It’s time to shape up or shake out

Thursday, January 1, 2004

The security product and service industry is going through a discontinuous change. First, past trends are no longer good predictors of where we are headed.

The institutional customer, large corporations, federal, state and local entities, hospitals and universities are looking for total solutions from security and life safety companies to what they perceive as new problems. They are looking for turnkey contracts by organizations capable of conceptualizing, designing, procuring and installing physical security systems and equally important, associated policies, procedures, plans and training services.

We are seeing the entry of large, new industry participants, particularly defense contractors. These new players have tremendous organizational and financial resources. They also have a very long time horizon and are willing to incur losses as they enter new market segments.

Our traditional security industry manufacturers have focused on developing and producing devices to be sold primarily into third-party distribution channels. The governmental and institutional customers want to deal with one entity, which can guarantee the total solution. They define the ability to make good on that guarantee in terms of the size of the company, whether or not it is publicly traded and therefore, regulated, past performance record on large complex turnkey prospects, etc.

These changes in the market place require the security manufacturing companies to either consolidate at an accelerating rate or develop new skills in directly subcontracting with companies hundreds of times larger.

A fundamental shakeout in the security manufacturing industry is inevitable. Some companies will be acquired, others will fail, and a few will prosper disproportionately.

Likewise, on the service side of the industry, fundamental restructuring is underway. This will result in real winners and real losers, guarding companies, alarm monitoring companies and security consulting companies has tended to focus on a particular niche: airport security, executive protection, background checking, political risk assessment, etc. Each of these is a part of the total solution, but none alone is sufficient by itself. Again, security service companies are facing a new set of stresses and challenges.

To succeed in the new competitive environment, they will need to broaden their offerings to the extent that they would be credible complements or even alternatives to “in-house” security departments. That means being able to develop security and life safety plans, implement those plans, administer security databases, provide life safety training, etc. Scale will clearly bring market advantages.

It is a new, competitive world filled with risk and opportunity.
Peter A. Michel is chairman of SIA’s Homeland Security Advisory Council. Michel may be reached via email at