With the deafening noise of gale-force winds, Americans breathed a collective (albeit cautious) sigh of relief in mid-May when the CDC announced a major easing of the demands and recommendations of a face mask prompted by a pandemic. It certainly brightened prospects in many ways about revival as we knew it and business closer to usual. This includes traveling and experiencing industry events.
At Security Sales & amp; The annual Integration Roundtable, held during the PSA TEC event in Denver to give the market an intimate view of current trends, challenges, opportunities and more. Although due to pandemic implications the session was held practically for the second year in a row, the speech took place just hours after the CDC’s milestone statement. That really set the stage for a lively conversation with fewer uncertainties than in the recent past.
Participating executive leaders were able to not only stay on top of the suffering and setbacks of 2020, but realistically assess where their integration business now stands – and share what they envision, more clearly as the pandemic dust settles.
This year’s panelists were Bert Bongard, President and CEO of Minneapolis-headquartered LVC Companies; Louis Boulgarides, President and CEO of Ollivier Corp. of Los Angeles; and Fabiola Francisco, director of customer success for Condortech Services in Fairfax, Va.
While the dialogue centers around the monumental effects of COVID-19, it’s all about the insights of acquired efficiencies, best practices, lessons learned, required solutions, and success tips.
Q: How has the pandemic impacted your business most and what do you see as we start to look past it?
Fabiola Francisco: The pandemic has certainly had an impact on our business, causing a halt for some time. We were able to balance much of our workflow across the federal government side. It started busier again, about two months after the pandemic hit. On the same subject : Debunking The Managed Services Myths. That was mainly because the government said, “Well, there’s no one in the office. Let’s get these projects up and running.” Where we struggled enough was with the supply chain, resulting in stops and stagnation for a while.
It was hard to drive our people to the workplaces to work on projects that customers wanted to do because everything was closed, including truckers and resources to get all of your shipments. Our staff has realized how important our work is and I think that’s the important piece. We may not have been recognized as first responders, but we certainly supported them. We did everything we needed to do to secure our federal government buildings and customers. Lately, we’ve been pretty busy on the government side and now a commercial has resumed. Usually the beginning of the year, first trimester and part of second trimester, it is quite slow.
However, in 2021 it has accelerated the pace. We did suffer a loss of income altogether, due to not being able to bill for two or three months last year. But we were able to manage with that. It was a little caring for my staff, and so we had to observe the culture here and how they felt about what happened. We had to make sure they were comfortable and had everything they needed. By 2021, it looks like we will achieve our goals. We were able to hire more people, which is a good thing.
Louis Boulgarides: In early 2020, we were in a hurry for a record year as the economy exploded. COVID hit and we were sent around to try to figure out how to support our processes and it was challenging. We were already primarily a virtual operation to begin with, so there weren’t really any logistical issues around that. And when 2020 ended, we were ahead of 2019. Where we really felt the impact was Q1 this year, and February is the worst month we’ve ever had. We had many orders scheduled to take place in 2020 that were delayed while people waited to find out what would happen with vaccines and reopening. About 60% of our businesses are in high-rise office buildings. Those here in Los Angeles still operate only about 10% occupancy. They are still hit.
We work with film studios that have returned in full swing. Pharmaceutical companies and medical facilities are beginning to move from COVID response back to normal operation. We start putting together some good months and making up for the first part of the year.
Q: To what extent were you panicked or very concerned? What was the mindset?
Boulgarides: I try not to panic in front of my other employees but there were moments. When 60% of the business is high office and they are literally a ghost town, it’s gut control at that point. Fortunately, we diversified quite a bit into other verticals that kept moving. We were able to manage through. To see also : Global IT Managed Services Market Report 2021-2025 Featuring IBM Corp, Cisco Systems, Fujitsu, & Accenture. Really the only time I was seriously worried was Q1 this year when things really slowed down. The quick way the vaccine was launched helped us exhale in March and start moving forward. The concern now is how long will this last? Inflation is coming, supply chain problems are coming and although there is a depleted demand summer is traditionally a slow time.
Q: Diversification was a key for a lot of integrators during this time. Were you able to lean on recurring revenue some, and how did that experience change how you view recurring revenue?
Boulgarides: Yes, it helped with the cash flow through the pandemic process. When I came to Ollivier, there was zero returning income. Over the past three years we have grown our recurring base to 10% of our income. Obviously that won’t support the business but it does create some flow. From the point of view of our clients there is still a lot of economic pressure on them and it is part of why I am focusing on holistic security. One of their biggest expenses is personnel. Read also : How Managed IT Services Help With Business Formation?. Having a security program effective for them will be very important. Using systems to reduce their security spending and continue to have it effective is really the best place for us to position ourselves forward. We need to help our customers get through this as costs increase and no one wants to go through those costs. Everyone is in this together to try to manage costs. This is how we approach security programs with people.
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Bert Bongard: We had to be very flexible managing through the pandemic. We had to change gears, with the bloodlines, protocols, disease management, work stoppages, delays, marketing strategies, all of it was in flux. We were fortunate that I started an initiative before the pandemic where we made our business continuity plans. Part of that was what happens in an emergency or pandemic situation. So we were a little ready. However, we had a lot of unexpected costs like hiring additional IT staff and had to work more with our HR staff as things attacked us quickly and furiously. Costs increased and revenues decreased compared to budget.
We grew year after year and although we didn’t reach our aggressive budget, we had a record year in 2020, which was amazing. It was really because of our diversification into so many different disciplines, including safety, fire, wiring, spraying and a very large service department. We would like to think of ourselves as recession-resistant and we have proven that we can be against a pandemic, so to speak. Among other things, we are able to withstand the storm, which being in the Minnesota market also includes the social problems we also suffered last year. I wouldn’t say 2021 has started gangsters, but we’re not far from our weight-balanced budget. One thing I would say about last year is that we had some job that was outsourced. Due to the pandemic we do not have as large a remnant as I would like to see.
Louis Boulgarides de Ollivier says that the work which his L.A. company is doing with film studios back to business as usual, and that pharmaceutical companies and medical facilities are now moving from COVID response to normal operation.
Bongard: A lot of these things have been around for a long time. Thermal was a hot bucket button, of course. We looked at it and did a few exams, but between HR and legalities we chose not to jump into that pond. And now we see that their demand is declining quite a bit. AI has been a hot topic for years and we see that really increasing as we can deploy analysis. Cloud-based and managed services really came in first place. We have a decent amount of that in our business but now we actually formed a team two months ago to look for it a little harder. I think it will be nothing but to grow, to grow, to grow. I would encourage any integrator to come in with managed services.
Boulgarides: We walked around exploring thermal and were ready to go. I didn’t sell any. I received one request for a thermal kiosk yesterday for a tall building that may reopen and they are looking at some solutions. According to Bert’s point, there is a lot of responsibility around all of this and how it is managed. Once people started going down that road, they were like, “Yeah, no.” The biggest requirement we received was for cardless credentials. Phone-based credentials mean recurring revenue for companies like us. It is low maintenance. You draw it. You build it. It takes care of itself. We’ve seen a huge increase in demand for Bluetooth credentials. Again, according to Bert’s point, we are really concentrating on utilizing analysis and video technology to help increase the staff for these properties.
There is only one expense for most of these farms that did not decline during the pandemic, security. Home care services fell, engineering services, parking fell, but they had to maintain security of the property. When property managers look at this from a business point of view, they are not able to utilize security personnel to adapt to the changes in revenue such as a building or site. Our ability to help support that with technology is a huge opportunity.
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Q: Has that mostly been about leveraging feature sets inherent in legacy equipment or replacement?
Boulgarides: Many customers have changed access control readers. The challenge is that there are several Bluetooth providers and the credentials do not always match each other. HID has an offer, other companies have their own offer. This has accelerated faster than the industry has anticipated and so this is still a bit challenging. In most cases it is an important aspect of manual processes necessary to get all the Bluetooth credentials in a system for people to use.
Francisco: Being heavily invested in a federal government customer base, we’ve seen them actually increase spending and focus on the AI piece. Artificial intelligence with issues like motion detection and analysis was highly required not only for greater situational awareness and operations but also for being able to take care of reports, distinguish patterns, and identify areas of focus or need. AI is something we will also see revealed in the property management market. We have a number of national accounts with several locations that are in RMR configuration for managed services like access control and CCTV.
On the government side, we don’t do a lot of Cloud-based work because of the way they work. They host their own Cloud data centers and there are a lot of regulations that go behind that. However, one thing they ultimately adopt, which we are really excited about, and it has a lot to do with the collaboration between security and their IT, makes a lot of virtual machines. Instead of us importing our large servers and MBRs, we are now working with our IT teams to be able to deploy our systems there, which provided a majority of the work we performed last year as a result of the pandemic. AI was great; more reports, more information. To help narrow the gap and build a strong relationship between IT and security, we hired an information assurance specialist to help get ATOs [Authorizations to Operate] for the government to make systems online and in their networks.
Q: Continuing with managed and Cloud-based services, have you found it challenging to develop a pricing model?
Bongard: Yeah, we’re still watching that. We take care of it separately. We have our installation vendors and we have our service vendors, and we operate it more through our service department. It’s a different kind of compensation and it’s about keeping people involved and interested. We don’t have it all figured out yet, but we do have a pretty decent platform. A good thing about it is that you can talk to your client and they can budget for it more easily. You can tell them, “This is what it will cost you during this time” and it becomes more delicious for them in the RMR model as well.
Boulgarides: When we put together the program, the first thing I did was bring in a director of managed services to manage the program. Our salespeople and other people in the company, when they get a chance at managed services, they can work with someone who leads the process. Whalers did not have to become vendors of managed services, they only had to identify the opportunities. Our gross margin for managed services is 50%. Installed systems sell somewhere around a 32% gross margin, so managed is much more profitable. The objections around Cloud are going away quickly, so we don’t deal with that much. It is extremely profitable and beneficial for our company.
From an motivating point of view, I make things really simple because I don’t want my salespeople to think too much. They get twice the monthly return income before everything they sell. If you sell a $ 1,000 RMR contract, the first time we get paid, you get a check for $ 2,000. It is 10% of our income now, with our goal being 20%.
Francisco: I love Luis ’compensatory idea and actually wrote it! RMR is very important to us and we currently have a large share. However, we would like to increase managed services. Much of it for us means learning change and training people for it. You also don’t want your big hunters to focus attention on RMR because they will get bored of it. It’s just a mindset for us to try to achieve that.
Q: What are some positives to come out of the pandemic experience in terms of operational efficiencies or best practices that will continue to benefit your organization moving forward?
Francisco: Before the pandemic, we were already busy and doing a lot more remote work. We were in Office 365 with Microsoft Teams, we had the Zooms, we had to Go to Meetings. We already had our virtual machines and everything in the Cloud. However, we had a plan that needed to be speeded up and we discovered a few things we were missing when we walked away.
Instead of doing a pilot program we went straight into production. We had to make it work. Everyone on our team rolled up their sleeves and fully adopted and engaged in the tools we have. They showed an initiative to learn and find out things. We still have some internal software that still can’t be in the Cloud so we had to find ways to manage that. We continue to have this innovative spirit and now our new thing is monday.com. It is a Kanban-type project management tool for several projects and my kids love it. We use it to track 50 current, ongoing projects. Another bright side of things was the strong camaraderie between our staff. We were blessed to have such an amazing team that we probably wouldn’t have realized if we weren’t all in it together. I guess trauma builds that cohesion that we experienced it together.
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Bongard: We’ve learned that more than anything, how resilient we are. You always hope you would be, you always think you would be, but you don’t know until times of trouble. Traditionally, we have no one working from home but during the pandemic we had 80%. We have learned that during a time of pressure one can create very good initiatives. As mentioned before, we have already examined our ongoing business plans and were ready. The other thing was that we were really enterprising in a meeting about what happened overseas before it really hit even the United States. We’ve also learned that technology really is the backbone of everything we do and has taken advantage of it more than ever. Practically office and virtual communication have become almost the norm. We learned that we can do this remotely. We learned that we can get through it. But it still doesn’t replace face-to-face and in-person touches.
Q: In long term, has virtualization changed to some extent the way you may do some sales presentations or hiring practices?
Bongard: Absolutely, especially some initial interviews. We had a lot of virtual lunches-and-lessons. We held a number of mini-conferences with our clients. It was difficult at first to keep people engaged. We had to change tools to make it more interactive and interesting. I think we’ve all learned as an industry how to get through that and improve it going forward.
Q: Perhaps some of the skills gained from that will add efficiencies down the line?
Bongard: Yes, especially training. Traditionally, we all had to send people to another state or elsewhere. You make costs and salaries or wages of some kind, every day from the office and hotel. During the pandemic, much of it was offered virtually and it was amazing. I’m looking forward to more of that. It is only more effective for companies and also for those who offer.
Boulgarides: We were already a virtual company so part of it wasn’t a major issue, but I never thought I should have 1,000 masks or cases of hand sanitizers in my warehouse. I do now if something like this ever happens again. When this thing hit, we had nothing. I went down to the wardrobe in downtown L.A. and force them to make us masks. This whole process, overall, as a company we are now better prepared for if that happens again. This may be the new normal as this progresses. We were lucky as a company in that, although we had a few cases of COVID, all did a good job following the guidelines to minimize spread.
The experience has strengthened our business strategy to diversify because you don’t want to have all your eggs in one basket. Thank God I didn’t have all my eggs in the office basket or else I wouldn’t be doing this interview right now. Managed services are really important, and we need to redouble our efforts there. It was one of the reasons we were able to get through this. It wasn’t enough to tour, but it helped a lot. Many of the things we did were reinforced as if on the right track; there was a wake-up call to make uble down on those things. It added a sense of urgency as there were a few bowel checks along the way.
This article originally appeared on our sister site Security Sales & amp; Integration.