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

Ex-Integrator Now Growth Strategist Interviewed on Apr 24, 2019
For more than a decade, Scot MacTaggart was a security integrator (at PA-based PSX). In late 2018, he left the industry. He is now a Growth...
19 Facial Recognition Providers Profiled on Apr 23, 2019
IPVM interviewed 19 facial recognition providers at ISC West to understand their claimed accuracy, success and positioning. 9 from China, where...
Locking Down Network Connections Guide on Apr 23, 2019
Accidents and inside attacks are risks when network connections are not locked down. Security and video surveillance systems should be protected...
Hikvision Admits USA Sales Falling on Apr 22, 2019
Hikvision, in a new Chinese financial filing, has admitted that its USA sales are now falling. Less than a year after the US government passed a...
Speco Ultra Intensifier Tested on Apr 22, 2019
While ISC West 2019 named Speco's Ultra Intensifier the best new "Video Surveillance Cameras IP", IPVM testing shows the camera suffers from...
Arecont Favorability Results 2019 on Apr 22, 2019
Arecont's net negativity remained the same in IPVM's 2019 integrator study, though integrator's feeling became relatively more neutral compared to...
H.265 Usage Statistics on Apr 19, 2019
H.265 has been available in IP cameras for more than 5 years and, in the past few years, the number of manufacturers supporting this codec has...
ACRE Acquires RS2, Explains Acquisition Strategy on Apr 19, 2019
ACRE continues to buy, now acquiring RS2, just 5 months after buying Open Options. One is a small access control manufacturer from Texas, the...
Access Control Course Spring 2019 - Last Chance on Apr 19, 2019
 Register for the Spring 2019 Access Control Course----Closed IPVM offers the most comprehensive access control course in the industry. Unlike...

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