On the Editor’s Desk

I’ve heard some people say they think the economy is going to rebound soon or is maybe rebounding right now, and I’ve heard some predictions for growth in the security industry, but I’m not sure what to think of the predictions proposed by Germany Trade & Invest.

Here’s their press release prior to ISC West:

LAS VEGAS, March 19, 2010/PRNewswire/ — Sales in the German security technology market are expected to grow by more than 50 percent by 2015. From biometrics to IT security, German quality products and services are in high demand. Germany Trade & Invest will be presenting the latest opportunities in Germany’s growing security technology industry at this year’s International Security Conference & Expo (ISC West) in Las Vegas from March 23-26.

Fifty percent! Well, I guess that is five years from now, so maybe that’s not all that bullish. Let’s get the details:

According to the German Ministry of Economics and Technology, revenue in this cross-cutting high-tech industry should surpass EUR 31 billion by 2015. This is a sharp increase over 2008 revenues of EUR 20 billion. 2009 figures are expected shortly.

I’ll say it’s sharp, but now we’re talking more like seven years, so not quite as sharp. Still, did overall revenues grow from 2008 to 2009? Maybe if they’re making nothing but IP video, but most numbers I’ve seen say the industry as a whole was basically flat 2008 to 2009, and I haven’t run into a ton of people talking big things for 2010.

So, say it’s $20 billion in 2009 and grows at 10 percent CAGR, that gives us $22 billion in 2010, $24.2 billion in 2011, $26.62 billion in 2012, $29.282 billion in 2013, well, okay, so they don’t even have to grow at 10 percent CAGR to get to 50 percent by 2015. It’s only like 7.58 percent CAGR to get from $20 billion to $31 billion in six years.

Realistic? I guess so. But for some reason seven percent annual growth seems more palatable than 50 percent growth by 2015. Shows you how numbers can be deceptive.

I like the typo in the following quite a bit, by the way:

Across the security technology industry, high-quality, reliable products and services are critical. Products bearing the “Made in Germany” label are synonymous with these high quality attributes. German companies are expecting revenues of up to EUR 21 billion by 2015. At the same time, companies based abroad can also tap into these opportunities, as one-third of sales in Germany are generated by companies based outside the country. With the largest security technology market in Europe, Germany is an attractive home for security companies. A large customer base, generous research and development funding, and well developed high-tech industries make Germany a prime business location.

$21 billion? I thought it was $31 billion?!?

Secretary Janet Napolitano has decided the virtual fence on the border with Mexico is such a failure that it no longer deserves continued funding.

As I wrote before, when 60 minutes eviscerated SBInet, this is a major black eye for the industry. And, in essence, it really doesn’t matter why the project is a failure - Boeing didn’t have the capabilities and oversold, the technology could never have done the job, the particular weather, etc., of the border makes the job impossible, who cares.

It’s being labeled as a failure and the message is that security technology cannot do what it says it can do. That’s bad.

And this quote is bad, but more for Boeing:

“Not only do we have an obligation to secure our borders, we have a responsibility to do so in the most cost-effective way possible,” wrote DHS Secretary Janet Napolitano in a press release Tuesday. “The system of sensors and cameras along the Southwest border known as SBInet has been plagued with cost overruns and missed deadlines.”

This part is bad for people who sell stuff:

It will redeploy $50 million of Recovery Act funding originally allocated to “commercially available security technology along the Southwest border, including mobile surveillance, thermal imaging devices, ultra-light detection, backscatter units, mobile radios, cameras ,and laptops for pursuit vehicles, and remote video surveillance system enhancements,” Napolitano’s statement said.

That’s $50 million in sales that won’t be happening.

Anyway, there’s a million articles on this. If you want to see the newsfeed from Google, here you go.

So, I’m speaking as part of a panel at ISC West next week. It’s called “Increasing the Quality and Affordability of IP Video” and it’s happening at 10:15 a.m. on Thursday of the show, in room 204.

I think it’s going to be solid. Basically, I’ve got vendors like Lee Caswell from Pivot3, Mark Kolar from IPVision Software, and Doug Marman from VideoIQ to talk about how different architectures can eliminate pieces of hardware and save money, and then I’ve got Jim Henry, CEO of Henry Bros., who can call bullshit if their solutions aren’t real-world practical, and to talk about how he saves on labor and installation costs when he’s installing IP video systems.

I mostly ask questions and look pretty. You get the idea. It’s worth attending if you think the TCO of IP video is too high, or isn’t competitive with analog.

How did it come about? Well, ISC West sent me a fairly cryptic note asking me if I would moderate a panel with that title and no speakers attached to it. I said, sure, but can I put the panel together? They said, sure, go nuts. And so I called some people I’d seen do presentations on saving money on IP video before, and there you have it. Easy peasy.

Nobody paid to be on the panel. And I sure as hell am not being paid. But I really am looking forward to the luxurious speaker-ready room that I get to slip into because of my speaker status. I’ve heard they have the best croissants that side of the Mississippi. Free coffee, too!

This whole topic of education at the trade shows has been getting a lot of play in some circles lately, actually. John Honovich has been a particular critic of the vendor-centric education that’s been a staple of the major trade shows, and, to his credit, he’s recently begun his own educational series, starting with IP Network Basics for Video Surveillance.

It’s a topic I know intimately, since I program the TechSec Solutions education (click through to check out the videos of what we did this year), which is a first-rate pain in the ass, and always has been. See, because the conference is for the entire security channel, from manufacturer through to the end user, we’ve always tried to program panels and presentations that were interesting to all pieces of that channel and featured viewpoints representative of all those pieces.

Initially, we did this by creating the entire program from whole cloth, figuring out what our attendees would want and then inviting people to participate in presentations and panels that we designed. And holy crap was that like herding cats. Further, it was limited by what we knew about in-house. If we’d never heard of, say, cold storage, we couldn’t very well put together a panel about it. Plus, we tended to invite those people we knew well to participate, for obvious reasons (and this was done way before the sponsors and booths had been sold, so we didn’t have to worry about conflict of interest internally, but we did have to worry about the appearance of conflict of interest).

So, three years ago, we went to the call for presentations model. We outlined the types of presentations we were looking for, said there needed to be an appeal to the entire channel, and let the call loose on the world, just like a “real” conference.

This works okay.

The first big problem is that some manufacturers just send you whatever canned speaker presentation they have on hand. It’s not unique to TechSec (as we say it must be) and it’s only sort of germane to that part of the channel that doesn’t buy their products on a regular basis.

The second big problem is that integrators/installers and end users don’t really have a driving reason why they should put in a presentation. Sure, the integrators might get some business from raising their profile, but let’s just say that integrators/installers are not particularly marketing savvy in this industry. Further, the end users are really just doing it to be thought-leaders in the industry and out of general beneficence.

So, most of the integrators and end users on the program are invited by the manufacturers who put in presentations (they have marketing departments for that), and then you know what happens?

Yeah, the end users and integrators decide not to come because there’s nothing in it for them, so I get a flood of manufacturers at the last minute - literally, a week before the show - who tell me, oops, so and so had a family emergency, or, oops, so and so doesn’t work there anymore, or, oops, we never really asked that person if they could come and then, well, they can’t.

This leads me to scream obscenities and threaten to just cancel TechSec and to quit (only in the middle of the office, not to the general public, as a rule, though you never know).

Those peers that can best offer education and understanding are really, really hard to get up there on the dais. For the presentation I put together for ISC West, we invited maybe five or six end users. None of them could make it - no budget, no time, no interest. So I gave up and went with just the integrator’s voice.

Could ISC/TechSec/everyone pay a stipend and pay for travel and whatnot for speakers? Sure. But that would drastically affect the prices for attendance. People say they can barely afford to pay for education as it is.

Thus, it’s not surprising to see that ISC West’s speaker list is pretty vendor heavy. To wit:

So, by my count, that’s 86 total speakers, 40 of whom are vendors, 15 are consultants (vendors who don’t sell products?), 11 are integrators, 6 are association reps, 6 are members of the press/writers, and 8 are end users.

Is that “vendor heavy?” I think you can make that argument. But, for the reasons outlined above, I’m not surprised by it. Since I know from experience that they’re not paying to be on the program, I think it’s likely they are the ones who volunteered/most readily said yes. And why wouldn’t they say yes? It’s to their benefit to be seen as an industry thought leader.

We’ve been given explicit instructions not to include logos in our power points (I’m working on ours right now, actually - boy would this all look better in Keynote… May have to make the conversion), and to not pimp our respective organizations (I will of course violate that willfully, telling people that reading SSN makes you smarter and that the other publications cause brain cancer).

I think there’s value in the educational programming, but I don’t run an integration firm or protect people and property as a security director. I’m a poor judge. The judges will weigh in next week. Whether we speak to empty halls or packed seats will tell me just how valuable these sessions are.

Maybe you’ve heard: I’ll be not only running in the Security 5k at ISC West (sign up now - it’s going to be a blast), but I’ll also be kicking off the event by singing the National Anthem.

Since I agreed to do this yesterday, I’ve been thinking about it virtually non-stop.

First, know that I do, indeed, sing professionally (well, people pay me money to sing) with a band. So it’s not crazy that I would offer to do this. I’m going to sing for three hours in front of drunken people tomorrow for St. Patrick’s Day, for example. I’ve performed for more than 300 people at a time on more than one occasion and I’ve been singing for people for a good 10 years.

That’s not the problem.

No, the problem is that the Star Spangled Banner is a wicked (that’s New England slang for “very”) hard song to sing. And I know that’s cliche, but have you actually tried it? How’d that work out for you? I’ve been trying it over the past 24 hours and my versions don’t suck, but they don’t seem to sound each like the other, either. There’s about 19 different ways to go about it, between keys, and pacing, and just how big you want to go.

So, I’ve been studying the greats. Have you seen Marvin Gaye at the 1983 NBA All-Star game? It’s often held up as the standard bearer. Check it out. It’s pretty amazing:

The antithesis to this, of course, is Carl Lewis’ NBA attempt:

For some reason, a full clip doesn’t seem to exist on YouTube, but you get the idea.

I could bring my guitar and have accompaniment, but then I might wind up sounding like this guy, who by my ear does a pretty good job, but doesn’t get a good review from YouTube:

Plus, for some reason the words are really hard to remember, probably because they’re not in good old American English. I mean, look, even Michael Bolton has forgotten the words:

That video’s worth it just to see the guard at salute smile when Bolton screws up. Great moment there.

So, I’m going to be doing a lot of practicing. Singing that thing with nothing more than a simple PA system, outdoors, at 7:30 a.m. in Vegas is going to be a tough row to hoe (as grampa always said), but I’m going to give it a go. Feel free to sing along. Loudly.

Less than good news coming out of the Henry Bros. Electronics camp. As one of the few pure-play integration firms that’s in the public sphere, it’s hard not to sometimes see them as a market barometer. If we do use them this way, “the recovery” may be more than a little overblown:

The Company reported revenue of $13.7 million for the three months ended December 31, 2009, representing a 28% decrease from revenue of $19.1 million for the same period a year ago. Revenue was down in all regions, offset in part by an increase in Texas. The overall decline in revenue is due principally to the effects of the continuing credit freeze and economic downturn, which has had a significant negative impact on construction markets and capital spending patterns of commercial businesses, combined with a significant reduction in revenue from the Company’s New Jersey region, as a result of the winding down of large projects that were not replaced by similar projects.

Conventional wisdom says that Q4 2008 was particularly ugly, and that things had maybe turned around by Q4 2009, but that’s not what happened for Henry Bros. This might be explained by the aforementioned “large projects” that were not replaced - sometimes integrators’ revenues are lumpy because there isn’t an infinite supply of large projects. But the down-in-all-regions part of that doesn’t look good.

The Company reported a net loss of $687,950 or $0.12 per diluted share, for the fourth quarter ended December 31, 2009, compared to net income of $725,756, or $0.12 per diluted share, in the comparable period of 2008. The Company’s net loss is principally due to a decline in revenues given the current economy. In addition, the Company’s investment in the start up of a new office in Houston, the development of new internet-based service programs, along with process and training costs, also contributed to the net loss.

If investments lead to a small loss, that might not be a big deal. The “internet-based service programs” could be heading in the direction of increasing recurring revenue, and that would seem to be a good thing. Still, this next part isn’t encouraging:

Revenue for the year ended December 31, 2009 was $55.1 million, representing a decrease of 11.6% from revenue of $62.4 million for the year ended December 31, 2008, stemming from the continued economic pressure described above. Partially offsetting this decline were increases in the Company’s Texas and Colorado operations, which were up 12.4% on a combined basis, as well as an increase in revenue resulting from the Company’s agreement with a division of L-3 Communications, which is part of L-3’s project for the U.S. Marine Corp. Systems Command to deliver a Tactical Video Capture System (”TVCS”). The L-3 contract generated $3.5 million incremental revenue in 2009 over 2008.

Okay, so 2009 was bad. No one was saying it wasn’t…

The Company had a net loss for fiscal 2009 of $823,957, or $0.14 per diluted share, compared to net income of $1.6 million, or $0.26 per diluted share for 2008.

This is doubly disappointing because of all the work Henry Bros. did to get profitable again in the first place. 2008 was a real comeback story for them, and 2009 has to be a kick in the teeth.

Jim Henry, CEO of Henry Bros. Electronics, stated “Though we remain optimistic that we will soon see a turnaround in our business, our entire management team was disappointed by our results for the fourth quarter and the full year 2009. The long term contractual nature of our business is such that we did not really begin to experience the full impact of the protracted recessionary climate until the second half of the year. This lag, coupled with unforeseeable delays in our TVCS project, made it increasingly difficult to forecast our performance. However, although the TVCS project has been moving slower than originally forecast, our contract is still in place, and while the timeline may have been moved further out, our participation and related forecasted revenue share from this project has not changed.”

Henry concluded, “We were also impacted in 2009 by an increase in our SG&A, as we made strategic investments in our Texas region, the ninth fastest growing market in the country. We strongly believe in the value of the investment, and that it will prove to be a prudent move when commercial spending begins to rebound. Going forward, we expect our success to be tied to how our offerings, and the knowledge of our team, benefits and improves services within organizations. We have addressed this with an enhanced recruitment process and more intensive training of our sales staff. As we look to a profitable 2010, we are poised to take advantage of the coming economic rebound, with a more qualified and efficient team.”

So, signs of 2010 being better?

The Company’s backlog as of December 31, 2009 was $28.0 million and $4.3 million above the $23.7 million at December 31, 2008.

Well, that’s a start.

There’s an interesting story out of Pennsylvania about a former security tech (ignore the headline - he wasn’t a guard - another lesson about the arcane way that daily newspapers have copy editors write headlines who don’t understand the story) who went on a drunken robbery spree of facilities in which he’d done installations.

Frankly, I’m shocked this doesn’t happen more often. Considering that many techs make somewhere in the $12 an hour range and there’s considerable turnover, I’m surprised this isn’t a more frequent black eye for the industry.

It’s why I’m also shocked that the ESA’s call for a mandatory background check for the industry isn’t a slam dunk. This is pretty clearly sensitive information and access we’re giving these techs and installers and it’s sort of imperative we know to whom exactly we’re endowing this trust.

Now, with that serious stuff out of the way, maybe we could pick on this guy a little bit?

First of all, he committed 46 burglaries and only scored $40,000 worth of cash and property? Um, does this guy not understand risk/reward very well or what? That’s a pretty pathetic return on his investment of effort, with less than $1,000 per break in.

Dude, you’ve got access to commercial businesses all over the place - you need to think a little bit bigger! Stealing coins out of vending machines? I’m guessing that’s not worth 15-30 in the jailhouse.

This is probably my favorite part:

Defense lawyer James P. Lyons said Mack is remorseful.

“This is a complete aberration,” said Lyons, indicating Mack has no prior criminal record. “He had an issue with alcohol and other personal things going on in his life that may have played a role. He was intoxicated when the majority of the crimes occurred.”

“He made really poor decisions. He doesn’t understand himself why he did this. It’s completely out of character,” Lyons added.

I love how the lawyer hedges his bets: “that may have played a role.”

So, his drinking and personal issues only may have played a role in his 46 burglaries? But maybe not? Also, the no criminal record part matters a little bit more when it’s a one-time deal. This guy was on a nine-month spree!

He’s never been a criminal before - except for this one nine-month period where he broke into 40 different places! I swear!

I have no affiliation with this webinar, but I have spoken to Carl Herberger, the presenter, and I can verify that he’s one grade A, hard-core nerd who really understands where IT and physical security come together.

You can read some of our conversation here, but the basic idea is that he works for EvolveIP, a company that’s looking for security integrators to team up with and help navigate the worlds of online authentication, hardening of networks, etc., that may not come naturally to your traditional security integrator.

Here are the topics he’ll be covering:

* Pandemic Continuity Planning
* Readdressing Malware Variants
* Addressing Social Networking and Web 2.0 Threats
* Re-architecting the Technical Security Perimeter
* Incident Response/”Get to the Bottom of It”
* Unmanaged Mobile Devices
* Growth of Social Engineering Techniques
* Cryptographic Key Management
* Virtual Machine (VM) Security
* The Ability to “Prove” Appropriate Levels of Deployed Security

It’s at 11 a.m. on March 16 (the page says “Thursday,” but I’m pretty sure it’s happening on the 16th because that’s what the calendar picture indicates - kind of an ugly typo there…) and it might be worth your while.

It’s been well documented how Mace would like to rid itself of the car wash business (and they’re getting pretty close). Now comes word they’re exploring selling off their digital marketing business, which sells things like beauty products online:

Mace Security International, Inc. (”Mace”, “Corporation” or the “Company”) (NASDAQ Global:MACE) today announced that it has retained Northside Advisors LLC, a boutique investment banking firm, to explore the sale of the Company’s Digital Media Marketing Segment. The Company’s Digital Media Marketing Segment is an e-commerce and online marketing business which has two operating divisions: (1) e-commerce, the sale of products on internet promotional sites, and (2) online marketing, which publishes internet promotional sites that offer the Company’s and third party products for sale. The segment uses proprietary technologies and software to sell products on the internet.

Dennis Raefield, the Company’s Chief Executive Officer stated that “the Company has not made a decision to sell the Digital Media Marketing Segment but is exploring the possibility of a sale dependent on the level of interest and offers the Company receives. If Mace sells the Digital Media Marketing Segment, it will use the funds in the operation of and to grow its Security Segment. We are committed to executing our strategy of focusing on our core security business and building a company for future growth.”

Also, if you’re looking for signs the economy is back on track, the fact that companies like Mace, L1, Pro One, etc., are exploring sales opportunities should tell you that corporate America thinks there’s money that wants to be thrown around right now. That’s a good thing.

Milestone, Genetec, and OnSSI might get the most pub as video management software providers, but Exacq is a definite dark horse that a lot of installers like to work with. More than one camera manufacturer, too, has told me Exacq is the easiest to work with and integrate with.

And, of course, they work on a Mac.

So, maybe it’s not surprising they’ve announced an aggressive expansion plan:

Fishers-based Exacq Technologies Inc. will invest $1.1 million to expand its Exit Five Parkway headquarters, creating as many as 49 new jobs by 2013.

Considering they only employ 30 right now, that’s an ambitious growth plan, indeed.

While the Vancouver Police angle to get a say in how the leftover cameras from the Winter Olympics get used going forward, it’s apparent that not all of those cameras will be sticking around anyway.

Here’s 1,000 of those cameras being auctioned off. Get your bids in now!

Actually, it’s a lot more than just 1,000 cameras:

* (1,000) Network Fixed Dome Cameras: Panasonic type WV-NW484S
- (1,000) 1/2″ 4.5~12.5mm Day/Night IR Lens
- (1,000) 15~50 F1.5 1/3″ Auto Iris Lens
- (1,000) Camera Mounts
* (90) PTZ Cameras and mounts: Panasonic type WV-NW964
* (2,000) IR Illuminators: Raymax type RM50-AI-30, RM100-SI-30
* (4,000) PIR Detectors: Xtralis type PRO-45H, PRO-100H, PRO-250H, PRO-18WH

They’re being sold by Honeywell Building Solutions and they were apparently purchased new for the 2010 winter Olympics.

So, why isn’t Honeywell BS just keeping the equipment around and using it on other jobs? Were they leasing the equipment to the Olympics, or are they just reselling it for them and then giving them the money? Does the Olympics not care if they get the money back?

I’ve got a few calls in but I’m not getting anything immediately back. I’ve also got a call in to the auction people about whether you have to buy the whole lot or not. I’m guessing you do.

Seems like a big parcel, though. What’s the winning bid on that?

The domes retail on Google for $825.

The mounts are another $215 each.

I can’t find pricing for the IR illuminators or the PIRs, but they aren’t free.

So, $2 million or so? Who’s going to bid on that? I’m kind of fascinated by this.