Two industry leaders look forward

CEO Juan Vallejo talks about the new Securitas Systems, five months independent
Sunday, April 1, 2007

SANTA MONICA, Calif.--In prepared remarks for security industry veterans and capital investors here at the fifth annual Security Growth Conference, and in a wide-ranging interview immediately following, Securitas Systems chief executive officer Juan Vallejo outlined a new vision for Securitas Systems: "Organic growth before acquisitions is the new mantra," he said. "In all of our countries, we create great margins and cash flows, but we have no inspiration and development without organic growth."
This came in March, following a five-month period in which Securitas Systems purchased integration firms in Italy, Norway and Sweden. In other words, the mantra is very new, indeed. Contrary to popular opinion, he said, "the acquisition part is really the hard part ... Organizations who think acquisitions are easy are underestimating what it takes to acquire. The cost synergies are the easy ones ... but what knowledge do they have? What can we add to this organization? What can they inspire us to do?" Without considering these questions, Vallejo said, "there might be nice margins, but we risk overpaying and not delivering value."
Securitas Systems targets 10 percent growth, "mostly by organic growth," and a growth return on capital employed of more than 20 percent.
Part of this will occur, he said, because of Securitas Systems' high percentage of service revenues, some 40 percent of revenues currently, and its focus on customer-requested solutions instead of product sales. He said, "I hear people say, 'We have a warranty, so they don't need service.' I'm like, 'Hey, service isn't just fixing it if something breaks.' He argued that an integrator's service value ought to come from know-how and an ability to continually upgrade and improve open systems. "It keeps the customer with you because he needs you," he said. However, he said a commitment to that kind of service requires investment on the part of the integrator "in people and structure." For example, "if you want to serve in an efficient way, you need a help desk, people to man it, online web service. I think most systems integrators are scared to get into that."