New year new strategy

February tends to be the month where everything gets back to normal. Children are back at school and the revelries of Christmas and New Year are well behind us. It also tends to be a major planning month as financial year-ends loom and directors of companies take a little time to plan ahead to protect existing revenues and even build a strategy for expansion.

Life remains far from certain for directors of CCTV installer firms looking into the future right now. The CCTV installer community is beginning to divide into two camps. There are the optimists who see IP-surveillance as an opportunity to expand and grow their businesses and there are the pessimists who see the new networked world as only a threat.

The optimists will be thinking this month about how to build networking skills and capabilities to grab a piece of the expanding IP-surveillance market. The pessimists, on the other hand, are thinking about how they can protect existing customers from the IP-surveillance ‘invasion’, whilst navigating around the strengthening business and technical arguments for IP-surveillance.

This article is really directed at the optimists and would-be optimists because they tend to be on the hunt for information and tools to help them fast track the growth for their businesses.

New skills
One of the first items on the agenda for CCTV installers for financial year 2005/6 needs to be acquiring networking skills. Knowledge of how networks work is critical for taking advantage of IP-surveillance market. It is important to know about protocol selection, IP addresses, routing and bandwidth management for example. Training is one obvious option to plug any knowledge gaps amongst your technical staff (see panel overpage).

Why are integrators winning out?
Our observations suggest that network integrators are penetrating the growing IP-surveillance market quicker and more effectively than CCTV installers for four key reasons. It is worth exploring these because they provide clues for some of the behaviours that CCTV installers may want to emulate to take IT installers on.

IT installers tend to have the right mindset for absorbing IP-surveillance as yet another network application. To these companies it offers another reason for them to consult and advise their clients and deepen their relationship with them.

They have many of the skills needed to integrate an IP-surveillance system into the network. (They don’t however have the knowledge about lux levels, camera positioning, use of IR lighting, frame rate selections, focal length, understanding of Data Protection Act requirements and any of the specific knowledge and skills needed for set up an effective surveillance system.)

IT budgets are increasingly influenced by chief executives, managing directors and finance directors, as well as IT directors. How IT budgets are spent has come under much greater scrutiny partly by virtue of budgets tightening generally but also because of the realisation that clever use of IT can help differentiate a company’s offerings, as well as create efficiencies and save the business money.

This climate makes it possible for IT resellers to promote the benefits of IP-surveillance direct to these budget holders. For smaller firms with ageing CCTV systems in place, managing directors are just as likely to turn to their IT installer to complain about the fact that they are not getting high enough quality images or decent recordings from their CCTV systems. And if the installer is tuned into IP-surveillance he may well get the contract to supply a new IP-surveillance system with all its related computer hardware.

Even if your company put in the original CCTV system and you have the maintenance contract on it, you may well be cut out of the decision-making process today.

Network installers are also used to selling themselves and the services that they can offer, not the products they install. They do this because they have experienced the market dynamic of falling margins as the IT products they sell gain acceptance in the market.

In the IT world, margins of profit on product sales tend to fall quickly and therefore it is crucial for resellers and integrators to reduce their dependency on these fluctuating margins by supporting the sales with services. Training, consultancy, maintenance and support services are classic diversifications that resellers undertake to reduce margin dependency and transform themselves into true value added resellers (VARs).

The only other way to preserve reasonable margins on products has been to continually innovate. Hence the continual quest of distributors and their reseller communities to find new applications and software packages to offer to the market. It is perhaps this continual quest for innovation which explains why IT resellers, now that they are becoming aware of the merits of IP-surveillance, are grabbing the opportunity with both hands. They are simply used to taking the next idea and exploiting it to create another income stream to help them grow or just stand still.

Six top tips for traditional CCTV installers
Set against this backdrop it is easy for CCTV installers to be depressed. But as with all successful businesses, continued success is based on constant change and adjustment to compensate for changes in market demand and moves by competitors. Now more than ever is the time for CCTV installers to remember these principles for commercial success.

The CCTV optimists see IP-surveillance as an opportunity, and the pessimists see the new networked world as a threat

Below are half a dozen important points for CCTV installers wrestling with a strategy for IP-surveillance and wondering where to go with their business:

1 Reduce dependency on product margins which inevitably will continue to come under downward pressure as new IT-orientated entrants enter the market. These entrants will work hard to expose the margin levels that incumbent players are demanding on hardware and will prove the point by undercutting your total price by offering more cost effective IP-surveillance solutions.

Relying on these margins is particularly dangerous in the light of IP-surveillance because these systems are able to integrate into existing IT networks and leverage existing investment in storage devices, servers and other network infrastructure.

For example, in one recent case at Stafford General Hospital one network installer compared the cost of upgrading the existing CCTV system versus moving to IP-surveillance, and found that the savings generated from use of the existing CAT5 network cabling and wireless links to outlying buildings were in excess of £42,000 on cabling alone, bearing in mind that extension of the CCTV system would have required extensive internal and external laying of new coaxial cables.

2 Once you have learned how to do network integration you can begin commanding higher man-hour rates. You can bill some of your staff as the highly skilled network integrators that they are becoming. This work is more complex and, as such, companies are used to paying higher rates. Revenue lost from product margins can be increased gradually as your staff are ‘upskilled’.

3 Don’t leave this work to ‘those young geeks in the corner office’ to look after. ‘Ghettoising’ this important work will devalue it in the eyes of the rest of your staff and customers and reduce your ability to win IP-based work.

It will also lengthen the time it will take to generate a significant income stream from IP-surveillance and may even put you out of the race as the income stream on traditional CCTV work falls.

4 Consider how you package and price remote monitoring and maintenance service offerings. You can charge a monthly fee for this sort of support with an option of chargeable on-site work where security incidents have been picked up and then need saving and liaison with authorities, as well as for repair, replacement and upgrading of hardware and software. Third party agreements can be established with existing remote monitoring centres which can easily view customers’ cameras over the internet, providing the correct front-end software and security authentication is used by them.

5 Customers that are requesting CCTV system upgrades across multi-building, campus-style environments (especially where wireless links are already in place between buildings) are an ideal proving ground for IP-surveillance. They offer a great opportunity to illustrate cost savings over traditional CCTV installations, especially where external digging and coaxial cabling is likely to be required.

6 Wherever good network infrastructures are in place, combined with CAT5+ flood-wiring (all newer office blocks will have this today), you should now be considering the cost savings in using this as the communications medium for moving and storing surveillance images. The alternative of laying new, dedicated coaxial cabling around this sort of building can be very expensive and highly disruptive. The need for weekend working to reduce disruption only exasperates the costs involved.

As I said in my introduction, February is a good time to rethink your strategy for the next 12 months, and if you are a director of a CCTV installation firm you will always want to present a future-proof vision to your staff so that you and they can have confidence that the company will be thriving a year from now.

Confidence breeds success, and businesses that believe they will be around in 12, 24, or 48 months generally are, because that confidence generates the energy which promotes success.

Those that fail to address the issue will inevitably find themselves, their businesses and their staff on the defensive as they lose customers and get beaten to new contracts. To many more CCTV installers this year, getting into IP-surveillance will start to make good business sense.

Dominic Bruning is MD of Axis Communications (UK) Limited, Suite 2, Ladygrove Court, Hitchwood Lane, Preston, Nr Hitchin, Herts SG4 7SA. Tel: 0870 162 0047, fax: 0870 777 8620.