Business resiliency during crisis

YARMOUTH, Maine—At this point in the global pandemic, unemployment is soaring; furloughs are plenty; some businesses are no longer in existence; and according Bloomberg Economics' model, chance of recession in the U.S. now stands at 100 percent. The time is now for security integrators to quickly adapt to these and other disruptions while at the same time maintaining continuous business operations and keep people safe by prioritizing what is most critical to be done. Easier said than done.

The following online panel, organized by Arcules, met last week to help the industry navigate this trying time, offering tried and true advice based on experience, history and extensive knowledge, witnessing the ebbs and flows of years within the industry:

• Andrew Lanning, co-founder, Integrated Security Technologies and SecurityNext speaker;
• Bill Bozeman, president & CEO, PSA Security Network, Security Systems News (SSN) inaugural Legend Award Winner and Security Next speaker;
• Greg Keeling, CEO, NYSS Inc., and SSN “20 under 40” class of 2017;
• John Mack, EVP MD, Imperial Capital, and SecurityNext speaker;
• Nigel Waterton, chief revenue officer, Arcules and SecurityNext speaker; and
• Ryan Schonfeld, founder & CEO, RAS Security Group and SSN “40 under 40” class of 2019.
  

Impact of COVID-19 on integrators

Many security integrators are already feeling the economic impact of COVID-19 as companies are cancelling or postponing new projects; however, it seems that some are faring better than others.

“We've been spending a lot of time talking to integrators over the past few weeks,” Schonfeld explained, “and over the last two and a half weeks, I'd say that their responses are somewhat polarized in that there are folks that are flush with work. We've also talked to integrators that are worried their pipelines are drying or have dried up. Haven't talked to too many folks with things in the middle.”

Schonfled attributes the varying responses from integrators to working in specific verticals and/or having a diversified portfolio of offerings. In addition, he predicts a rush on work in the near future based on increasing crime during this pandemic. With a high number of vacant facilities, management is or will soon be quickly seeking ways to secure them.

Dividing integrators into small, medium and large categories, Bozeman realizes that everyone has a different story.

“We are seeing some layoffs,” Bozeman said, acknowledging that this is a dirty word, but it needs to be brought up in discussions during this critical time. “The larger companies, especially the manufacturers, there's been substantial cutbacks on their part.”

From a resilience perspective, however, telecommunications, the energy and water sectors, Department of Defense (DOD), federal and municipal governments, critical infrastructure as a whole is still a viable vertical with various sectors within. “These folks [people who work in critical infrastructure] are busy when there's a crisis; these folks need to work and those industries need to work,” Lanning said, speaking from experience.

Additionally, Lanning advised having a broad set of offerings as well as partnering with others can give multiple revenue streams to draw from in times of economic downturn.

Keeling is literally in the middle of all the COVID-19 pandemic drama, as he offices and does business in New York, but through it all, he said that there is work out there, but the biggest problem is creating a safe working environment for technicians.

“You can jump through as many hoops as possible and really go out of your way to create a safe working atmosphere, but that doesn't mean they're [technicians] are going to show up for work that day,” Keeling explained. “That's what integrators are experiencing in New York right now. You have outfits that have 50 to 100 technicians, and hearing form other companies that we work with, they can only get three guys to come to work and actually get into a truck.”

Fear is real and striking everywhere, but as is commonly said, “actions speak louder than words.”

Security integrators' to-do list

Based on the impact and outlook of the COVID-19 pandemic, there are still valuable, profitable actions integrators can do to come out on the other side just as strong if not stronger. This starts with focusing on finances.

“If you're a CEO or owner, rather than attending a session on technology or even how to prevent the virus, you need to understand your balance sheet,” Bozeman said.

He continued his financial focus, reflecting on his years of working with integrators: “It's interesting how some integrators are incredibly good at doing very, very difficult deployments of high technology, yet they really don't' have a solid grasp of their balance sheet. I attribute this to people just staying in their comfort zone. But this is not the time; you need to focus on the finances first. You don't want to be in a position where you can't pay your bills.”

This brings the next to-do item on the list: complete the Paycheck Protection Program (PPP) under CARES application, which is available right now and take it to an SBA-approved lender.

“We're talking about up to four months of payroll protection for companies with less than 500 people, as long as you're a tax-paying corporate entity,” Mack explained. “The current PPP Program allows you to get a loan of two and a half times your average monthly payroll, up to $10 million and will be forgiven, assuming you keep your employees employed.”

It is quick to get this funding, as well. “We're talking about a matter of days from application to funding,” said Mack. “The banks have absolutely no risk; it's fully guaranteed by the government, so they're very motivated to get these loans out.”

As far as actual day-to-day business is concerned, add diversify and add recurring revenue, and take on a more consultative approach with existing as well as new customers to the to-do list.

“Diversifying the workload and portfolio through recurring revenue, whether it's health monitoring or different types of monitoring and services that add things beyond just project-based work to your portfolio is going to be critical,” Schonfeld advised.

Echoing this advice is Lanning, who encourages adding critical infrastructure to integrators' portfolios in their local community. “If you want to be relevant when times are tough, you've got to be relevant to the national security strategy and critical infrastructure is a part of that strategy,” he informed.

Even if consulting isn't currently a part of an integrator's strategy, interacting with customers in this way, is necessary in the currently changing landscape.

“What people's needs were even a month ago are different than what their needs are today, and I think being able to be nimble and adapt to changes quickly is going to be critical,” said Schonfeld.

Consideration of hosted managed services

Speaking of change, Waterton said that it's a time of reflection and understanding exactly how your business runs and how to change is necessary, taking into consideration the addition of or if already implemented, leaning on hosted managed solutions as part of income revenue. Start by assessing where you can offer your expertise to help customers and determining what services or products customers are getting elsewhere.

“We took skills that we had to have to work with enterprise companies — a Cisco certification, any sort of network certifications, computer, server … anything like that — and we decided to make the jump into not just trouble shooting cameras or servers, but helping [end users/customers] with security compliance, software patches, vulnerability assessments, network configuration … more toward NSE-type of services,” Keeling said, highlighting the ways in which he adapted within the industry early on in his career, incorporating hosted managed services into his portfolio of offerings.

Lanning sees offering managed services, specifically cloud solutions, as a way to truly serve the customer.

“The value for the customer first and foremost that I love is that we get to do diagnostics; we get to do testing; we get to look at the environment when they're having a problem, remotely, and see what's going on,” Lanning said. “For us, it minimizes truck rolls which is going to save us money, save the customer money and make the resolution quicker.”

Hosted managed services also create ease for customers in their daily professional lives.

“If you know you've got an end user who cannot consume technology … people don't need a security management headache; they need the equipment to do something for them,” added Lanning.

This is why customers tend to love reports as a service, which adds to security integrators' recurring monthly revenue. The reports offer knowledge; hence “do something” to add value to their business. The reports “lets them [end users] know there's some value so make sure you put that in their face so they get reminded that you're doing all this stuff for them,” Lanning said.

Bozeman is also in support of the adoption of a hosted managed services as he has literally been advocating this for years.

“Look, I've been in the game long enough; I'll just admit it,” Bozeman said. “I have been begging our integrators to adopt, not to abandon their model, of course not, that's ridiculous, but to at least implement as high of a percentage as they can of [hosted managed services] model. My begging didn't work. I think the virus is going to work.”

Waterton agrees that the virus is “going to be the thing that creates change.”

Everyone is currently living day to day, making business decisions on the fly based on the coronavirus environment. Once all this shakes out and the industry gets back to some state of normalcy, it's important that companies can show they were about to weather this storm.

“Companies that can show they were able to get through this difficult period, reasonably well, can show they were resilient and were able to pivot and make operational changes that got them through it successfully, how ever you define success — revenue, EBITA [Earnings Before Interest, Tax, Depreciation and Amortization] or otherwise — I think their valuations will be enhanced into the future,” Mack concluded, which is advisable for successful merger and acquisition activity.