Subscriber Discussion

Lower Hardware Costs Enable ‘Remarkably More Valuable’ RMR Based Business

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Paul Boucherle CPP CSC
Dec 27, 2016

As one door closes another one opens with security opportunity. The speedbump for most integrators for building RMR through SecurityaaS service offerings has been amoritization of hardware costs and cash flow. Lower hardware costs actually enable this business model to grow your business and reduce risks. Your initial offerings must address cashflow however over 18-24 months it will become nearly "self-funding" within reasonable scale. In 5 years you have a company that is remarkably more valuable with much stronger cash flow. The glass has always been half full sometimes the perception...not so much. 

NOTICE: This comment was moved from an existing discussion: I Am Leaving The Industry... Here's Why

JH
John Honovich
Dec 27, 2016
IPVM

Paul, thanks for sharing that.

To play devil's advocate, doesn't lower hardware costs make it much easier for people to just buy it themselves at Costco.

How much is a small business willing to pay a security integrator each month when he can pick up a whole 'system' at Costco for $400 - $800 one time cost?

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Paul Boucherle CPP CSC
Dec 27, 2016

John, always a good point especially with smaller DIY people. The reality of plug an play I think is different dependent on the type of customer that buys it. The real growth market, from my perspective, is the SMB market. Large enough where they are too busy to entertain DIY and complex enough to need the help of a professional that can design, implement and manage service for them. Usually the access control line is the stronger entry point then followed up with video. Lower cost access control systems such as ZKAccess and many others you have covered have low hardware, lisense and credential cost points enabling a different business model. If you lead with video you are open to the entire string of discussion points, competition, buying channels that were brought up in the discussion. 

UI
Undisclosed Integrator #1
Dec 27, 2016

OLD reality gone: Integrator-Installers like myself where able to mark-up 40% or more on the hardware/equipment each and every time and additionally our professional installation fees. Even on lower level kits assembled/integrated by ourselves from different components and sourced parts from different brands which where of course compatible with one another.

NEW reality now: Integrator-Installer is not able to mark-up anymore on the cheapest kits from security wholesalers, nor over the COSTCO's Lorex/Swann/Private Labels DIY All-in-One CCTV KITs with enclosed easy-to-follow instructions and all the marketing, 24-Hour phone support and website information layers that comes with them.

Only exception I guess would be: $30~40 bucks for the pick-up fee which is reasonable for most customers to pay for saving the annoyance of driving his own car to the local COSTO store and waste time on the cashier lines) and then additionally as always the professional fees for installation. The thing is: 99%+ installers tell the customer: you know what, you can buy it yourself and then call me later when you have done so, those $30 bucks are not worth my own time either, it's "not money".

2 things, as far as I know (correct me if I am wrong):

- COSTCO has yet to hire a bunch of technicians in-house to do field service, tech support and installations for the end users in their homes. Their core business is still selling big-box merchandise in attractive and colorful packages and then push them out as fast as possible to the end-consumer.

- COSTO has yet to offer All-In-One DIY Kits that include other more specialized security system components like: Photobeams for perimeter intrusion, Pet-Immune Motion Detectors, Multi-Criteria Smoke Detectors, Video Baluns for situations where the 60-feet siamese cables distances are exceeded and cable runs are up to 100 meters (Ethernet), PVC/EMT conduits, junction boxes, High-Quality 100% Copper Cat.6 network cables, rackmount boxes for protecting DVRs under lock in the wall, etc.  and therefore these are still professional integrators' business and therefore subject to mark-up and profit margins.

That said, even if the customer buys the DIY KIT himself, I still DO NOT lose the sale. He will still pay me for my services and I've learned more about those kits and their internal configuration as well.

For many years now, I've seen in hardware stores, some GE and HONEYWELL brand name DIY security products but I am guessing they are not selling as fast as those camera kits at COSTCO, wonder why... I've seen some of them hanging with faded out colors and opened packages (customers returned them maybe after being frustrated on trying to install them himself ??)... 

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UI
Undisclosed Integrator #1
Dec 27, 2016

... I have NOT installed a lot of Lorex/SWANN kits from COSTCO, only a few so far... but every time my customers buys them and ask me to install it on their homes: my first words of warning are : "After 60 feet, I will have to charge your for the extra network cables and video balun to reach the cameras that are farthest, is that OK ?? " ... and I've yet to receive a NO as an answer. I guess customers are not dumb either, they know a $500 kit has it's own limitations and will not include all things that he may wish could work for all situations. But I guess those $500 still mean a good deal for himself / his pocket.

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Paul Boucherle CPP CSC
Dec 27, 2016

A good test of this theory is to go back and ask prospects you have lost a bid to DIY solution to see how the solution actually worked out for them. I recognize this is challenging and includes customer remorse bias based on their initial decision. However there are grains of truth worth exploring. Having video that is available vs. Actually usable is very different. How many crappy recorded video events have you witnessed that is totally unusable for law enforcement or prosection? IPVM has made this argument for many years through very well done, hands on, marketing hype free tests.

This is a important to understand when selling quality that is valuable vs an installed camera that is window dressing.

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