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Retailers differentiating with supply chain management

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Tuesday, October 6, 2009
Wanted to point out a cool white paper released today by the Retail Industry Leaders Association and Auburn University, focusing on supply chain management. Find it here, but beware the immediate pdf download (why this new trend toward pdf downloads, I'm not sure). The conclusion the paper reaches is this (SCM stands for supply chain management):
As the retail industry seeks to weather the storm of bad news regarding the global economy and weak consumer spending, CEOs and directors are counting on SCM to sustain profitability. Though revenues are stagnant in many retail organizations, costs are viewed as controllable. In particular, the expenses falling under the control of SCM executives are receiving strong attention from the top of the organization. SCM executives now find themselves in the spotlight and must perform their brand of magic to save the show. They must pull multiple rabbits out of the hat, cutting inventory levels while maintaining high in-stock availability, reducing transportation expenses in a time of unprecedented fuel price volatility, and building consensus when others seek to protect their silos and turf. Certainly, it is nearly impossible to perform these “tricks” without extensive preparation and precise execution.
How can "security" help these SCM executives look like magicians? Security is not even mentioned in the paper, which makes me think there's an opportunity there. For example, the paper notes this about RFID:
[N]ewer initiatives have not had as great an impact on performance. It will take time for retailers to fully harness the potential of sustainability efforts and RFID technology.
So, it would seem that Lojack's recent partnership with NC4 makes a lot of sense. If constant awareness and protection of the supply chain can evince tangible savings, this white paper makes it clear that SCM types are going to be all over it like white on rice. But it's also going to take an education effort. It's clear that SCM executives are not focusing on security, or technology in general, to solve problems and create efficiencies. As with the capabilities of security systems as a whole, often the end users are thinking of the solution because they don't know it exists. Make sure they know it exists.

Back to School!

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Monday, October 5, 2009
I just wanted to remind readers of SSN of some of the upcoming opportunities for education in the security industry field. I've written over the past couple weeks about several opportunities, including A CSAA-sponsored webinar this week on Oct. 8, which will focus on beating attrition and increasing RMR, an online PERS primer from Visonic, the company that held intensive PERS boot camps earlier this year, and training to become CSAA Five Diamond certified. The best part about all of these upcoming initiatives is that they are all completely, 100 percent, absolutely FREE. You don't get anything free these days except bad advice, usually, so the value is pretty dang hard to overestimate. Why not take full advantage of these opportunities and help to better yourself and the industry?

Stanley bags one of the larger remaining Sonitrol pieces

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Monday, October 5, 2009
Not surprisingly, Stanley is continuing to gobble up the Sonitrol franchises that remain out there. It's part of the strategy and it makes sense. They liked the Sonitrol model enough to pay $275 million for it, so why not buy up the franchises, increase the economy of scale, etc.? The announcement today is that Stanley has purchased one of the larger remaining pieces (by my count there are now roughly 90 franchises left), scooping up (ha! scooping up! sorry, inside joke) Sonitrol Cascades, Sonitrol of South Oregon, Sonitrol of Spokane and Sonitrol of Yakima--collectively operating as Sonitrol Cascades--from Vyanet Capital Group, L.L.C. Here's the full release. No link available:
Naperville, IL – October 5, 2009 – Stanley Convergent Security Solutions, Inc. announces the purchase of four Sonitrol franchises: Sonitrol Cascades, Sonitrol of South Oregon, Sonitrol of Spokane and Sonitrol of Yakima collectively operating as Sonitrol Cascades from Vyanet Capital Group, L.L.C. Sonitrol of Cascades is one of the top ten Sonitrol franchises in the U.S., based on recurring revenue in 2008, and was reported as the 41st largest security company in the United States overall (based on Security Dealer Magazine’s “SDM 100” annual ranking). The sale includes mostly commercial accounts including education, local government, property management, banking, retail, restaurant and other customers being serviced throughout Oregon and Washington state. Terms of the sale were not disclosed.
Okay. I admit it. I quoted that whole paragraph because I think it's funny that Security Dealer is getting credit for doing SDM's SDM 100. Does anyone know what SDM stands for anymore? Two minutes of googling turned up Security Distributing & Marketing Magazine (I kept getting "Security Device Manager"). I had honestly forgot, if I ever actually knew. They, like ASIS, have done a good job of just going by the letters. Everyone knows SDM. But, apparently, they don't know what it stands for. Congrats to Security Dealer for getting a little credit, even if they did somewhat recently change their name to Security Dealer and Integrator. Anyway, didn't mean to steal Stanley's thunder.
“This transaction is a natural fit for us since our 2008 acquisition of Sonitrol Corporation for $275 million. The Sonitrol Cascades franchise acquisitions are a great opportunity for us to expand our operations in Washington and Oregon. We’re excited to be adding such a quality organization to Stanley CSS. Sonitrol Cascades has an accomplished group of customers throughout the Northwest,” stated Tony Byerly, President - North America, Stanley Convergent Security Solutions, Inc.
They love throwing that $275 million number around. I guess I would, too, if I bought something for $275 million. They don't tell you what they bought the four franchises for, though...
Stanley CSS will expand its direct coverage for Sonitrol products and services to include the Eugene & Medford, Oregon and Spokane & Yakima, Washington areas. Stanley CSS’ stated strategy is to mainstream advanced Sonitrol audio verification technology and services across North America through its corporate locations and franchise partners.
And I can attest to the fact that they haven't just bought Sonitrol and rested on their laurels and let Sonitrol bring in the cash. As ASIS they were showing off a pretty cool new panel that allows for both Sonitrol-based intrusion and two doors of access control. They're combining Sonitrol's capabilities with the old HSM customer care and reporting features and have a pretty powerful base on which to build. The coolest part of that they were talking about at ASIS is a tracking service for your technician, like you get with UPS or FedEx. I'm guessing end users would like constant updates of just when the guy coming to fix the security system will arrive. Now, if only they could license that capability to the cable company...

Raising some serious cash in Provo

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Monday, October 5, 2009
The sun isn't even up in Utah yet, but ApxAlarm's Stuart Dean announced this morning that Apx has raised a chunk of change. It closed on a new credit facility, which brings its cash on hand to $440 million. The facility is led by Goldman Sachs and will be used to "fuel growth in the next few years." What's that mean exactly? I'll let you know as soon as I get a chance to talk to Apx today. It's only about 6:30 a.m. in the Rockies right now. images-11 COO Alex Dunn, in a prepared statement, says that securing a loan of this size in today's economic environment is notable. From the release:
“The fact that we raised a credit facility of $440 million in the current economic environment validates that we are one of the premiere residential security companies in North America,” said APX Alarm Chief Operating Officer, Alex Dunn. “This is a real credit to our management team and the thousands of employees who provide world class service to our customers.”
Last year, at about this time, Apx closed on a $215 million credit facility, also led by Goldman Sachs. Apx used the bulk of that facilty to fund subscriber growth. Here's that story. I'll know more after my call today. In the meantime, here's the release.

LaSalle corruption scandal comes to an end

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Friday, October 2, 2009
The story is old enough now that LaSalle Bank isn't even LaSalle Bank anymore, but its former security director, George Konjuch, has finally copped to charges that he defrauded the bank by taking kick-backs in exchange for funneling work to INS Integrated Security Solutions, at the time headed by Armando Navarrete. We first reported on this back when the news of the charges broke in December of 2007. At the time, Navarrete's lawyer made this argument:
"This is not a conspiracy case," Smith argued. "You can't be a conspirator with someone that's extorting you." Smith said Navarrete was doing security work for which he was contracted, something his firm has been doing for more than 35 years, with a UL-listed monitoring center in Wood Dale, Ill., and then Konjuch started asking for small gifts--$200 here, help with paying for a wedding there--with the implication that the continuing contract depended on it. "When do you say 'no' to somebody who says what business you get and what business you don't get?" wondered Smith. "When it got to $40,000 a month, Navarrete wondered, 'How do I get out of this?' at which point all hell breaks loose."
Unfortunately, that argument didn't sway a jury. Navarette was convicted of bank fraud, bribery and illegally hiding bank transactions in July and is now in jail. Navarette at least never wavered in his story:
Navarrete admitted paying $1.3 million to George Konjuch, vice president of physical security at LaSalle Bank in Chicago. The cash payments in envelopes came from multiple withdrawals to avoid required disclosure of transactions over $10,000. In addition, prosecutors said, Navarrete gave Konjuch $20,000 in free security equipment at his home, $15,000 in free landscaping and snow removal, a $10,000 cashier's check for his daughter's wedding, and paid his way to Las Vegas for joint gambling junkets. But Navarrete testified that Konjuch extorted him, demanding the money or threatening to cut off his business.
Konjuch wasn't shy, that's for sure. Unfortunately for Navarrete, of the $45 million he billed out to Konjuch, "A witness for the prosecution compared the invoices to those of other companies and INS bills to other banks, and testified that $30 million of the payments were unjustified." Oops. Part of me feels for Navarrete, though, especially after reading this paragraph:
His client is a Cuban immigrant who served five years in the U.S. Air Force, then worked on jet fighters for Lockheed, before getting a job as a cash machine technician with INS, then becoming operations manager and buying the company in 1997.
The guy pulled himself up by his bootstraps. Unfortunately, it seems like maybe he got accustomed to those bootstraps being of the finest leather and went a little too far in his quest for the American dream. If we're going to grade these guys as scumbags, I'm giving Konjuch a solid 10 (after all, he's in charge of protecting people and assets, and he used that position to illegally pay for his daughter's wedding! Is this guy auditioning for the dad role in Say Anything 2?), but Navarrete is only a 7 at most. Offering a bribe is bad, but taking it is worse.

Who's the awesomest person in Arizona security?

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Friday, October 2, 2009
I just got a release from COPS Monitoring. It appears one of their own--Maria Malice, vice president of special projects--has won the prestigious Alarm Person of the Year award from the Public Safety Committee of the Arizona Alarm Association (AzAA) for the second year in a row. Here's the release:
Maria Malice, vice president of special projects at COPS Monitoring was voted Alarm Person of the Year by the Public Safety Committee of the Arizona Alarm Association (AzAA) for the second year in a row. According to the voting criteria, the person should present a professional image as well as offer positive contributions including ideas, time spent, dedication to the false alarm prevention program and implementation and completion of tasks in conjunction with the Public Safety Committee. Malice has been instrumental in the planning and set up of the Public Safety Days event, and has spent a lot of time on statewide licensing legislation that will be submitted for the next Legislative Session that starts in January. Held in September, the Public Safety Day event is specifically designed for alarm coordinators, security company owners and staff, monitoring station personnel and others in the security industry. The full schedule included a NICET Level I-II Test Prep Fire Alarm Class, various seminars and the Public Safety Appreciation Dinner. Malice, currently the Arizona Alarm Association president, was honored at the annual dinner, which was held at Don & Charlies’ Restaurant in Scottsdale. The dinner also provides the opportunity for alarm coordinators, their Chiefs of Police or Sheriffs, and alarm companies to discuss issues of concern. "It was truly a surprise to hear that I had been honored with this award a second time,” said Malice. “For me, working with the Public Safety Committee and serving the industry in the great state of Arizona is both an honor and a privilege.”
Congratulations Maria! Pictured below at the event are (left to right) Maria Malice, Becky Buchannon from Phoenix PD, Patty Rea from Phoenix PD, Jon Sargent from ADT, wearing his SIAC hat (and when I say "hat" I mean "shirt"), and Kathleen Schraufnagel from Broadview Security. maria-malice-wins-alarm-person-award-2nd-time

IndigoVision is growing, how 'bout you?

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Friday, October 2, 2009
Apropos of the discussion on Johnson Controls' numbers in security integration, IndigoVision just released their numbers for the year ended July 31 (why it took until Sept. 30 to get them together, I'm not sure, but much of the financial world is a mystery to me, frankly). And they look pretty good.
* Revenues up 43% to a record £26.4m * Operating profit up 59% to a record £3.26m * Adjusted basic earnings per share up 59% to 34.1p * Net cash more than doubled to £3.5m at 31 July 2009 * Maiden dividend of 5.0p per share
It gives some proof to the much-heard adage out there that video is growing faster than the rest of the market. I don't care how small or big you are, growing 43% organically is pretty solid. You can see the full numbers report here (pdf warning). In the full report, however, the numbers are slightly less rosy. Yes, revenues are up 43%, but net profit is actually down to 2,485,000 pounds from last year's 6,538,000 pounds. It may be because of a tax quirk, but it's reality. Also, cost of sales rose 76 percent while revenue grew 43 percent, so the company had to work harder to make its money this year (which makes sense). Regardless, if you start the year with 1,371,000 pounds and wind up with 3,551,000 in the bank, you've had a good year, especially in this economic climate. It's a good sign for IP video in general, too. Not only is the sector growing, but it's just starting to tap potential. Check this quote from IndigoVision CEO Oliver Vellacot:
Although the security market is moving from older analogue systems to IP, 90% of this transition has still to take place, giving IndigoVision a clear opportunity. In the current year we will be stepping up spend on research and product development to prepare IndigoVision for the next phase of growth.
There are only a few industries out there right now that can express such optimism.

Link round-up

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Thursday, October 1, 2009
I had a few minutes, so I wanted to point out a few semi-interesting things from around the web that came across my desk today: • I'm always interested in mainstream media representations of video surveillance, especially when they DON'T mention big brother. Here's a nice puff piece for the industry from Appleton, Wisc. Note the quote from Terry Kuehl, sales consultant for TECC Security Systems Inc. • Of course, video surveillance works both for and against the cops. This news report about cops getting caught on video surveillance playing Wii bowling while executing a search warrant was probably particularly embarrassing. • I found this video supplied by Schneider to promote the brand switch from TAC to be more than a little amusing in an awkward kind of way. But I'm always busting on security companies for not using videos, so I've got to give them their due for at least having a go at it. • I like this story about MotoLink, a GPS-tracking service, mostly because it reminds me how awesome Bermuda is. We should have TechSec in Bermuda. Stupid me.

Questions on the Johnson Controls story

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Wednesday, September 30, 2009
Because the comments to the stories can only run 500 words, I've moved a series of comments from John Honovich and I from the comments section of the Johnson Controls story here: John Honovich: Is this organic growth or based on acquisition? Who is the source of this statistic? Sam: The numbers are coming from Johnson Controls internally. I have no way of verifying them, so that's why I used phrases like "the company is reporting" and "saying it's moved from two percent to five percent." They say it is the result of their investments in generating organic growth. John: Organic growth from 2 to 5% market share sounds unlikely - even over a multiyear period. Assuming that the market size roughly stated the same, it implies that Johnson Controls increased revenue in this market 250%. Sam: That is a conclusion you can draw. However, the market may have shrank, allowing JC to grow market share simply by growing while others got smaller. That would contradict their predictions from last year, of course, so allow that it stayed the same: "As part of this initiative, Johnson Controls conducted a survey of security end users and came to the following conclusions: The market is growing at a 10 percent annual rate, with roughly $104 billion in annual spending; of that, $24 billion is being spent on integration alone, and that market is growing at a 17 percent annual rate. Asked from whom he sees JCI taking market share, Joel Lehman, JCI vice president of security & fire, said, "we'll take the 17 percent growth on that 24 billion dollars. That would be fine."" So, by their estimates, using the $24b number, JC's revenues went from 480,000,000 to $1.2b in security. JCI's 10k says total revenues in the efficiency unit as a whole were $9.2b for the nine months ending June 30, 2009. That was down 10 percent from 2008, but if it's true they shifted significant resources from "efficiency" and energy and focused on security, it seems reasonable to me that they could be projecting $1.2 billion in security in 2009. Even if they only mined their own current customers, only seven percent of whom (according to them) used them for security when they started the initiative, they should be able to grow pretty significantly on a global basis. -- I think comments on the blog can be longer, so if anybody else wants in, go ahead in the comments field. If you run into problems, email me directly.

NRTL NKOTB gaining momentum... watch out U.L. and FM

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Wednesday, September 30, 2009
I couldn't resist the turgid headline. As you may (or may not) recall from my first blog post, I'm fond of TLAs (or four- and five- letter acronyms, too, as the case may be). I just received a release from Mace Security International declaring its recently acquired monitoring center Mace CSSS had earned ETL Listing. Intertek/ETL, you'll recall from my cohort, Martha's, recent story is gaining in acceptance as an alternative to the other two main Nationally Recognized Training Labs, Underwriters Laboratories and Factory Mutual. Here's some of the release from Mace:
Mace Monitoring Center becomes one of the first U.S. central stations to earn the ETL Listing Mace Security International, Inc. ("Mace" or the “Company”) (Nasdaq Global:MACE) today announced that its subsidiary , Mace CSSS,Inc. has earned the ETL listing by Intertek, a testing laboratory recognized by the Occupational Safety and Health Administration (OSHA). The ETL listing indicates that Mace CSSS has been investigated and found to be in effective compliance with rigorous operational and safety standards and is eligible to use the ETL mark. This certification assures customers that their alarm monitoring center is maintained and tested annually by a nationally recognized testing laboratory to ensure full compliance with all federal, national, and local standard and codes.
It's nice that centrals now have more choice when it comes to NRTLs. Peter P. Giacalone, the recently hired president of Mace Security Services, said the listing was more proof of Mace's dedication to excellence. “We continue to strive to achieve the highest quality standards in the central station monitoring business," Giacalone said in the release. "The ETL listing combined with our UL standards listing places Mace CSSS on a standards level that only a handful of alarm monitoring companies have obtained.” In Martha's story from the October issue of SSN, CSAA officials said they expected members to vote for accepting listing from ETL. I emailed CSAA's VP marketing and programs Celia Besore to get a sense of how the voting was going, and she had this to say:
CSAA members will submit the final votes on the CSAA by-laws change at the Annual Meeting in few weeks. Some have submitted their votes by paper ballot, but the voting is not complete. The by-laws change will allow companies certified by any CSAA-approved Nationally Recognized Testing Laboratory (NRTL) to apply for CSAA membership. The only two NRTLs that are CSAA-approved currently are UL and FM. If and when the by-laws change occurs, a CSAA committee will review any NRTL applications to see which additional NRTLs to approve.
Sounds like U.L. and FM might have to make room.

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