NWOSS looks to build 'new school' network

Kostelac: More integrators should consider intrusion business
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Wednesday, March 5, 2014

LIMA, Ohio-Northwestern Ohio Security Systems, a family owned systems integrator based here, values old-fashioned RMR generation, but it takes a “new school” approach to building its business, John Kostelac, NWOSS VP of sales, told Security Systems News.

Right now Kostelac is working to create a network of systems integrators. He said it will be “like a national account company conglomerate-where all different companies [across the country] contribute to serving national accounts.”

Several such networks exist already, but Kostelac said they're either closed groups or their product focus does not align with that of NWOSS.

NWOSS works with partner companies across the country on some national accounts, but he wants to establish a formal network. In doing so, Kostelac said,  “I envision something more new school.” This group will share NWOSS' goals of building an RMR stream consisting of standard and newer service offerings.

It will be “made up of companies that are current today and not old school partner-type networks where everyone has known each other for 30 years,” he said.

Once established, the network will have to “continue to vet companies in the group so that it doesn't turn into [an old-school network] 10 to 15 years down the road. And the same with technology: We can't keep selling the same products if the market goes another way,” Kostelac said. “Change is good.”

Ultimately, he said, it's the way to “compete on a national level against the Stanleys, Simplexes and Johnson Controls. There are a lot of advantages to doing it this way because you can pick the best company in each area. You bring value to the end user because they get the best regional support and [their account] is managed by someone they know.”

 Founded in 1981 by Kostelac's father and uncle, Jim Kostelac, and Trell Yocum, NWOSS began as a Sonitrol franchise and later became an independent alarm company. It gradually developed into a commercial security and fire alarm company and “naturally progressed into access and video,” he said. Today it does both systems integration, fire, commercial and residential security.

It has 46 employees and a UL-listed central station. NWOSS does not release exact revenue figures, but Kostelac said annual revenues are between $5 million and $10 million.

Its geographic footprint is all of Ohio, and “we do cover eastern Indiana, West Virginia, northern Kentucky, western Pennsylvania and other surrounding states. And for national accounts, we have partners around the country,” he said.

About one-third of new installation sales revenue is driven by work that NWOSS does with the state of Ohio. “We have been a state-term schedule holder [fire and security] since 2001,” he said. “We provide turnkey solutions under the state term contract … [without] having to go to bid.”

One quarter of NWOSS' revenue comes from maintenance and service revenue. Another quarter of its revenue is from monitoring. Most of that is “old school alarm monitoring,” Kostelac said. “We are a big DMP dealer and we do a lot of residential and commercial alarm monitoring.”

Because NWOSS has its roots in the alarm industry, “we focus on RMR [and] we do better as a company because of it.” Kostelac said that he's “baffled that more systems integrators don't get into intrusion.” Integrators see that the installation of an alarm account will bring “a fraction” of the proceeds of a video installation, but they apparently fail to see is that a “national account that includes intrusion monitoring … that's a goldmine.”

In addition to “old school” monitoring, NWOSS does remote video monitoring for accounts that it has around the country using Agent Vi [analytics] and a Milestone system.  It is also rolling out Milestone's new customer dashboard as an RMR generator.

NWOSS is actively interested in acquiring other companies, but its focus is alarm companies rather than a commercial company or systems integrator. Why? The valuation is fairly straightforward for an alarm company, but “on the systems integrator side it's a different story if they don't have RMR,” Kostelac said. And an integrator's RMR should be diversified. “If 75 percent of that RMR is tied to one account, what happens [to the value of the company] if that account walks out the door?” he said. Commercial companies and systems integrators often have unrealistic expectations for sale prices.

“If we could find a good mix of alarm and commercial accounts, that would be great,” Kostelac said.