The Next Level of RMR Atricle by SP&T News

Recurring monthly revenue has long been the lifeblood of many security companies. But while those residuals traditionally came from monitoring, today they’re increasingly coming from web-based applications. And, like most changes driven by technology, the growth in RMR comes with a learning curve; it requires adaptation. More and more integrators and dealers are pitching web-based applications, says Carlo Di Leo, general manager of Richmond Hill, Ont.-based Double Vision Group. And, because many customers are already familiar with these applications in their IT services, as well as the monthly bills that come along with them, they have some understanding of the new model.
“They may not be familiar with the security product and how it works, but they will be familiar with having to pay monthly fees for a service that’s offered over the web,” he says. Moreover, Di Leo says, web-based video surveillance has many benefits for the client so is easy to sell. They no longer, for instance, have to worry about backing up data, updating software or purchasing expensive hardware. They don’t need to add staff, or add to the existing staff’s workload, to maintain the hardware and software. They pay a set
fee every month, and there are no surprises. “For the dealer and integrator, you’re collecting that income every month. You’re putting your markup on it, whatever it is, and that becomes part of your recurring revenue. So, the more you build that up over the next five years, the more it will grow,” he says.

A major new opportunity for RMR is in access control, says Douglas Penson, president of My Managed Security, based in Milton, Ont. By moving access control to the Cloud, he says, companies avoid what he calls the infrastructure “pain point” that comes with the traditional platform: the old PC in the closet. Typically, with access control installs, the client chooses to use an older computer, creating problems later on with managing the system. The operating system may be old, the software has not been updated and anti-virus and backup were not maintained. “Then the computer fails,” he says. “They lose the database of all the staff or the tenants, and before you know it, you have a thousand people locked out of the building. Or everyone on the system may still have access,
but they can’t add, change or modify cards. Maybe they have a critical situation and need to lock down the building, and they don’t have access to the program to be able to do that.” Moving access control to the Cloud essentially outsources it and takes the computer off site, Penson explains. For dealers, it means they can go to a company like My Managed Security and sell the services to their own customers without a huge capital investment in infrastructure. “They can be in the game with very minimal cost, similar to the central stations.” Clients can have the security provider manage and maintain the system without having to show up at the company or home. Changes to the system — users added or deleted, access levels set up — can be made over the phone. “It’s that powerful, and clients aren’t used to having that type of service and turnaround. It takes away the concern of the clients needing to be a specialist in access control,” Penson says.
“And with that comes the RMR. You’re charging a monthly cost for that service, which in turn makes your security company more profitable. As well, because you have these maintenance contracts in place, it makes your business more saleable and helps you with an exit strategy in future. You have something to help you sell your business.” Di Leo says many in the security market are reluctant to move to selling software as a service (SaaS), and they’re taking some time to learn how the new model works.
“Many integrators are stuck on the old way of doing things. There’s definitely a learning curve to selling it. Most integrators will think, ‘I don’t want to tell my customers they have to pay X number of dollars a month.’ But if it’s pitched in a certain way, then the customers understand it. There’s definitely a benefit to it,” he says.“It’s just about changing the mindset, how you sell equipment. Training would have to be involved: training sales staff on the way you sell the technology to people.”
Ron Petnuch, president and CEO of Pittsburgh, Pa.-based Intertech,says that RMR is taking off because security technology, which has gone far beyond the traditional burglar alarm, is becoming part of businesses’ operations. Access control and video surveillance systems do more today than provide security; they also play such important roles as keeping track of attendance and helping companies comply with regulations. While Intertech does traditional monitoring — of equipment and fire systems, for example — their significant RMR comes from service contracts with commercial clients. These contracts can be five years in length and require Intertech to service facilities, maintaining cameras and access control systems, etc. Different contracts provide different levels of service. “We get a monthly fee, and we have to perform against that,” he says. “So as an integrator, our view of the business is to do project work, do service work and do their monitoring.
Traditionally, integrators did projects, like contractors, but never did the other pieces. We’re an integrator with a security operations centre, as well as a large service arm. So we’re doing all three pieces of that.” Many of Intertech’s clients are in industries — oil and gas, pharmaceutical, health care and government — that must adhere to a host of government regulations, Petnuch says. Where limiting access to areas that contain, for example,controlled substances is legally required, an access control and video system is
essential.“The system is not only part of security, it also provides the means for them to generate reports for the regulatory agencies they have to comply with. If one of those cameras goes down or the access control device is down,it needs to be fixed pronto. They can’t operate without that,” he says.“When the local pizza shop’s burglar alarm system isn’t working, you could take two or three days to get out there and fix it. With these guys, you can’t. They will pay for a service contract to have that repaired and maintained because it becomes an essential operational system to their business.”
Security systems are also being used for operational efficiencies, Petnuch adds. Access control records go to the human resources payroll department. For one client, the system reduced overtime by 40 per cent. Small businesses and retail chains present one opportunity for RMR, Di Leo says — one that integrators and dealers have not yet taken full advantage of. If they’re installing a video system at a shop with five locations that need
only three or four cameras, they’re likely to sell a DVR and four cameras.“You’re selling that equipment, and that’s great. But once it’s all installed, it’s done. But if you go in with a Cloud-based solution and a recurring revenue model, you can add maintenance to that for an extra small cost. And now you’ve turned your one-year deal into a five- or 10-year deal.” Another benefit of SaaS, Penson says, is that security providers can tap their existing clientele; they can introduce this new technology to the clients they already have. The security company also has the advantage that it’s sold on a per-door basis. One client with many doors will provide a good monthly return. Instead of charging one set fee for an entire building, you can make a percentage on each one of the controlled entrances. Penson says many more dealers of traditional control systems are coming to My Managed Security asking about SaaS because they see other dealers offering it and clients are beginning to ask for competitive quotes.
“It’s a hot topic. It’s changing the way we do business,” he says. “And the only challenge I see is changing the mindset of the dealers to start selling these new
services and providing this new technology to their clients.” Page 20 & 21 (April 2012 Issue) by Linda Johnson