Future Security Controls concentrates on margins

Independent integrator looks to sell its managed services offering to other integrators
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Wednesday, July 18, 2012

OTTAWA—Future Security Controls is a small independent integrator that is enjoying enviable margins—north of 15 percent—in the past couple of years, according to CEO Sam Shalaby.

Based here with a second office in Toronto, FSC has 50 employees and does between $8 million and $12 million in revenue annually. “We did 18.6 percent in gross margin in 2011. In 2010 we did 25 percent,” he said.

It’s unlikely the margins will stay in that range indefinitely, Shalaby said, but he does expect to maintain margins above the 5, 6 or 7 percent that many integrators are experiencing these days.

How is FSC attaining those margins? By focusing on being “mean and lean” and investing in technology rather than acquisitions or geographic expansion, Shalaby said.

Specifically, FSC—a PSA Security member—bought into the managed services model “before anyone else was doing it,” he said.

The systems integrator, based here, began offering managed services in 1989 and over the course of several years has founded a sister company called SecureNet, a control center that offers specialized monitoring services and its own proprietary managed access control software.

Shalaby said his next move would be to sell his managed access software to other integrators. The software has been implemented with several FSC customers for the past six months. Before that, it was in beta for 18 months to two years.

Shalaby describes FSC’s managed access offering as “a true cloud system, without a rich client and without an appliance … you don’t have to install anything other than readers and controllers, you don’t have to go onto [the customer’s] network … you only need an Internet drop.”

FSC’s first control center was established in 1989 and has gone through several iterations. Shalaby started the center with the idea of catering to managed services clients. It didn’t work well and ended up becoming a traditional central station. He sold that business in 1995 and worked for two years to open another one “to offer true managed services.”

All of the employees of SecureNet have government security clearances and have training beyond the standard central station operators. FSC’s client list includes “a lot of specialty work for the Canadian federal government,” the Royal Canadian Mounted Police, Ontario Provincial Police (172 police stations), many financial institutions, Fortune 1000 and larger companies such as John Deere, and high-tech companies.

“Our business is 55 percent federal government, 30 percent commercial and the rest is residential and retail,” he said.

Managed services are attractive to large enterprises and government groups that want to eliminate in-house security departments, but you need to make the transition away from a manned security department as painless as possible, and clearly demonstrate the ROI, Shalaby said.

For companies without their own security departments, the sale of managed services showing ROI is easier, because “the upfront fees are nearly nothing,” he added.

Managed services makes up “30 percent of our business and it’s growing at a faster pace than anything else,” he said. FSC offers much more than managed access, however. It offers managed video, database maintenance and more, in addition to lots of standard installation and service of integrated systems, Shalaby said. Managed services is not the answer it itself, but it’s a key component that will complement “all the other services you provide,” he said.