Recession Impacting Security Projects

Author: Severin Sorensen, Published on Feb 10, 2009

If you are selling a disruptive technology that greatly reduces cost, then this market is just right for you. However, if you are selling a heavily capital intensive project requiring new installation then you might have to wait a little longer for the NTP. Monthly recurring revenue contracts of monitoring and maintenance have increased value at this time and are a safe as your clients ability to pay; pray that you are not servicing General Growth Properties, Simon Properties, or any other REITs that are poised for restructuring in 2009.

There is a widely held expectation that security-related systems and services demand will increase with rising crime opportunity resulting from increased unemployment and economic slump; however the crime wave is still forming, and this peak demand is not on the radar yet. Criminologists find that there is a one-year time lag from significant negative economic shocks and crime waves, so gear up, it will be coming.

As for the present, I can tell you that work financed by tax-free bonds municipal based funding is in trouble. Many states and localities have stopped or suspended projects not already in construction phase due to uncertainties and poor bond market demand. My own firm, Sikyur, does large scale project management of security installation projects and we have a long-lead time for projects many months out; our 2009 contract pipeline was secured by Q1-08, however 85% of this pipeline froze within weeks of the Lehman Brothers collapse owing to the fact that my book of business was largely municipal bond-financed, and only a trickle flow of these bond-financed municipal projects has leaked out in the past five months. The climate for state and local bond market is improving, but has not returned to pre 9/15/08 levels.

The fact is, state and local governments are largely under funded and running deficits. As late as Jan 27, 2009, CFO Magazine published the following – Titled State and Local Government Deficits Soar; Projected operating deficits of state and local governments have sharply risen; estimated $312 billion over a two-year period, the Government Accountability Office says in a new calculation. The operating deficit will be about $131 billion for 2009 and $181 billion for 2010, the GAO says. The projection is sharply higher than the projected range of $100 billion to $200 billion that the independent, nonpartisan federal agency estimated as recently as November. Since most state and local governments are required to balance their operating budgets, the declining fiscal conditions suggest that, without intervention, these governments would need to make "substantial policy changes" to avoid growing fiscal imbalances, the GAO warned in a letter to Max Baucus, chairman of the Senate Finance Committee. "The recession contributes to declining state and local revenues in the midst of increased demand for state and local services.” 

There remains work out there for those already under contract, but the delays by the CEO/CFO decision makers are starting to take their toll. I personally have a half-dozen projects approved at the departmental level, but awaiting the final notice to proceed decision -- and they are just not forthcoming. Hopefully we will get a honeymoon period with the new Obama administration and companies will feel safe investing and upgrading again. For the time being however, unless you are servicing the education, health care, or funeral home industry, there is reason to be concerned.

Severin Sorensen, CPP, is a leading industry expert and entrepreneur. He is the CEO of Sikyur, providing guidance to CSOs and security executives.

Most Recent Industry Reports

Uniview Low-Cost Bullet PTZ Tested on Jun 21, 2017
Uniview is offering a HD zoom bullet camera, the IPC742SR9-PZ30-32G, with an integrated pan / tilt positioner, for the price of a low-cost...
QSR Video Surveillance Best Practices on Jun 21, 2017
Fast food restaurants or QSRs (quick service restaurants), are frequent victims of crime and fraud. Because they are open late, deal with cash, and...
45 Drives 'Lowest Cost' Enterprise Storage Company Profile on Jun 21, 2017
45 Drives claims the "lowest cost per Hard Drive Slot in the industry." But who or what is '45 Drives'? What started as a product design to...
No Hack, Still Liable, Court Finds ADT on Jun 20, 2017
Recently, ADT has been in the news for a $16 million settlement for a cyber security vulnerability class action suit. One of the most important...
Resolver / PPM 2000 Incident Management Platform Profile on Jun 20, 2017
You might have seen the company whose employees wear hockey jerseys at trade shows and wondered "what do they do?" PPM 2000 has been active in...
Axis P3225 Mk II Tested Vs. Original on Jun 20, 2017
Axis has released a number of 'Mk II' versions of their cameras, which are the same fundamental camera but with specific improvements. We tested...
Directory of 40 IP Camera Manufacturer Discovery Tools on Jun 19, 2017
Locating the IP address of a DHCP client or factory defaulted device on a network is often a difficult task.  In another report, we discussed...
Dahua Demotes USA CEO on Jun 19, 2017
Dahua has demoted their USA CEO Tim Wang. Inside this note, we examine the move, Dahua's challenges and what lies ahead for the...
Avigilon Increases Prices In Canada, Europe and UK on Jun 19, 2017
While many video surveillance companies are racing to see who can cut prices the fastest, Avigilon is taking a contrary approach, actually raising...
VMS UI - Light vs Dark Preferences on Jun 16, 2017
Several VMS manufacturers have the ability to choose a user interface with either a light or dark color theme. 150+ integrators told us which they...

The world's leading video surveillance information source, IPVM provides the best reporting, testing and training for 10,000+ members globally. Dedicated to independent and objective information, we uniquely refuse any and all advertisements, sponsorship and consulting from manufacturers.

About | FAQ | Contact