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

Simplisafe is 'Blowing The Doors Off' on Feb 17, 2017
The company alarm dealers love to hate, Simplisafe, is 'blowing the doors off' according to Michael Barnes, one of the top financial advisors in...
Hikvision OEM DDNS Devices To 'Lose Remote Access' on Feb 17, 2017
The fallout of Hikvision's DDNS discontinuation is expanding, this time hitting OEM partner Supercircuits, who reports that on June 30th: The...
Milestone: "Easy Money Days Are Over" on Feb 17, 2017
Contrary to IPVM's criticisms, Milestone has reaffirmed that glory days remain. But they admit that they 'easy money days are over': Are the...
Directory of Alarm Panel Manufacturers on Feb 16, 2017
Alarm panels are the central controller of intrusion systems. The following is a list of manufacturers of alarm panels. This directory only covers...
Panasonic Favorability Results on Feb 16, 2017
Panasonic is one of the largest brands in the world and a long term provider of both video surveillance imagers and cameras. But, like all...
China Huawei Gives France Free City Surveillance on Feb 16, 2017
China is using its financial resources again, this time in France, just a month after the Chinese government funded a $100 million security /...
Hikvision Silicon Valley and Canada R&D Expansion on Feb 15, 2017
After massive growth in their sales team, Hikvision is now planning to add two new R&D centers in North America. In this report we examine...
Directory Of Wholesale Central Station Monitoring Providers on Feb 15, 2017
Wholesale central stations help smaller and local dealers providing monitoring to their customers. Dozens of options exist.  Below is the first...
Bosch/Genetec Video Cybersecurity Partnership Examined (CHAVE) on Feb 15, 2017
Surveillance products have been relatively weak when it comes to cyber security. Default passwords, open ports, and weak authentication mechanisms...
Security Alarm Industry Trends - Barnes on Feb 14, 2017
This is a review of key security alarm industry trends, taken from Michael Barnes' presentation at the 2017 Barnes Buchanan conference. Key trends...

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