This year’s Incentive FM Group roundtable addressed the issue of margin erosion in the UK contract security industry, and asked whether it is having a detrimental affect on the safety of client’s buildings and the viability of the security industry at large. The attendees also addressed what could be done to address this commodity pricing approach and whether the industry is selling itself short by broking labour as opposed to defeating risks. It asked – is there a way of setting a new standard and options for a better way of working?
Attendees at the roundtable were: Jeremy Waud, Incentive FM Group (Chair), Craig Pickard, Incentive-Lynx Security, Simon Chapman, Lodge Service, Steve Hall, Ultimate Security, Chris Kenneally, Cordant Services, Bobby Logue, Security Industry Strategist – Logue Corporate, Paul Harvey, Emprise and Chris Wisely, Axis Security. Jeremy Waud, Chairman at Incentive FM Group, chaired the event and started by getting a consensus from the Group that the low margins that are now the norm in the sector make it extremely difficult for security companies to survive. However the Group was split over whether the prices have finally bottomed out with some seeing a slight upturn in recent months.
Chris Wisely, Managing Director at Axis Security, said: “Margins have been falling for many years and in more recent times; this has been exacerbated by the economic downturn. Whilst it remains a challenge for businesses within the sector to generate margin improvement, we now feel that it is acceptable to some of the more discerning customers to pay more where a higher quality service can be evidenced.”
Craig Pickard, Managing Director at Incentive Lynx Security, said: “Procurement processes that focus too heavily on price will often result in contracts that are underfunded and do not achieve best value.”
It was agreed that the margins issue was not being helped by the large TFM companies who are often offering security solutions with an extremely low (or zero) margin so that they can get other elements of the operation, such as M&E, which attract a much higher margin.
“This is very predatory behavior and results in the smaller firms being knocked out of the equation,” commented Jeremy Waud, Chairman, Incentive FM Group
The Group felt strongly that what is at the heart of the challenge is that all too frequently customers simply do not understand what they are buying and that the industry needs to work harder to educate customers. It was felt that existing trade bodies had failed to do this and there was little confidence that they would in the future.
Steve Hall, Ultimate Security, said: “The various trade bodies have lost their way and I’m not sure how they can turn it around. They need to show what they can do.”
Key members of the Group felt that lack of differentiation between companies and what they are offering was also something that needed to be addressed and that added value niche services should be considered.
Paul Harvey, Emprise, said: “The security industry is partly to blame for its troubles as they are not offering any clear differentiation and in the absence of anything else clients will buy on price. There is too much of a victim culture in the industry – we need to step up and show where we can add value.”
The entire group was united in the belief that the industry needs to attract more good people or train the exiting ones to enable them to drive through these changes. They acknowledged that this was a difficult task against the backdrop of falling margins. However it was felt that a key account management approach would help to drive the education process.
Simon Chapman, Lodge Service, said: “The longevity of our relationships with our retail customers has to some extent helped us to maintain good margins. As we truly understand their business it is easier to deliver and demonstrate value.”
The Group concluded their discussions by brainstorming the idea of bringing together a number of security businesses to agree a high standard service offering – a best of breed solution – that could be offered to clients. It was agreed that this is an exciting development but to be successful it will need marketing to raise awareness. Plans were made for the group to meet next month to discuss this further along with innovative pricing solutions, and in due course to invite key clients to critique the output plans.
Bobby Logue, Security Industry Strategist, said: “The time is right to stop skirting around these issues and address them. We need to re-engineer the way that we sell security to deliver better value.”
Chris Kenneally, CEO at Cordant Services, said: “The battle ahead is margin versus value. Many customers only understand cost and we need to change that.”