On Sunday, March 29, U.S. President Donald Trump announced in a press conference that he would extend nationwide social distancing guidelines for another 30 days, until April 30, in order to combat the COVID-19 pandemic. While he had originally suggested the country would be back to normal by Easter, he is now saying June 1 may be a more feasible goal.
So now that we know this economic disruption isn’t going away soon, how will the industry be affected?
Many companies have already been responding in the past couple of weeks, as social distancing and shelter-in-place orders went into effect across the nation and beyond. On March 17, manufacturer Farpointe Data announced all manufacturing and shipping operations had to be halted as its home base of San Jose, California, was put under a shelter-in-place order (the company later announced it had restored operations on March 31). Multiple companies, such as Genetec, have put an increased focus on online education. Most are having all non-essential employees work from home. Some, like ADT, are sending mass emails to customers assuring their employees are considered essential by the government, so they are able to continue providing service.
One of the most drastic responses so far was by Convergint CEO Ken Lochiatto when he posted a letter on the company’s site stating that he, Convergint President Jim Boutwell and Co-Founder Dan Moceri would forego their salaries, while the company’s executive leadership team volunteered to reduce their salaries by 50 percent. In addition, exempt salaried colleagues will be taking a 20 percent salary reduction starting April 1, and some employees will be furloughed.
“It is clear to us that this crisis will get worse before it gets better and will likely continue for months, if not longer,” Lochiatto said. “We could withstand a decline in bookings, an increase in customers not paying us, colleagues not having projects or services to work on, or some customers cancelling business. Unfortunately, all are happening at the same time.”
The company said that its business in San Francisco dropped 75 percent within just one day of the city-directed shutdown. To provide relief for employees who have been furloughed by 80 percent or greater, Convergint will still provide medical benefits, suspend insurance premium charges and supply one day of accrued paid time off from this year per week of furlough.
"Right now, global economies are facing a situation of uncertainty as this virus continues to spread," said Convergint Director of Marketing Micah Carlson. "However, the core services of our business — security, fire and life safety systems — will always be an important need in our world today."
According to a new survey of the security and critical facilities industries from Clear Seas Research, the majority of companies (75-92 percent) are taking action to encourage better hygiene from employees to prevent the spread of COVID-19, increasing the frequency of cleaning/sanitization procedures, encouraging hand washing, promoting social distancing and providing hand sanitizer/antibacterial soaps. Sixty-three percent of those surveyed said they are eliminating/reducing business-related travel for employees, while 42 percent say they are requiring or giving their employees the option to work from home. Other actions being taken to keep employees healthy include delaying projects (42 percent), cancelling projects (21 percent), splitting workforce shifts to reduce the number of employees onsite (17 percent), temporary closing of business (13 percent) and purchasing new technology for remote workers (8 percent).
The same survey asked respondents what workforce changes they anticipated for the next three months. While 29 percent of those surveyed said they anticipated no changes, another 29 percent anticipated some employees being laid off. Seventeen percent anticipated the temporary suspension of employees without pay, and 13 percent anticipate the temporary suspension of employees with pay. Only 8 percent of respondents anticipated the hiring of new employees.
Government assistance, such as that offered in a $2 trillion stimulus package, may ease the burden on businesses. The security industry is also at an advantage because many of its employees and operations are considered “essential” by the government, meaning they can continue working during shelter-in-place orders.
The Security Industry Association (SIA) has created a COVID-19 resource page that provides the latest updates and programs; resources for health and prevention, regulatory and policy information and business operations and continuity; and preparedness solutions and recommendations from SIA member companies.
"Small businesses should pay close attention to provisions related to U.S. Small Business Administration (SBA) lending; the SBA and the U.S. Department of the Treasury will issue rules and applications for financial assistance," said SIA CEO Don Erickson. "We have also provided information on accessing SBA disaster recovery loans on SIA’s website. A potential Phase 4 stimulus is being discussed, which would focus on infrastructure modernization that would impact the industry, particularly if mass transportation and education infrastructure is included."
Phase 3 of the stimulus bill included multiple loan options, and Ken Kirschenbaum, attorney at Kirschenbaum & Kirschenbaum in Garden City, N.Y., has assembled a team of lawyers to assist security companies in understanding these loans.
“The security businesses will be affected like all businesses, as well as all people,” Kirschenbaum said. “But the alarm businesses will survive, unlike many of the subscribers whom the alarm companies service. You will be more attuned to not only your operations, but the business of your subscribers . . . All of this is happening so quickly, we are all at a wait-and-see mood. Everyone should stay healthy and we will be standing when this is over.”
Rapid Response Monitoring has taken extensive measures to protect its essential employees that are still working onsite. There are now handheld thermometers and thermal camera systems that monitor the health of everyone entering the building. The company even recently finished construction on a new facility in Syracuse that provides plenty of room for staff to protect social distancing.
“The future is still unclear and we will likely see a greater impact once we understand how the dealers weather the storm,” said Morgan Hertel, vice president of technology and innovation at Rapid Response. “Yes this pandemic will pass and things will go back to normal — the real question is what will the economy do to recover?”
Chuck Petrusha, president and CEO of Advanced Security, said his company has had several residential and small business customers cancel their installations.
“The future is unknown,” Petrusha said. “This will slow sales and keep employees from entering businesses and residences where they could become infected.”
Petrusha believes communication is the key now.
“I believe the more we can communicate the less fear there is in the equation,” Petrusha said. “To facilitate communicating easily and often, I worked with staff to create a distribution list for company email and text messages. We also have a dedicated Zoom Room where I can host all-staff company meetings virtually, with no need for anyone to violate the social distancing guidelines . . . Security remains one of the top five family concerns for Americans, and the need for our products and services will continue to grow as we all come out of this pandemic a stronger community and industry.”
Rick Caruthers, president of Galaxy Control Systems, a manufacturer out of Frederick, Maryland, isn’t too worried about COVID-19’s impact on business, despite dealing with a supply chain issue early on in the pandemic.
“Early in the spread of the disease we were affected by a shortage of semi-conductors from Asia,” Caruthers said. “This affected our ability to produce hardware on one of our core products. Thankfully we have been able to maintain stocking levels by working with our integrator partners and prioritizing orders until we were able to see the production normalize . . . At this point we do not foresee any further disruptions as it relates to manufacturing, and on the sales side we are seeing higher than normal activity.”
Caruthers added that while he thinks new businesses without much of a foundation may struggle through the pandemic, he has seen commercial customers actually using this time to upgrade or add to systems while their facilities are empty, as their employees are working from home.
“We have been in this business since 1985 and have learned that in good times and bad, security seems to remain steady as far as projects and sales,” Caruthers said.
Melissa Brinkman, CEO of Custom Alarm, has also seen an increase in installations due to buildings being vacant.
"We see that there will be an increase in crime with some people becoming desperate and taking advantage of businesses being unoccupied," Brinkman said. "All types of industries could be impacted by crime and we see a need for security companies to respond in a way to help these businesses protect their properties and assets during this uncertain time."
She warned, though, that while business may be good, the ability of customers to pay for services may be questionable.
"We will also see attrition rise due to the number of people wanting to cancel due to financial reasons," Brinkman said. "I would anticipate a lot of our smaller, locally owned businesses may run the risk of going out of business prior to this all being over, and that would cause a loss of ongoing revenue. I see work for the installation and service team being more sporadic and changing day to day due to people’s fears or precautions they are taking both from a social distancing standpoint as well as a financial protection standpoint."
Michael Reyes, regional vice president of consulting company Guidepost Solutions, sees an increased focus on crisis management as the answer to potential cash flow problems during this time.
“As the security experts, we continue to provide solutions to [our clients’] ever-changing needs,” Reyes said. “Several of our offices have pivoted to provide crisis management and continuity of operations consulting at our clients’ request.”
Specifically, Reyes said he’s seen a surge of requests for the use of remote operations through the use of global security operation centers; remote managed security services; the use of thermal imaging and temporal scanning for visitors and employees; and the use of enhanced tracking capabilities for assets as travel becomes restricted.
Gregory Blondeau, CEO of app-based visitor management system Proxyclick, said his team has also been working to adapt to customers' changing needs.
"As an app-based visitor management platform, we’ve been heeding the call from our clients asking for a touchless visitor check-in process without the use of iPads or tablets," Blondeau said. "We’ve been helping them implement flexible workflows for health screenings of essential employees, partners and contractors. Our visitor badge editor has been key in capturing vital information for clear display, such as body temperature checks. The fact that our system integrates seamlessly with many access control systems on the market, has allowed many of our enterprise clients to send unique QR codes to their visitors for scanning at entry points."
Proxyclick even created a COVID-19 resource center to guide customers on how to secure their buildings with a proper visitor management system.
Nigel Waterton, CRO of Arcules, a provider of cloud-based security based out of Irvine, Calif., said the primary shift hasn't been in how they conduct business, but how they think about the work they are doing.
"It’s safe to say that we’re in an unprecedented period of time and we as individuals are dealing with not only the personal challenges that have befallen our families and communities, but the business implications for our customers," Waterton said. "Across the security industry, we’re beginning to see security integrators start to assess their current business model and look at ways they can diversify their portfolio, adding an increased focus on recurring monthly revenue to the more traditional project-based model."
Waterton said this can take shape in a number of ways, including: bringing more managed/hosted services to the table; incorporating ongoing service and support packages; and remote monitoring through certain cloud-based platforms. Whatever the solution, Waterton said the idea that there’s a different way of doing things is taking hold in the industry as each and every business takes a closer look at the model they’ve built.
"Now is also the time that we should be taking a look at how our services are delivering value to customers, asking them about the challenges they’re facing, and how they’re using technology to solve them," Waterton said. "We’ve been given a gift of time to slow down, connect and reflect on what works, could work or might work in the future for our customers. The challenge we’re presenting to our employees and partners is: How can we make things better for our customers using cloud video technology and all that it brings to the table? What is on the minds of our customers and partners? How are they handling the challenges across their business and what can we do to align our efforts with theirs? Looking ahead and being able to address a changing risk landscape is imperative in this current moment."
Christine Lanning, president of Integrated Security Technologies in Waipahu, Hawaii, believes that maintaining a customer-first approach, while believing in the life saving technologies you provide, is the key to making it through this tricky time.
“The good news for the security industry is that we are life safety, and there are always opportunities in security,” Lanning said. “Taking advantage is not about a technology per say — it’s about providing value to your customer. Are your salespeople calling your customers and asking them to buy something? Or are they calling asking how they can help?”
In order to help customers and the community, Lanning’s team at Integrated Security has been looking at thermal technologies to help healthcare customers with taking the temperatures of large groups; revamping its collections process to stay on top of customers who owe money while offering help to those who are struggling; and setting up an internal email with resources available to families on where to find food, how to get mental health help and where to get tested for COVID-19.
To further ensure they would survive a recession, Lanning said Integrated Security has revisited its business continuity plan to create a reverse accountability chart, which is a plan of what is required if the company is 50 percent shutdown, 75 percent shutdown or 100 percent shutdown.
“Right now, we are hanging on as we’ve come into 2020 with a great backlog of work; only one customer cancelled,” Lanning said. “But I can’t say the same for other systems integrators. I’m part of a PSA peer exchange group of nine other security owners where we share business challenges; we’ve been in correspondence and some are struggling as their customers put a hold on projects.”
For small businesses who may struggle with the effects of the pandemic, Lanning recommends adding a COVID-19 line item as an expense, and dumping all expenses in there, including your staff and personal time spent dealing with the crisis. She also urges small business owners to reach out to the SBA and their banker immediately — not when they already really need to.
Star Asset Security of Orlando, Florida, has created a COVID-19 Response Plan which its leadership team is constantly discussing and comparing to the legislative mandates coming out. The plan includes: eliminating all non-essential business expenses; continually reviewing and readjusting the top line budget expectations for 2020; rapidly moving around its workforce to support customers and vertical markets that are continuing to spend; continuing with a proactive approach by leveraging the managed services platform to help customers and their daily operations; and putting a strong focus on accounts receivable and collections.
“Our prayers are that additional actions are not needed, but our leadership team is committed to being transparent with our employees about our business and plans to keep it healthy,” said Scott Anderton, chief operations officer at Star Asset Security.
For now, it seems like the best course of action is planning for the worst, while hoping for the best.
“COVID-19 is this generation’s crisis,” Reyes said. “Like World War II and 9/11, the response to this crisis has the potential to fundamentally change behavior and the industry as a whole. The security industry will be challenged to develop stronger screening practices and emergency operations planning, and to deploy tools to detect and minimize the impact that pandemics, attacks or natural disasters can have on a company. Our clients are seeking our support in these areas now — maintaining the health and safety of our clients’ employees is as important as ensuring the health and vitality of the companies themselves.”