.
SDM reports on this condition in our annual exclusive report, “Video Surveillance: State of the Market,” beginning on page 68. Integrator Ed Newman, vice president of Universal Security Systems Inc., who is featured on our cover, said he has finally seen a leveling off of the drop in profit levels his company had been experiencing over the last few years, which he attributes to new, inexperienced competitors.
“A variety of different types of contractors â€” electrical, general, defense, telephone, and computer contractors â€” all viewed the security market as billions of new dollars being spent,” Newman related to SDM. “It tends to drive prices down. The fourth quarter of 2007 was the first time we’ve seen some stability in the market. Many of these contractors that had won jobs suffered significant losses on them as a result of a lack of experience. Now they are deciding maybe they will go back to doing what they do best.”
Last month I attended a conference hosted by Micro Key, and while there I spoke with a representative from a small, central station company based in central Florida. He said his company was formerly about half-residential and half-commercial. But with the Florida economy being hit as hard as it has by the housing industry, his company has turned mainly to commercial such as retail stores and other small facilities. Even there, he said, he ran into competition that didn’t used to be competition; for example, very large systems integrators that were “reaching down,” he described.
Certainly our industry is still in a state of flux. My best advice to security professionals during this difficult time is to continue to educate your staffs. (For starters, there are many excellent Webinars available free of charge; stay tuned to SDM eNews for listings.) One thing that hasn’t seemed to change is that a good reputation still brings new business. Therefore, continue to build your reputation for having a staff with expert technical knowledge and customer skills and your chance of prevailing over the changes is very good.