Security and Economic Recovery: Changing Perceptions – Geoff Zeildler at IFSEC

The economic downturn has certainly been keenly felt within the security market, with the last five years bringing particular structural consequences.

Business cuts across most sectors have led to a change in the role and authority of many corporate security managers, with companies’ risk expertise often reducing as a result.

An increased focus on cost has also led to an intensification in the role of procurement professionals in the tender process, with decisions often made by those with little or no security expertise.

With signs of an economic recovery beginning to show, Geoff Zeildler of the British Security Industry Association (BSIA) explored possible implications for the UK’s private security sector at a seminar delivered at today’s IFSEC Internation 2014.

All signs are pointing to an economic upturn. Since June 2013, the UK has enjoyed a sustained recovery – GDP has increased 3.1% with CP inflation at 1.8%, unemployment is down to 6.8%, but capacity remains and the stockmarket is up 8.6%.

As a result, the private security and outsourced services have positive prospects, with continued government policy of prospects and most major business services and security companies outperformed the stockmarket.

Security market drivers

The recession has structurally changed the market. there has been decreased authority of Security Management in end users which can be linked to cost pressures. Budgets are being defined more by experience than risk. Procurement values specification and contract volume are being regarded over security solutions, and people are seeking fixed prices over signing payments.

Recent dynamics include the attention of corporate risk has been focussed on Cyber and IT. While there has been a falling headline of crime statistics, business crime is flat and both shoplifting and fraud is increasing. Public trust issues have emerged although security providers are not aligned with their customers. Finally, the attractiveness of outsource services is being questioned. There have been limited mergers and acquisitions with people not investing in this market.

The impact on the security supplier

With pressured budgets, margins have tightened. Gross margins have tightened up to 50% in guarding, while the strength of the pound is encouraging imported technology. While the 1.6% wage inflation is not too bad, costs such a pension auto-enrolment, regulatory uncertainty and extended payment terms stretch cashflow while lending is still tight.

There has also been a reduction local Operations Management, including support and response capacity as well as zero-hour contract staff.

While there has been some success with gain-share through the introduction of technology, the overall focus has been on cost-out.

Changes to the industry that need to be accepted

The recession has impacted buy approaches and buying approaches have changed security needs. Procurement and IT have an increasing influence on purpose criteria and structure. Budgets will also reduce the absence of business-impact failure. Structures restrict control of integrated solutions, except in smaller customers and service bundling will increase in some market areas.

Unfortunately, professionalising the industry is not enough to gain respect, says Zeidler. Physical security will not be represented at Board level on the current mandate, accreditations will become hurdles for procurement who then focus back on price and people are still critical of the idea that quality is key to service and contract retention.

“Where reputation and quality and quality is damaged,” says Zeidler, “Insourcing is likely as part of broader outsourced service management.”

Perception of the market in 2014

Security is a deter/respond service to external incidents and every day is different, but it is hard to link service outcomes. It is also becoming increasingly complex in terms of scope and technology – as illustrated by IFSEC Global’s Periodic Table – and enmeshed with service management.

Every customer has different issues, priorities and management structures and the result is a highly fragmented market in both supply and demand unless outsourced – where the benefits have been poorly defined.

But there are some common requirements for all parties. Service benefit language that engages constructively, not hysterically at Board level. Prevention and other unrecognised activities must be made visible. And the industry must be able to demonstrate the benefits of converged security and enable it in larger contracts.

Changing perceptions

The industry needs to work together to for a more effective market. The BSIA Stakeholder Forum can assist in defining the challenge and more SRI studies must be undertaken to understand the benefits.

The industry also needs to demonstrate value by effectively collecting and analysing big data.

And finally, the industry needs to communicate better to deliver a new view of the impact of security at IFSEC 2015 with case studies of what has gone before.