NextGen Wins SDM 2017 Systems Integrator of the Year
What happens when old friends and their former wrestling coach decide to go into business together? If you are NextGen Security, the result is organic growth from $0 to $33 million in just four years; an “out-of-the-box” business model that treats each customer as unique and a culture that feels more like a family than just a place to work.
Frank Brewer had retired. He had built a successful security integration company several years ago — Security Services and Technologies (SST) — which had been successfully acquired by a larger systems integration company. He thought he was done with the security industry. Meanwhile, many of his former employees had been acquired yet again by an even larger entity and while the former SST employees were part of a highly successful division for the acquiring company, the decision was made to phase it out, both because of the risk involved in the highly regulated and complex industries it served, as well as the feeling that it just didn’t quite fit with their business model.
“It wasn’t on my radar to get back into the security industry, but at the time several key players became available,” Brewer recalls. “I had experience and, after meeting with Ryan (Loughin) and looking at the market, there was a dire need out there to fill a gap in the market. There was a screaming need from customers to have a high level of service from a company big enough to take on any project.” Add to that the expertise in a very large complicated vertical market and it was a recipe for success.
Together with Loughin, who would become president, and three others, the idea for NextGen Security was formed.
“I had always missed the electronic security industry,” says Dwight Smith, senior vice president finance and administration, who had previously worked for SST, but left in 2005 to work for a software company in Tampa, Fla. “Ryan and Frank contacted me in the summer of 2012 to say they were thinking of giving it another go. In November of 2012 we opened our doors and the rest is history.”
While the timeline may sound impulsive, these five friends and colleagues had a history and level of trust going back, in some cases, to childhood. Ryan Loughin, Dwight Smith and Steve Greis (vice president, Southwest), all grew up together and went to the same high school. Brewer had been Loughin’s and Smith’s wrestling coach at one point.
“Our entire leadership team has worked together in one capacity or another for 20 years,” Greis says. “Obviously doing anything that life changing is scary. A lot of us had young families, so coming home and saying, ‘Hey honey, I am going to quit my job and start a company with my buddies from high school,’ you can imagine how that conversation went. But we actually had some great support from our clients, many of whom were asking us to do this due to the expertise we had in securing their specific market.”
Ryan Rieger, vice president petrochem and energy, was the only one of the five that hadn’t known the rest in childhood — but he had worked with them for many years.
“I am the only outside insert into that group, but I have been taken in as part of it. There is a solid trust between all the partners of the company. I have known these guys for over 15 years now, so at this point I feel like I grew up with them.”
When it came time to form a business, there was no hesitation, Rieger says. “It was a group effort between all of us. We all had different reasons, but we had all been part of an organization (SST) for 10 years plus where we were used to doing.”
Of course, a company can’t run on its leadership alone. Many of the employees from the phased out petro-chem division were ready and willing to join this new venture.
According to Loughin, a good number of his former group needed a place to go and NextGen made the most sense. “We were picking up the pieces and putting them back together,” he says. “Today at NextGen our former group is nearly all back together. It’s been great to watch the rebuilding process and get back to what we do best.”
One of the first to join was Daniel Purcell, director of engineering Southwest. “I was in one of those waves that were let go from the previous company. I had talked with Frank and Ryan L. and actually waited about two-and-a-half months before Next Gen got started. I was very excited for it because of my prior experience with the management team. I had more than enough opportunities to go work for other companies in those months, but I put all that on hold for NextGen.”
PROGRAMMED TO SUCCEED
Because of his prior experience as CEO of SST, Brewer had some immediate and concrete ideas of what he did — and didn’t — want to bring forward to the new company. “As investor and CEO I wanted to be sure the people running the company with me are fully engaged and have a lot of upside with little downside. That is the layout of the company.
“People are paid on either the profitability of the region or the billings that an operational person would install or a sales organization based on their performance,” Brewer explains. “As a company, at the end of each year we give a percentage of the profits to all employees regardless of where they are. That is my way of making sure everybody gets touched.”
Loughin says this structure has another benefit. “There are four major departments: sales, operations, engineering and service. All four are incentivized on a project-by-project basis. Everyone is working towards the same goal and incentive plan. That is one of the things that really creates our teamwork culture.”
That was by intent, Brewer adds. “In the early 1980s when I got into the security industry I worked for large companies and I was taken aback that the sales departments were pitted against the operations team. There was always a friction that, ‘You didn’t sell this correctly or choose the right product.’ From that experience I swore I would never let that happen in any organization I was running. You still have personality issues, but it is programmed to succeed, not fail, because it is designed to have people that want to work together.”
Clearly something is working because NextGen has grown organically without outside investment from nothing to $33 million in four years, including an impressive 74 percent growth rate in 2016. The company currently ranks at No. 20 on the SDM Top Systems Integrators Report.
Brewer has a formula for success he swears by — maintaining a 12-16 percent EBIDTA score. “That is a Frank Brewer experience, where I feel that is the right place to be as an organization,” he says. “Business isn’t a perfect science, but we have been pretty close to those numbers on a year-over-year basis. In my opinion if you are making 20 percent EBIDTA you are doing one of two things: you are either taking advantage of customers and overcharging them, or not taking care of your employees and paying them well. In contrast, if you are under 10, you are not running the company well enough to sustain.”
For Loughin it is also about efficiency. “We set out to be very efficient from day one, including very good partnerships with several subcontractors that do a lot of the heavy lifting like cable pulling and electrical. We focus on high-level design and engineering and project management, but have the tools in our toolbelt to allow them to be more efficient.” One thing that helps significantly with this is a back-office program that was put in place from the start and was designed for a much larger scale than the company started at.
“It’s an Oracle-driven system from Khameleon Software that is completely customized to our needs,” Brewer says. “Having done this before, there was a specific matrix on every level of business I knew I needed to look at. I have a complete dashboard. All the management teams have complete dashboards and we all use the same system, soup to nuts from prospect to quote to order to project to invoicing.”
Dwight Smith, who had worked for Khameleon after being in charge of a similar system for SST, was brought on board to handle that part of the business, Brewer says. “Most people wouldn’t invest in a person on Dwight’s level. They would wait to build the business up and then backend that stuff. We did it up front. That shows commitment to running the business right from the very beginning.”
Smith says, “The biggest thing we did differently was we started the company with growth in mind, but it was admittedly top-heavy. We started with senior-level people with years of experience in the industry and with systems designed for project-centric companies like ours, but ones that were $29 to $50 million. We were running a full-scale enterprise systems right off the bat. We built it bigger from the start and grew into it.
“Because we all had a background of working together for 10 to 15 years there was a little bit of a ‘perfect process.’ It’s great when you have a business system that adheres to that path already. You don’t have to change your process or system to fit each other. There is perfect harmony. We knew the design, the job flow, how estimating was going to take place, how project accounting was going to happen. There wasn’t a whole lot of ‘feel it out.’”
All this front-end work paid off almost immediately, as the company began to get large-scale projects, particularly in 2016, he says. “A lot of our revenue last year came from five very large projects.” While things have normalized in 2017, Smith points to this ramp-up as a good preparation for every job. “That $50,000 job will have just as many purchase orders and receipts. You have to be able to expand and contract based on inbound revenue and I think we did a good job of adjusting from a large revenue model down to a normal project workload.”
The growth rate in 2017 is projected to be 2 percent, but profits are expected to be up 20 percent, largely because of the lifecycle of the projects and when they fall in the calendar year. There are also several big projects in the planning stages, any one of which could bump things back up to the large scale of 2016, although Smith says he doesn’t think the company will see many 74 percent years. “We are proactively aware of the strains that would put on the company. There are only so many 74 years you can have before things start to burst at the seams. We don’t ever want to be that company.”
‘FRIENDS & FAMILY’ CULTURE
One of the ways NextGen strives to keep its culture vibrant and thriving is by being very open, both literally and figuratively. Not only can any employee walk into the president or CEO’s office and share an idea, but the company is also open with its financials. “I don’t think there is too much financial information that we don’t share,” Smith says. “We are happy to share gross profit by division, bonus decisions, budgets for the coming year, etc. Our people kind of take a little more of an ownership in the company when they see that our performance as a whole is based on the sum of these parts.”
The company also takes its name literally when it comes to attracting employees. There is a deliberate attempt to attract and keep younger employees, who often have different ideas of what is important than their older colleagues.
“We are trying to resurrect some of the culture from SST, but at the same time we are doing it better,” Greis says. “I think what is important to an employee now versus the ’90s is different. Back then the emphasis was on the 401K or job stability, but millennials also want their workplace to be cool. They want their friends to be in there with them, and be able to get out and see the city and not sit at a desk all day.” (For more on NextGen’s efforts to attract millennials see “Recruiting the Next Generation” online at www.SDMmag.com/Systems-Integrator-of-the-Year.)
When it comes to recruiting, Brewer may have been ahead of his time. Greis credits Brewer with setting the cultural tone from the start, based on how he had done it at SST. “Frank knew Ryan and Dwight through wrestling and recruited both of them straight out of college to work for his company. Ryan recruited me. And that is how we recruit today. When we have good young talent, we want them to recruit their friends.”
That is how Human Resources Manager Becca Welk came to work at NextGen two years ago, she says. “A close friend of mine from high school did an internship here and he referred me.”
To further the “cool factor” the company moved to a new office complex last fall, and put a lot of thought into the design and features that would reflect the culture, the employees and also be a showpiece for visitors.
It’s just as attractive for employees, Welk says. “It is not just for all the technology that we can showcase for our customers, but it is a place you want to show your friends and you want to come to work. It reflects us as a company. We have the kind of environment where you can walk right into senior management and talk to about something. And they give you the opportunity to grow and learn as an employee.”
The offices have a very “neo” feel to them, Smith says. “People often call us the Google of the security industry because of the way the office looks.” The mechanics do speak a little bit more to the younger group. There is a prominent shuffleboard, a lot of open space and light, several areas designed for informal meetings and a very modern appearance.
Based in Houston, Greis’s department is already in its second space and projected to outgrow that within the next 18 months, so they haven’t gone as far with the office design as the Exton, Pa., headquarters office. However, they have tried to mirror its concepts. “We have done some very nice improvements to make it look like a miniature version of the Exton office,” he says. “We get a lot of positive feedback from manufacturers and clients.”
The new Exton office facilities were clearly a hit with the employees. Many specifically mentioned it in voting for NextGen to be named one of the “Best Places to Work” by the Philadelphia Business Journal, a distinction it was awarded in August. At the recognition ceremony several of the employees’ comments were read, Smith recalls. “There were a lot of comments not just on the fact that it is a great place to work, but why. They mentioned the office and even the kitchen. It has a glass front with lots of light, a high ceiling and a long bar-height eating area. Most people go out and bring back lunch. They would rather eat here. That helps in not just building relationships as coworkers but as friends, in and out of the office.”
This works top down, as the employees see the founders’ friendship in evidence. “I look forward to coming to work every day,” Smith says. It is not something I dread and I am not watching the clock and heading out at 4:59. I enjoy being here and enjoy the people I work with. There are a lot of long-term relationships. Some of us played together as kids. Frank was my coach when I was 12. It can be a casual work environment and we can speak freely to each other. I look back on the last five years and can say it was worth moving my family back from Tampa.”
Rieger agrees. “We all bring something a little different, but we trust each other. When we get together to talk about business issues, everybody respects each other’s views. We bring all our ideas to the table and come to a consensus on where we want to take the company.”
One of the things they decided up front was the importance of having an open door policy across the board, Rieger recalls. “It doesn’t matter what department they are in. If they are in my department they can come talk to me, but they can also go to Dwight or Ryan or anyone. Younger employees especially appreciate that. We are not hiding anything. There are a lot of new ideas that can come from people who haven’t been in the industry as long as we have. We seriously consider any ideas that come to us.”
All of these efforts have paid off. NextGen has a very low employee attrition rate of less than 2 percent, Brewer says.
“People don’t leave NextGen of their own accord,” Greis agrees. “People want to work here and that is really cool.”
Other employees echo this sentiment. Mike Ficco, director of engineering petrochem and energy, says the teamwork aspect is really key. “There is no dead weight. We don’t have to worry about anybody not performing on some basis. Everybody has been hand-picked, vetted or was a recommendation from someone well respected. Everybody has everyone else’s back, no matter what. That is the culture we wanted to cultivate.”
Chris Cundey, director of operations petrochem and energy, agrees. “One of the ways we are unique and effective is whenever we have large tasks at hand that are too much for one person to handle, we gather around and bring in people from other disciplines. Everybody contributes their expertise so the customer gets taken care of. The Amish have a saying, ‘It takes a village to raise a barn.’ That is our approach. There are no attitudes or personalities. It is, ‘Let’s get this job done and do what it takes.’”
In fact, this attitude was about to be put to the test as of the writing of the article. Hurricane Harvey hit just as Cundey and a few of the other Houston employees were being interviewed. To read about how NextGen planned to respond to this disaster, see the sidebar below.
Like almost everyone else, Cundey refers to his coworkers as his friends. “I love to get up and go to work because I work with my friends. When you have the same goals you have managed to achieve as a group, it is worthwhile getting up every day and kicking butt, for lack of another term.”
NextGen also gives back to the community, sponsoring several charity events throughout the year, and giving around 1 percent of its net profits to nominated charities at the end of the year. These nominations are run through a volunteer committee of employees called NextGen Cares. In 2016 about $50,000 was raised for charities such as St. Jude’s and Wounded Warriors.
‘OUTSIDE THE BOX’ CUSTOMER APPROACH
NextGen’s approach to customers is decidedly “non-standard.” In fact, every project is treated as a custom design and even service plans and customer reviews are done on a case-by-case basis. But that doesn’t mean there is no formula at all. NextGen was founded out of the petrochem space, but it didn’t take long for the founders to identify synergies in other verticals: especially any that required a high level of engineering and complexity or that were heavily regulated.
Consequently, some of the largest verticals NextGen services include petrochem, oil and gas, energy and utilities, healthcare and food manufacturing, but also higher ed, technology and corporate — particularly corporate headquarters for their customers.
“Over the last six months, food defense has been one of the quickest growing verticals we work in,” Loughin says.
“We came up with these verticals based on what fits our expertise,” Brewer adds. “Generally they are complicated, large, but a company we know we will be able to do business with long-term.”
Another thing many of NextGen’s verticals have in common is an emphasis on high level certifications, training and safety, which is something the integrator set off from the start to meet and exceed, starting the process immediately to become SAFETY Act designated. (See “SAFETY Act Helps Win Business” below). Safety is also evident in the everyday practices at the office.
“The markets we work in, safety is a huge concern,” Smith says. “We have a full-time safety manager here that oversees OSHA and workplace safety.” This past year the company set a goal of having every single employee CPR first aid and AED certified. To date, about 95 percent have achieved that goal, Dwight Smith reports.
Cliff Smith, director of operations Southwest, says the focus on training and certification is extremely important to customers. “They look to us to be subject matter experts and how we do that is we all carry certifications in the products we deploy.” But the workplace safety aspect is equally important, he adds. “One of the things that kind of sets us apart is our safety. That is high priority. All my field personnel are CPR certified. That is crazy. Who else is doing that?”
NextGen is always looking for ways to help its customers, while maintaining the non-standard custom approach that has made the company successful. One of the ways they have done this recently is with the addition of a permanent power substation demonstration area in the new offices, which turned out to be even more beneficial than originally anticipated, Rieger says.
“We call it a substation but it is not just that. We have evolved it to fit a lot of different technologies that we use in other verticals and we use it as a demo for existing and new customers. It gives us an opportunity to show them the technologies, how they work and how they integrate together.” It also serves as a bench testing unit for new technologies they are considering as well as a troubleshooting area. “In the field you run into issues and we can set that up right in our office and try to recreate it in a controlled environment to figure out what the issue is and how we can fix it,” Rieger adds.
Another cutting-edge technology they have incorporated recently is the use of drones, Rieger says. “Initially we started using them for engineering and 3D scanning, but I think their use will grow in how we engineer and design systems going forward.” Currently NextGen uses a third-party company to fly the drones, particularly over rough terrain and to view underground conduit, as well as to help lay out cameras and angles. “Once the 3D scan is done, you know what is below and above ground. That allows us to sit with the customer and look at exactly what that terrain is and how the cameras should be laid out, and show them physically what those cameras will be looking at. It is much more efficient than all going out to the site.”
Almost everything NextGen does for its clients is tailored to that particular customer. For example, they will embed employees when it makes sense for the customer. Currently they have nine employees serving in that capacity. “We could be more profitable with those employees out doing time and materials service, but if we know that is absolutely best for the customer we do it,” Loughin says.
The integrator does quarterly reviews with all of its customers, but they let the customer set the pace and formula. “They vary significantly by customer,” Greis says. “Some are very formal while others are much more relaxed. We review items such as service response time, call resolution percentages as well as how we are doing communication-wise. For some of the larger clients we have developed specific key performance indicators that can range from safety performance to continuing education for our staff to introductions of new technologies.”
Sometimes the difference is simply how well they know the client. “Some are people we have worked with for 15 years or longer, and others may only be in their second year,” Greis says.
Not surprisingly, the company’s service plans don’t follow a set formula either. “We do everything from full service contracts to just material and labor, or even straight material,” Greis says. “It really is a million different flavors. We are successful because of our flexibility. There is no plan A, B and C.”
However, NextGen is looking ahead to doing more RMR-related work, particularly as the cloud trend continues. Recently they have begun offering cloud services, partnering with Montreal-based manufacturer Genetec. “Cloud is coming and that definitely will create more of an RMR model for us, without a doubt,” Greis says.
What’s next for NextGen? The company is not planning to acquire nor are they worried about getting too big, too fast. “I feel that our culture is so ingrained to a high level of customer service and employee retention that it wouldn’t allow us to grow too fast. If we can’t deliver it right, we are not going to do it,” Brewer says.
“We would like to be between a $50 to $75 million company,” he adds. “To put a finer point on it, we are a big, small company. We are big enough to tackle any project, but small enough to provide the level of care from the management team that our customers need.”
With a focus on employees as family, customers who are treated as complex individual use cases, and the out-of-the-box flexibility to do just about anything the client needs, NextGen seems set to reach its goals.
A Focus on Cybersecurity
In the past few years, cybersecurity has become a hot button issue across the security industry, and NextGen has strived to be on the forefront of that, even dropping a major manufacturer partner when they were unable to resolve a vulnerability the customer had identified. “Through an IT audit we were performing for the client we realized the device was very susceptible to hacking,” Ryan Loughin recalls. “We gave the manufacturer the opportunity to correct it but they couldn’t.”
This attention goes both backward and forward, as NextGen has made cybersecurity a requirement in forming new partnerships as well.
“Picking our product lines, that is one of the deciding factors of who we support,” Mike Ficco says. “Often equipment that is easy to set up is the least secure. Because systems are so open you have to lock a lot of things down. What we have done internally is we have a committee that reviews products. We have cheat sheets explaining what to turn on or leave off and what products to use. We have our own vetting process we go through.”
When it comes to its customers, NextGen addresses cybersecurity through secure document sharing, Ficco says. “We use Dropbox Corporate. We have a folder set up for each individual customer. We immediately take access away if we terminate somebody and we can say for sure they were not allowed to remove any documents from there.”
NextGen has also sought the services of a company that can do an internal vulnerability assessment. At press time it wasn’t complete, but Ficco says they are closely watching how it is done. “When we contracted them we told them we will be looking over their shoulder to understand more about what they are doing so we can speak the language better to our own customers, and they were very open to that.
“We have identified that we need to go down this road and we are going to practice what we preach.”
SAFETY Act Designation Helps Win Business
The SAFETY Act was enacted by Congress as a part of the Homeland Security Act of 2002. “SAFETY Act” is actually an acronym for the section of the Homeland Security Act titled the “Support Anti-terrorism by Fostering Effective Technologies Act.”
It is a little known federal law intended to protect businesses from the liability they would face following a terrorist event. The Act’s liability protections apply to physical attacks on persons or property, or to acts of cyber-terrorism that can result in physical injury and/or cause financial harm.
NextGen achieved the SAFETY Act designation in 2015, after beginning the process shortly after its founding in 2012.
“There were a number of our customers in the chemical, oil and gas verticals that required we obtain the designation, says Ryan Rieger, vice president petrochem and energy. “From the time we opened our doors we started the process and it took a couple of years. It really helped us to do that work on sites that are regulated by CFATS and MTSA. Even on the legal side of things a lot of our customers understand the protection that affords them.”
Rieger says he believes NextGen currently holds one of the broadest coverages as an integrator. “I would say it is not typical to have this distinction. Some manufacturers within the security industry have it for their product. The way we are dealing with it is more of an overall design of our systems and there are multiple manufacturers we are bringing into that design. As long as we are designing and installing a total perimeter security system, it covers our entire design and installation of the system. It delves heavily into our processes and procedures, how we select the technologies and how we service them after the fact.”
Recruiting the Next Generation
True to its name, NextGen is committed to recruiting, training and retaining the next generation of employees called “millennials” — who occasionally get a bad rap. NextGen not only tries to understand them, but has gone above and beyond to address some of their unique needs and concerns.
“One of the key things about the millennial group is their need for constant feedback on performance,” says Dwight Smith. “We joke that this is because they have had graduation ceremonies for every grade and participation trophies for every game they have ever played. But the reality is we do have perpetual feedback, even if it is just through open dialogue. We absolutely recognize that this age population is what is going to be our vehicle of growth.”
In addition to its attractive new office facilities, open door policies, and more informal work environment, NextGen is attempting to reach millennials in an even more meaningful way — through their wallets.
“We draw a lot of college graduates and what we found from interviews is that these kids are coming out of college saddled with debt,” Smith says. “It is very scary to them and we don’t want that to inhibit their performance as an employee.”
Last year NextGen did a trial loan reimbursement program with a couple of employees, with the hope of a broader rollout, but they found out it is a little more complex than they anticipated, with many different types of loans, including some cosigned by parents. They aren’t giving up, however.
They are now working with a company called Gradifi, which helps administer this type of benefit to come up with a better way to do it. “From what I have seen it is without a doubt the hottest benefit in 2017 (according to Forbes),” Smith adds. He is determined to make it work. “This is something I definitely don’t want to see fall through the cracks just because it is complicated.”
Efforts like this do matter, says millennial employee Becca Welk. “The millennial generation is an interesting one. I am part of it. It is hard to get them to stay. They are always looking for [where] the grass is greener, always looking where they can go next. The key is to capture those employees and give them a reason to stick around.”
Programs like Gradifi do just that, she says. While NextGen itself is only five years old, she sees a positive trend emerging when it comes to her millennial coworkers. “An important piece to knowing if they will stay is those managers being in touch with their employees, and saying, ‘Where do you see yourself going and let us help you get there.’ We have a lot of millennials who have been here for two, three or even four years. It is young, but the ability to grow and know your path is important and we are getting there with this group.”
Hurricane Harvey Hits
NextGen’s headquarters may be in Pennsylvania, but the company has a thriving and growing office and presence in Houston, Texas. During the writing of this piece, Hurricane Harvey wreaked devastation on the Houston area. Luckily the office and all of its employees weathered the hurricane relatively unscathed, but the same can’t be said of many of their customers. As the event unfolded day by day, the systems integration company handled it in typical NextGen fashion — in other words, like a family and a team.
“I think the biggest thing about NextGen is the family culture,” says Cliff Smith. “With the hurricane, everybody is so concerned and looking to help in any way they can both here in Houston and at the corporate office. We have gotten calls from the CEO and president and account managers. Everybody cares and everybody is invested.”
In fact they had daily calls, starting even before the hurricane hit. “We put our plan together the Wednesday before because we didn’t know what the storm was going to bring,” he says. “We got guys out early on Friday to make sure they had time to fill up their trucks and get their families ready. We did a daily roll call during the storm to make sure everybody was OK. There were a couple of employees that had to evacuate and one that had water in their house. Then when everybody seemed OK, we started gearing up for how we could help our customers. By Monday our service manager had engaged all of our regular customers to say, ‘How are you guys looking? What can we do?’ By Wednesday they were doing service calls,” he says.
It is going to be all hands on deck for a while, Smith says. That means that the teamwork mentality of everyone pitching in will be in full force in the coming weeks and months.
“We have had quite a few meetings about recovery plans after Harvey,” says Daniel Purcell. “We understand a lot of large project work we are doing may be on hold while companies recover. Service and response will be a priority. Guys normally doing installs will be doing service and getting people up and running. Spare parts and equipment has been increased to get customers up as quickly as we can.”