Integrator Roundtable: Security Execs Talk Procurement Challenges, Labor Fears & More

They say having a good cry is healthy. Although no tears were shed, the commiseration was no less cathartic during Security Sales & Integration’s longstanding annual integrator roundtable. That’s because owners and operators of security installation businesses have been confronted with unprecedented circumstances.

They include moving past the pandemic; supply chain stagnation; soaring inflation; scarcity of talent; and a fragile economy due to turbulent world events. All that and more was on the table as integration leaders shared common challenges, hardships, experiences, strategies, solutions and even some comic relief.

Following two pandemic years in which this summit-like meeting of the minds took place virtually, participants were once again able to convene in person at PSA TEC in Denver, where the roundtable has taken place more than a dozen years.

This year’s panelists were Christine Lanning, president of Hawaii’s Integrated Security Technologies (business partner and spouse Andrew Lanning was also present as a guest); Dean Reece, president of Portland, Ore.-based REECE Complete Security Solutions; Trevor Stewart, president of Pine Brook, N.J.-based Security Control Integrators; and Jim DeStefano, senior vice president for Unlimited Technology in Chester Springs, Pa.

Despite all the challenges currently in the mix, as Christine Lanning states at one point, “It’s not all gloom and doom.” On the contrary, there has still never been more opportunity out there for steadfast, agile and savvy operators. Resiliency has always been at the heart of the security industry and so no matter the hurdle these forward-thinking executives are not about to cry in their beer.

Let’s let it fly with the elephant in the integration industry room: supply chain. How is it impacting your business? What are some of the strategies you’ve come up with?

Trevor Stewart: It’s impacted our business, project-wise. Nothing’s a straight line anymore. Everything’s back and forth, trying to find a substitute. The other thing that’s changed is we don’t return anything anymore. We keep mistakes because we’ll sell it some different way.

It has made all of our customers, including ourselves, really rethink single-source solutions. The big boys on the street; Nobody’s staying in that route. You can’t. Nobody predicted it could get this bad, but we can’t let it happen again.

Is there any particular type of product that is harder than the others, whether it’s readers or cameras or … ?

Stewart: Well, you can’t get card readers. Cameras are particularly hard when you have large customers and they hard spec in certain manufacturers. A lot of them have opened up to using other manufacturers, other models. We bought hundreds of cameras thinking they were going to last through the end of the first quarter. They were all sold by Christmas, and then I looked for a blink of an eye and said, “Oh, my supplier has 2,000 of these cameras.” The next week, there were none.

Jim DeStefano: It is a challenge. We foresaw some of this coming. We didn’t see it coming this bad, but we did preorder a lot of equipment. We stocked a lot of things that we knew we’re going to need due to having some customers under a playbook where they use the same equipment. We can predict how that’s going to flow. We’ve done well but that chain is starting to slow down. With those customers that have standards, it’s very difficult to deviate from that because they’re used to doing one thing.

If you look at card readers on the low-frequency range, you’re talking October, November before you can even get something from the manufacturers. A lot of our higher education customers, they’re ordering for kids coming back in the fall and we’re going, you better order like now, don’t wait. We have customers that want their projects done now. They don’t want to wait six, eight, 10 months.

The customer starts to ask, “Why can’t you get these? Why don’t you have these? Why can’t you get my jobs done?” We have to constantly educate them on the supply chain difficulties. Then our manufacturers are telling us some of the proposal estimates are only good for seven days, five days. Telling the customer they need to cut a purchase order for us to honor that is not the way they work. It’s 30 days, 60 days down the road.

Do you prioritize according to how long a customer has been with you or if it’s a new install versus an upgrade to determine who’s going to be first in line for whatever product you can procure?

DeStefano: Yes. We have long-time customers, some since inception of the company. We know their plan, in some cases two years, three years out. We’ve got to take care of those. Otherwise from a prioritization standpoint, it’s if you give me a PO today and you give me a PO a week later, that’s the way you’re going to fall.

Dean Reece: We’ve overordered absolutely everything. Some items we ordered spot-on, some items definite swing and a miss, some items we were able to return. We’ve been actively managing the inventory. That gets us into the same problem we’ve fought as an industry for 20 years: How do you sell out of your inventory because we’ve evolved to a just-in-time industry now? We’ve almost got to go back to the old days where what’s your min/max time and everything else. It’s become a real challenge. Our systems aren’t really set up for that. It’s very manual right now.

The estimators tour the warehouse weekly so they can put eyes on what’s there to know what’s going in for our good, long-term customer X. They are used to having a specific card reader or card format and now may not be able to get it. You’re not even getting a ship date on it! We have to ask those customers if other options are OK with them. Those hard conversations are forcing us to get tighter with every customer. Some understand and want to work with you. Some are less forgiving.

DeStefano: Another factor that’s interesting with this is that it is not just whether the technology of an alternative reader/card will work, we also run into the aesthetics aspect. They don’t want to see a difference, same thing with cameras. They want the same look and feel for all their sites. That becomes another challenge.

Stewart: It becomes more of a partnership with your customers, and everybody just being transparent. This is where we are. I mean, they are getting lead times for Cisco switches of over 400 days. I have seen good in this situation from the standpoint of having to communicate more with your customers.

Christine Lanning: We’re in a different situation as our customers aren’t as likely to shift gears with type of equipment. DoD has explicit instructions if you quote an Axis camera, you sell an Axis camera. To get that changed is like an act of God. Our customers are willing to wait. We’re treading water, and people aren’t also talking about the admin cost and resources, and the impact on the schedule.

Constant check-in with where’s this piece of equipment, constant communication with the customer about where equipment is, and then trying to put that on the schedule. We’ve seen projects slip because the equipment’s not here. That’s more of an impact to us than anything else, at least from a revenue perspective. The customer’s willing to wait for what they want, but that puts the strain on us because we got a huge backlog of work we can’t do because we don’t have the equipment. It isn’t all doom and gloom. A lot of people understand because it’s not just our industry having supply chain issues. It’s also where I see opportunity.

Interestingly, when there is an opportunity for customers to go somewhere else, they don’t want to because they know you’re working hard to try to get them the equipment they need. I think it’s an opportunity to shine as a systems integrator to say, “We’re here for you, we’re communicating with you, we know you have a problem. But we’re going to work with you to get through this.” It’s really important to maintain that relationship.

With the slowdown in products, how are you broaching price increases?

Reece: Be honest with your customers, tell them what’s coming. It’s crazy what’s happening right now. You’re getting price increases out of the blue from nowhere, you’re giving them an order, they have it for a week and then you get a notice of a price increase on the product you’ve already given them a purchase order for. Technically, your purchase order’s invalid, but you’ve already given them this price and they’re telling you it’s actually going to cost more. They’re going to ship that product, but they’re going to bill you more than is on your PO, so that creates so much craziness in the back office. Just keeping up with it is a nightmare.

Lanning: Some advice I received is that when you order equipment, get deposits for it or at the very least take that equipment once you get it, put in the customer’s storage unit and bill them for it so you can get the money upfront. I think that is really smart. Also, a general contractor told me that about 80% of the time if the price goes up the customer will approve that increase. Even though they’ve already contracted this amount, they’re willing to accept that prices are going to go up. It goes back to if you don’t ask, you don’t get.

Stewart: It comes down to are you going to be an order taker or are you going to be a solutions provider. If you’re an order taker, the supply chain’s going to kill you. You’re not going to be able to survive it because you’re not going to think outside of the box. You’re not going to communicate with your customers. If you have trained yourself and created an environment in your company to create solutions, then the parts shouldn’t matter. You sell yourself, that’s how a company our size competes with a company that’s $500 million in this industry.

DeStefano: That is a key point. Customers will pay for it if they see the value. If they don’t see a value and you’re just another company in a transaction, just selling me stuff and putting in stuff, then I can go to a bunch of other stuff providers. We have to show what our value is worth, what our value is before, during and after the sale.

Stewart: You have to always show your value. Don’t give away a service, put together a quote, what it would cost and say, “Hey, this is the value to this. This is what I’m giving you.” If you just do it and don’t actually take the time to quantify it, they don’t see it. If you give your kids something for free, they don’t see a value. If their bicycle has a flat tire and you buy them a new bicycle, they’re like OK, I got a flat tire now I get a new bike. It’s the same thing with engineering time, all these things — there always has to be a value. To me, people undersell.

Reece: There’s no qualification on the customer side. There’s no license for them to take, no classes to take in order to figure out how to spend money with us. What happens is they go back to their purchasing experience, which is when they bought a car usually and they treat us like the car dealers. If it’s a relatively unsophisticated purchasing guy, he’s going to be out there, he’s got a ladder in the other room, he’s got his toolbelt on his chair and he’s going back and forth between doing his day job and writing POs to you. He doesn’t know the right way to do it. He doesn’t know how to buy on value. He doesn’t know anything else.

It’s really a head-scratcher and if you’re a new sales guy, they’re insecure. They’re young, everything else and it literally destroys them. But now with the market, the way it is, my guys are empowered to take these guys and educate them. I’m noticing this happening more and more, it’s a big change coming. I’m watching these customers elevate. They’re making mature decisions because they have no choice. Before they would go to the next integrator until they found someone to say yes, and that’s been taken away from them because we’re all in the same boat.

Stewart: It just comes down to, you have to tell them the truth. I can’t tell you how many times we’ve been in a meeting and the customer will have an agenda. I tell them, “Look, I can tell you the truth or I can tell you what you want to hear. It’s your money and you get to spend it how you want, but if I believe you’re doing something that’s not in the best interest of you or your organization I’m going to say why. I’ve been right more than once, but I’ve also been wrong. This is my experience that I’m bringing to the table, and this is how I’m laying it out.”

Keep reading to see how the labor shortage is impacting these integrators as well as what their recurring revenue strategies look like…

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