Bracing for 2009
The SP&T News editorial advisory board got together at the end of 2008 to explore the impact of the global economic shakedown on the security industry as well as the neeed for better training in the industry as new technology takes centre stage.
December 19, 2008 By Jennifer Brown
The SP&T News Editorial Advisory Board members who participated in the roundtable were:
Robert Burns, Senior Regional vice-president, technology division, G4S
Michael Martin, Senior Managing Consultant, IBM Canada
Carlo Di Panfilo, Vice-president, Canada, Dedicated Micros Inc.
JF Champagne, Sales Manager, Canada, Brivo Systems
Kevin Parisien, Project Manager, Security and IT Systems Group, MMM Group
Victor Harding, Acquisition manager, Reliance-Protectron Security
Barb Geisel, Chubb Security
To view video excepts on what the advisory board said about the economy, click here.
To view video except on their predictions for IP video. click here.
To view what they had to say about training, click here.
SP&T News: At the top of most people’s minds right now is how the
credit crunch and economic turmoil in the U.S. and here at home may
impact the security market. What do you think the immediate impact will
Carlo Di Panfilo: For us, it’s business as usual. We have come out with
a whole new range of IP-based products. We have a multiplexer system
and we have IP cameras and high-definition video. On the U.S. side I
think this economic pinch is going to affect everything, but we’re
trying to be competitive with new product offerings in the market.
JF Champagne: I think the best way to describe it is there are no
projects being cancelled, per se and we’re not seeing people pulling
projects off the table, but what but I think what we are seeing is the
sales cycle get stretched a bit and go a little longer. Where
traditionally we have had a hot market with people throwing money at
projects to get them completed, we’re seeing them delayed or more
relaxed. We’re a company experiencing fast growth so we’re seeing
just a softening of that growth, but from our perspective there is no
major concern yet.
Kevin Parisien: I think it’s business as usual. I haven’t seen
anything right now indicating that would be disrupted. The projects we
have right now are not affected by the downturn because the budgets
were already established in previous years, so it’s business as
usual. I can see possibly because of what’s happening with the
residential market that might have an impact here at some point, but
certainly for commercial projects I wouldn’t anticipate any change at
Victor Harding: What I hear from authorized dealers of ours, and these
are people in the mass market that are trying to do volumes of new
systems every month, is that the rate of housing closings has slowed up
a bit. Whether that is the credit crunch, I’m not 100 per cent sure.
I think that’s going to affect us for sure. The other thing too on
our side, and I think it will take a while, is you need a lot of money
to run a dealer program because you are buying thousands of accounts a
month and paying $600 to $900 an account, so lines of credit become an
important factor. You need to make sure your lines of credit are solid
and the cost of capital is challenging your competitiveness.
Barb Geisel: I agree with what Victor says about the credit. It’s
going to be more challenging for customers to get credit from
integrators and suppliers. I can see large corporations need to cut
back in administrative areas during times like this, and I can almost
visually see sales administrators walking over to the credit
department, because that’s what you need to beef up in these times.
Also, as JF said, there is an impact and I can sense my customers
delaying the sales cycle. Although, in these times you just have to be
more competitive, not necessarily financially, and make yourself stand
out from the competition. So far I haven’t seen much of a problem in
Michael Martin: We’re doing some large-scale projects and I
guess some of the medium-size projects will have longer runways to see
them become real. We’re getting a lot of requests for automation and
analytics and that’s where we’re putting our energy. It seems to be
a growing area for us at the moment. The other aspect is integration of
IP where surveillance/security used to be a standalone entity.
We’re also seeing consolidation and centralization where people are
building a video surveillance NOC (network operating centre) and they
are aggregating traffic because networking has become cheaper. Distance
is no longer the issue it used to be. We have five NOCs under
development in North America, I’ll call them video head ends and there is
one being developed here in Toronto. Banks and government are looking
at this for consolidation.
In the U.S., banks are acquiring other banks and they need consulting
help on how to bring them all together, and it affects all aspects of
their business right down to security and surveillance. Our forecast is
looking pretty healthy in the banking scenario because there is so much
Burns: Our organization is divided into three divisions: retrofit, new
construction and service. The retrofit division is terrible this year;
few smaller projects, and if money is being spent it tends to be from
their operational budget rather than the capital budget. The new
construction division is doing well this year. The new construction
division has a two- to three-year time horizon so spending decisions
are made well in advance. The service division is outstanding this
year. We attribute this performance to clients fixing and adding to
their systems rather than buying new.
SP&T News: What about the now lower Canadian dollar? Last year we
heard installers were being hurt by the higher dollar because Americans
were coming here to do business. What about now?
Geisel: This month alone (October) our dollar has dropped 18 per cent.
Last year we talked about how come manufacturers hadn’t lowered the
price to keep business in Canada. Shortly after that discussion the
major manufacturers did lower their price. You can imagine now what’s
happening to these manufacturers now. Now it is affecting everybody — manufacturers, distributors and integrators. The one thing that I know
will change dramatically this year is inventory levels, because
inventory costs money. It will be just-in-time delivery. There will be
a lot less stock.
SP&T News: Will there be more pressure on distributors to change their model?
Champagne: I don’t think it’s about where the price point is;
it’s the speed at which it changes. Distributors have traditionally
been the buffer between U.S.-based manufacturers and the Canadian
SP&T News: Victor, in terms of acquisitions, how do you think the climate will affect people’s attitudes?
Harding: I have never been able to determine what makes people sell.
Strangely enough, what I’ve noticed recently is there is a whole
generation of people who got into the business as independent security
dealers in the mid-to-late ’80s — the boomer generation — and
I’ve noticed more and more those people are ready to get out but I
can’t point to deals we have seen where people have said: " need
to get out to raise money."
Martin: Have you seen multiples change though?
Harding: It’s interesting. We have a parent company now and the
people in the parent company are forever pointing at the economic times
and the fact things are slower and they think we shouldn’t have to
pay as much for deals. A bigger factor than that though is how many
competitors that are out there buying. The problem is in the
acquisition game, if it’s not booming I think you can or you must
back off and not pay the extra two or three times that you might pay,
but I don’t know that it affects things dramatically. What I think
affects things even more is having fewer buyers. In late 1990s/early
2000s, we had in Canada three or four people buying companies and
bidding prices up.
SP&T News: With respect to the economic impact on certain
technologies, do you think it will slow the adoption for things like IP
video, or have people been waiting to get out of analogue for so long
they have planned and budgeted for it?
Parisien: Most projects are being done out of necessity and to get cost
savings. A lot of projects I get involved with are airports looking to
create a common infrastructure that can be shared among multiple
tenants as well as the airport operator themselves. The IP component
becomes a cost savings rather than something that is going to cost
money in terms of security if they have to go out and include separate
cabling infrastructure which is limited and five years from now the
technology will be obsolete, the logical thing is to go IP and it’s a
huge cost savings depending on the application. I don’t see it
slowing up for the next couple of years, but most of my projects are
across Canada and globally.
Di Panfilo: I think if there is a transition going on from analogue to
IP-based systems there’s no question about that and all the new
builds will be new IP systems. I don’t really see a slow up there —
more services can be shared on an IP system. It’s becoming more
economical to do it.
Burns: I agree. The adoption rate is only going to speed up as
analytics improves — that makes the IP video argument even better.
There‚Äôs going to be a point at which we don’t look at analogue
video at all anymore and I think we’re getting to that point now. If
anything, it’s about the existing infrastructure an organization has.
If it has an infrastructure that can’t handle the volume of video on
a network, you have an IT guy jumping in to say, "Don’t touch my
Champagne: It has a lot to do with the people involved in the decision
making processes. More and more the IT people are playing a role in
making the decisions. As more of these people are there, it will be the
only valid solution. From a cost perspective and a need to integrate
systems IP becomes the only valid solution. I don’t think the economy
will have an impact on the overall rate of adoption of IP.
SP&T News: What are the hot new applications for security going to be for next year?
Harding: Given all this discussion about IP I’m still amazed how many
residential security systems are on land lines and not on IP. We try
very hard to stay up to date when a customer goes from to Rogers Home
Phone or Shaw, but the switch to IP phones presents a problem for
residential systems because people forget they have something else
hanging on it.
SP&T News: Kevin, what technology are you looking to for next year?
Parisien: The one technology I’m looking forward to most is the
megapixel camera technology being adopted into the IP system platform.
I don’t see it used in a lot of places. The image quality blatantly
trumps the MPEG4 image and there is a very clear difference. The
downside to that is because of the high-quality image you need a lot of
storage and a network capable of transporting it. With the advent of
H.264 compression format that will change and some of the bandwidth
requirements will come down. In a number of applications I deal with
there is a standard image camera connected to other IP or analogue
cameras where I’m not getting the image resolution I would like. Or,
I have to put three or four cameras in one area to cover everything.
SP&T News: Robert, what are your clients asking for?
Burns: Analytics is big. They are talking about IP video analytics and
command and control software. We’re getting to the point where people
are expecting us to take a Dedicated Micro system, a Samsung system,
and a Bosch system and put it all together under one piece of software.
So working with SDKs (software development kits) is quite common for us
SP&T News: Once you have those analytic and other electronic tools in place can an organization get rid of some guards?
Burns: In theory it’s true. In practice it’s very difficult. The
way I explain it to the guard people who are shaking in their boots
because they’re afraid they’re going to be out of business. How do you replace a guard in a hospital or an airport? It just
can’t be done. The best security system in the world is still a human
being. Electronics make yes /no decisions. If we can reduce the
variables to a yes/no then we can use electronics. A good example is a
gatehouse application. If you have trucks going in and out during the
day you need a security officer to sort that out. If it shuts down at
night the officer now becomes a night patrolman. The variables reduce
significantly if you can put a fence and gate up with video analytics;
you can deal with it off site and remove the guard and save the company
a lot of money. How much of the guarding business will be made up of
that? If in five years it was 10 per cent it would be a lot.
SP&T News: Do you have clients coming to you and saying they want to get rid of the guards?
Burns: Absolutely. A guard 24/7, 365 days a year is $150,000 to
$200,000 a year, so that’s a huge amount of money to spend and over
five years one security officer could equal $1 million in capital
expenditure. It’s a big concern — for many companies the biggest
spend they have on operating budget is security.
SP&T News: What about training? Are we getting any better at training people for the electronic security industry?
Harding: I might be the only guy that’s ever been on a CANASA board
who has not been in favour of some of the regulations. Trying to set
somebody up in B.C. is a major pain in the backside. I would like to
see B.C. to do something about their legislation. The consumer isn’t
asking for it and I defy someone to show me that the systems installed
in B.C. are any better than the systems installed elsewhere in the
country. What I can tell you is nobody can find an installer in B.C. I
think the biggest problem is to get a TQ in B.C. How they are going to
cope with it for the Olympics is beyond me. Maybe self-regulation is a
better answer than the government legislation because the problem with
government legislation is that it’s a restraint of trade. You can’t
get people to do the work. People at CANASA are always talking about
how important it is to get regulation, but it’s a very self-serving
attitude. I’m in favour of training but not in favour of a government
saying unless this person has this and this they can’t install an
alarm system. What’s happened in B.C. is a retrogressive movement.
SP&T News: Is requiring some training not better than having someone walk off the street and become an installer?
Harding: All I can say is somehow the market works. I think there’s a
point where it’s important that Chubb or Protectron, if they are
using installers, that they make sure they have gone through a course,
but the extra step to get the licence makes things very difficult to
find installers out west.
Burns: We’re actually happy to see there is a cost to entry in the
industry because if there’s a cost to entry then you have people take
a pause to consider the investment.
Parisien: From the perspective of the manufactured system, the need for
training has grown tremendously. There is a unique set of
qualifications required to install it. It’s not plug and play even
though the brochure may say that. I think for the guy out in the field
‚Äî though on average there are very few who have gone through the
projects — that would give them the insight they need. A simple
cabling problem overlooked in the field can prompt a customer to ask
for a system to be removed. It’s all because the guy in the field has
been taken on face value.
Martin: I did an audit for a school board and I rejected one school
three times and it was rewired three times and not once were the craft
standards what they needed to be.
Parisien: There are CANASA courses and others out there, but there need
to be courses that are more hands on and courses that not only teach
you how to do it, but also inject some enthusiasm into the people
taking the course so they‚Äôre around for the long run.
Di Panfilo: The training standards are being pushed off to the
manufacturers. We do it two to three times a week in our office. We do
technical training and IP training. As manufacturers we’re challenged
because you don’t get the maximum performance from the product if
you’re not trained. This stuff can be plug and play, but if you want
to maximize performance some additional knowledge is required.
Parisien: Training by the manufacturers is terrific and you need that, but it’s product specific.
Champagne: Manufacturers have been pushed to provide the basic training
simply because the people presented to them don’t have the skill set.
Burns: There is a big divide between the guy with the calluses on his
hand and the software analyst. Getting the physical structure set up is
an art in itself. And getting the software up and working is an art
and the desires of those two people are often completely different.
Geisel: I think it’s also important that the integrators are well
trained. A lot of sales reps aren’t selling IP video because their
sales reps don‚Äôt understand it. If they do they wonder if their sales
people can install it properly.
Harding: It sounds like we need to devise a whole new set of courses
around IP networks. It’s well and good to say the integrators have to
do the training but if I was on CANASA I would say there is demand for
courses to fulfill these needs.
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