An Honest Integrator On The Truth About RMR

I'm sure this will get 1/3 of the traffic of your most read pieces, but this is a great article, and Mr Lynch sounds like someone who would be good to work for.

Agreed!! Very well said

Completely agree.

Wow, what a breath of fresh air after being buried month after month in trade mags that tell me that RMR is the wave of the future and that the ones that don't accept this are doomed to failure.

Try convincing an enterprise IT director that his network is not worthy of supporting a physical security infrastructure and that the cloud is a better way to go. As much as they dislike having to provision for the quirks and turns that various security software require, not to mention the bandwidth and storage, they usually end up favoring keeping things in house and tell us themselves that storage is incrementally not that expensive in an enterprise setting.

For smaller customers without strong IT support, the managed services/cloud still makes an attractive offering, but the math does get a bit out of hand when there are high counts of cameras and doors. Oddly enough, though, some of the newer cloud security offerings do smack of having their pricing models developed by folks from the telecom/IT world versus the security world. This means there are too many options and additional features that may or may not be part of the base license.

Nice post, Mr. Lynch

What about for integrators looking to cash out?

Revenue being equal, won't RMR get you a better valuation?

We're on Team Lynch. If you understand them, have the willingness to meet their expectations, and have the capacity to deliver the services they need, enterprise customers will keep you busy. A large percentage of those enterprise customers understand that you need to make a fair margin, too.

Excuse my ignorance but was does RMR mean besides

Resting Metabolic Rate?

I used to be at a manufacturer who was so focused on the RMR buzz word. They wanted to focus on services, and couldn't understand that the services is what the SI offered. This was after a merger where one division thought they understood the security space.

I doubt we ever sold any services or received any RMR. When a problem came up and a customer or SI complained loud enough, RMR contract or not, we would be onsite and bail them out....

If I was only getting $29/account I wouldn't be interested in RMR either. Why not get both? Adds/changes/new systems and $50-100/month/account. You can quickly get to $3M/year in profit for your company without having to roll a truck or take an order.

6000 alarm owning old white guys just rolled their eyes at this article. (If they are not too cheap to pay for a subscription) I have been in enough meetings to see these owners morph in to "Mr. Burns" from the Simpsons at the very mention of RMR. For integrators, it is such a waste of time and breath to talk RMR. For the truck slamming lick and stick crews, it is the only avenue they have to make money. Everyone wants to be an integrator, but they end up not being very good at what they do, so they need to lock people in to contracts.

There are some good points here but I think the discussion can be taken one step further; do integrators typically provide value to professional/enterprise customers? Having dealt with many manufacturers, distributors, and integrators over years on behalf of large enterprise clients, I would say that the value add is not always there.

Very large customers often dedicate resources to work on specific systems while the average technician from an integrator company often is expected to support several competing products for multiple customers across each discipline (e.g. access control, intrusion, video). In that scenario, the customer techs tend to be the subject matter experts as well as having the site-specific information advantage while the integrator's tech may only have limited experience with a specific product and does not work with it every day. Granted, the integrator's tech likely has a much broader knowledge base and can bring a lot of "what we did at another site..." to the table, but it is unlikely that he can compete when it comes to in-depth knowledge on specific products. The vendor training/certification is a relatively good start but there is no substitute for working with a product every day in a large, complex environment.

I personally believe that there is a very comprehensive and valuable role out there for integrators to assist enterprise customers, I just don't know how many are able or willing to pursue it. I would much rather see their efforts spent on this than on the behind the scenes game playing with manufacturers and distributors to further protect an unnecessary and ever-diminishing monopoly. I have a lot more respect for an integrator that tells a customer to do some things themselves and offers to help with others than I do for one who works behind the scenes to ensure that a customer cannot get access to a product except through them. With very large customers, making a fair profit for true value-added services (over and over and over again as noted above) seems a much better long term strategy than trying to charge exorbitant markups for occasional work or getting a few small RMR contracts.

We have found hosted access control to be decent fit for the small opportunities that come our way. The enterprise clients we serve would never even consider a hosted solution. Additionally, most enterprise clients have 24x7 security centers, so 3rd party alarm monitoring is not a need.

My take... I am integrator that falls into this non RMR category. In the past month I sold my business. I've been entertaining a sale for some years as I grow to that magic age of "enough." The people I talked to all wanted to know what my RMR was. The magic sale number was all based on those "locked in contracts" and RMR. I have none. My customer base has always been person-to-person commercial. We grew the business by word of mouth and were careful not to exceed our capability. We have the major school district and both major hospital chains as customers. As people from those organizations moved around, we again gained customer base. The amount of RMR that would be available from our normal customer base was just not worth pursuing.

We were lucky enough to find a buyer that is all wrapped up in RMR but also saw our customer base and what we did. He provided a reasonable buy out amount and a method of transfer that our customers are comfortable with. It is highly unlikely we will lose the customer base as long as we maintain the same level of service and attitude.

I will add, we do have a related company selling background music - ala Muzak. That company has the RMR. It has the contracts. It is profitable. The combination of the two companies provided the owners and employees stable employment for many years.

I disagree, this current and future market the parts are dwindling to thin margins, with advocate of web. That said us integrators have to shift from the old mind set. Going forward you will have a few options, sell parts the way you always have with margins getting thinner, but do have the RMR for monitoring or other such services. However you still charge for Moves Adds or Changes or any othe "design" time. Keep in mind with equipment margins getting thinner in the near future we, integrators will be charging for mainly labor and design with margins getting smaller. The Data industry fell in that trap years ago, telecommunications industry where I originally came from is in the same boat. Security and Audio Visual guys will soon follow suit. And as always said if you don't you Will be left behind.

RMR (Recurring Month Revenue) is targeted with hosted solutions as a sidekick.

As I stated before... integrators are going to be forced by the market to think outside the box. With Disti’s and online web sources selling equipment at or below the integrators cost direct to customers this will shape our industry drastically in the future. AND its ALREADY happening! The Data guys shift was about 8-10 years ago, the Telecommunications industry (which I have been apart of for over 35 years) has been shifting into this mold for a few years, the security and video industry will be shortly behind. With this happening the integrators which in the past relied heavily on making a 30-45% profit on all parts and another 50 %+ off gross labor will change drastically. The new platform will look something like this, the Integrator will Design/ Build a system for a client, help them get parts direct from web or Disty ( for a small fee) Install for regular fee’s or less and then charge an RMR to support, upgrade, maintenance and provide a few hours of light programming. This will in essence make up the bundle. Some companies will add other things like Gold, Platinum, or preferred accounts which will get them in the pecking order of their choice. Larger customers such as Enterprise will go for the Gold. In the end the Integrator should make way more money on that one project then he would have with Traditional. Let me explain how I have seen it transpire with competition and how we do it as well, as the market guys is shifting. Case in point a lot of the telecom guys said” heck with IP I don’t understand it, and I would never sell it to any of my clients” well guess what IP telephone systems have far out sold traditional systems in the past few years and as a matter of fact all the telecom companies and manufacturers alike are selling, guess what “hosted solutions” so those naysayers guys are getting left behind as we speak. Like it or not our industry is re-shaping.

Anyrate, back to my example. These numbers are pretty close but will slightly vary depending on your business model but the numbers will work out about the same.

Traditional System, take a 7 phone, 7 camera system either is about the same.

• The budgeting cost for camera system used to be $ 1,000.00 per camera depending on type and difficulty of installation and market area, but you get the idea. So based on the budget integrators
• Sell Equipment $2,500.00 to $3,500.00 depending on equipment, Installation $1,275.00 ish, Misc Materials included in equipment.
• Total sell $3,775.00 and maybe upwards to 7K, for this example we will take the smaller which is harder to sell. The larger the deal the easier it is to make a 60 month ROI.
• Total Profit, Including Labor $1,700.00 (this will be the one time without MAC) take home.

New RMR system, in contrast to above system

Design and build system for small fee $ 350.00

• Assist customer to purchase or maybe sell product at 10% max markup to run thru books. $ 377.50 ( to assist in getting best deal)
• Installation at $ 1,275.00 including Misc Materials) May or may not charge depending on situation, some companies will give free installation.
• Total upfront sell $ 2,002.50
• Plus client buys cameras/poe injectors or switches at ($ 700.00-1,000.00 from wherever)
• Total client upfront $ 2,702.50 -3K
• Total Profit Integrator upfront $ 1,512.00 (Taking out overhead from Installation)

Plus client will pay another $25.00 per camera per month for lifetime upgrades, lifetime maintenance, no upgrade equipment or fee’s etc…... This would be for a hosted solution with cloud NVR and Storage.

Integrator will make between 20 – 30% off the cloud company per camera per month. Or $7.50 per camera per month. Or $ 630 per year which you can see the integrator did not get all the upfront but in the first year will make that back plus any ongoing years is Re-occuring profit he did not have before.

These numbers change depending on the size of the Deal /NVR, amount of recording needed and time stored etc…., which adds cost for the traditional and skews the numbers higher but in the end the integrator will make more money but not all at once as he is used to.

Whats Good for the customer is much lower upfront, no licensing fees on hardware, and maintenance is included and no fork lift upgrade needed when they grow larger. This is more appealing to the customer and more so, the larger the deal is as well. Plus all VMS software /hardware and such are included in the RMR price. Some hosting also allows for on-site NVR with cloud backup so that will change deals slightly, however you see the idea.

That said for the guys that say it will never happen, the first time ABC company comes into your large customer and says, we can install your system with all these updated features with latest bells and whistles at no charge and you just pay a small monthly fee, and show them on a 60 month scale it can make financial sense then your sale is vulnerable. We all know that a life span on any technology gear is only good for 3-5 years and that most likely will have to be serviced before that and updated /upgraded. So if your always going to need a phone system, security system, data system, then this kind of approach will make sense to them. Especially since everything is going cloud service these days. Because cloud technology has No maintenance, no Licensing fees, redundant already, no lightning strike problems, no power related issues, security is good ( most are hippa compliant) and hacking is pretty much prevented from the start, no gear to wear out, unlimited storage, no upgrade fees, no travel time for programming, Can use system anywhere, no special routers with port forwarding needed, no updates that mess system up, no obsolescence on NVR or computer running an OS that’s outdated. And the list goes on to why hosted is much better for clients than traditional. Now more than ever do I see, even my clients, they get a quote and first thing they do is go to web and see how much less they can get it for. So anyone that says we are not in a buyers market has not been paying attention lately. I also find most customers, even the most faithful, when their boss tells them you need 3 quotes and the big blackbox companies come in and say the magic phrase, you will be only the next best price. I have seen it develop over the years and see it more rapidly approaching since the big guys (Manufacturers) are pushing for cloud technology, because in the end they make way more money and they can stay in the customers pocket longer a little at a time but if they do a good job and the client stays with them it can mean a big payday in the end. Anyway this is what I see from a consultant and Integrator’s eyes, so keep your eyes peeled and watch the “race to the bottom” question is…..where will you be?

Room for Everyone:

"The Security Industry" is far from a homogenous group of lemmings. The business of building alarm accounts differs vastly from the business of large commercial specialty electric contracting, and the differences within that spread are very real for very real purposes. Everything from licenses, permits, qualifications of staff, accounting methods, ownership models, financial strength, virtually every aspect of the true "business" is or can be different. Therefore, there is plenty of room for everyone. Small end commercial operators can clearly see the value in hosted services but that doesn't mean everyone one of them is going to jump in overnight. Large enterprise customers will generally not recognize the value offered in hosted services, but that doesn't mean everyone of them will embrace self support at every level.

The problem is that buzz words get started in this general industry and take off in the trade magazines with article after article hyping the pros and cons of every new buzz. At one time it was "integration" some time after came "convergence" and now the discussion of RMR. All relatively loose terms, with plenty of width in meaning and interpretation.

Any business that has existed for any period of time must enjoy some degree and interpretation of RMR. Whether it is alarm monitoring, general contracting, high end integration or any other combination, repeat customers define RMR whether you do one deal and they continue to pay you over time or whether you do recurring and reoccurring business with them, their subsidiaries, or their simple referral.

I think the larger point is, if you are not now enjoying RMR in your business at some level, you better find a place to hide or change things dramatically.

I want to throw this out there. First RMR, which is the discussion will and does go hand in hand with cloud services or remote support, take your pick. Second just because you have to have a physical camera onsite does not mean anything,...you have to have a physical phone on a phone system but the rest of the system, voIcemail, voicemail to emails....etc is still in the cloud, and we collect RMR in that. Therefore since phone systems right now are 80 percent IP and only 20 percent traditional ( changed happened drastically in last 5-6 years ), I would bet security will follow suit pretty quickly. It is not the camera to focus on but the cloud offering such as, Cloud NVR, Cloud VMS, Cloud Storage ( as much as you want) Cloud setting changes ( you are doing this as a DDNS ) right now. Linking the systems to other providers like GEOfeedia, ( have you looked at that add on, it will make the hair on the back of your neck stand up!!!!) and the list goes on. So the real point is someone earlier discounted RMR to the point that it will not happen. I say it's happening now and the proof is out there just look around, go to forums, go to the ADI roadshows and check it out. Look at how DDNS is shaping things. Companies like OCO is starting to make a living off cloud based offerings. It's coming so we as integrators have to be ready to give them what they want at the same time as being integrators. Bottom line is we will have to change the way we do business. It's life and it will not stop or change for us so be ready. That's all I am saying. And BTW your analogy of doctors, do you know Doctors are seeing patients over the web, to diagnose and treat patients right now!. Did you know doctors are operating on patients in foreign countries, while they are here in us, using video conferencing and it robots. And they say in the near future you will not go see a doctor every time you are sick but will be diagnosed and treated over the web ( we now call this The Cloud, for you buzz word guys) Those are facts my friends so don't underestimate cloud offerings and RMR because some day they will be like Google, ...who thought back in the day when the World Wide Web ( that's what they called it back then) would strike it rich at being a search engine) we all laughed and slapped our pants but guess what........Any rate take care and good luck.

Oh I forgot on my last post, also look how fast Access points went cloud basis with a RMR forced, i.e. Meraki that Cisco bought, also Amazon Cloud offering also for AP's and the list goes on ( that little controller in the cloud changed everything) , and guess what you have a physical AP that has to be put up. Ooh and yes most of the AP's now are self learning ( like Meraki's ) so in most cases the customers IT guy can install and don't you think that if a Camera was self installing and self learning they would install those too? I say yes. The trains coming guys and I see the light don't you:)

Here's the real truth about RMR.

When we sell a system, we typically install Fire, Video, Intrusion and Access Control. All have RMR associated with them; I refuse to do a job that doesn't include RMR. Our primary market is SMB's. We have several enterprise customers, but the SMB market is more profitable for us. I do not like the idea of having only enterprise customers; you can lose BIG revenue if they go somewhere else. Look at what these Facility Maintenance Companies are doing, if you think they are not coming after your enterprise customers, think again. Having a large, residential/SMB RMR base to protect yourself against the loss of a big client or clients is good business.

There are plenty of opportunities for add/change/move..etc. In the SMB market and with our enterprise customers. RMR provides us with steady revenue to pay support staff and sales commission when times are slow, and provide strong profits when times are good. If we did not sell a single system for an entire year, we could keep our business going without laying anyone off. We could go several years without selling any new systems and still have a strong company.

We get RMR from the following:

Fire (average $X,XXX/year/client)
Annual fire inspection, test, and certified report.
Fire Alarm Monitoring
Fire Alarm Cellular Communication (cellular communication is huge for us, we have thousands of cell units out there generating revenue with almost zero maintenance, cell units also eliminate the need for the customer to have two phone lines for a fire system saving them lots of money).

Burg/Access Control/Video (Average RMR $XXX/year/client)
Monitoring
Cellular Communication
Remote Access/Management
We manage the system for them
Video Verification
Remote video investigation (we have lots of SMB's that call us to investigate video for them they pay a small monthly fee for this service)

Maintenance Agreements:
Clients pay XX.XX/monthly for unlimited service calls all they pay is a small trip charge for business hours and a different charge for emergency service. If someone drives a forklift into a device, we cover it. The only thing we do not cover is rewiring, lightning or acts of God.

I earn 10's of thousands each year in sales commission from my RMR accounts. On top of the usual add/changes/moves..etc. For me, I can go into the year knowing that I will earn at least $XX,XXX.XX. Our company knows that it will earn at least $X,XXX,XXX.XX. This is a win-win for everyone; the company has predictable income outside of installations and service, sales reps have predictable income outside of installations and service, and we can have a fully staffed office for customer support. If a client is paying any form of RMR, they can take advantage of this team 24/7/365.

RMR is not for trunk slammers. Last I checked IPVM loves RMR unless IPVM started taking cash payouts from Arecont ;).