COVID has had an incalculable effect on all aspects of our lives. Because of it, how we go about our business has changed the risk profile considerably. Listen now to hear Jim and Sal talk about the changes that occurred, what new challenges are on the horizon and what opportunities await us if we look at it in the right way.
Sal: So Jim, we’re both doing this remote today. Because of the most recent snowstorm that we had we decided to give Zoom a shot. So let’s talk about the outlook for 2021, what are some the changes, the challenges, some of the opportunities that are coming up. But maybe before we get into 2021, a couple of thoughts about 2020?
Jim: [chuckle] Yeah, this was the year that was. I often say that from the systems integrator perspective that we are goalies on the dart team without pads. And this year encapsulated that or amplified that. Don’t know what the best term is for it, but we certainly started out the year with expectations of continuing our booming economy, and what have you. And “wham bam”, as soon as March hit, everything changed. But we went through that back in 9/11. We’ve been through a number of other crises like that in our country and in the industry before, but we always seem to adapt. Necessity is the mother of invention, and there’s been a lot of inventing this year.
Sal: It’s funny… Before we actually get into this show, just for our banter part here, just thinking, I don’t remember 9/11… I remember 9/11 obviously, but this year just seemed to fly by. And I think it was… Everything was like two weeks at a time. It was COVID was only gonna last for a couple of weeks, we weren’t expecting a long time, and all of a sudden the year got away from us. And I’m not… I can’t remember if 9/11 was the same thing for us, if it was the same. Do you have any recollection or experience on that?
Jim: Yeah. That seemed to fly too. The first it was the shock of, “What do we do now?” I remember standing outside the office, maybe an hour or so, two hours after the planes hit, saw the F-16s flying overhead and you just wonder, “Okay, what’s next?” But we got back into the office and obviously being so involved with the Trade Center and with properties down there at the Trade Center and with the agencies down there, we were just so busy trying to figure out how to get back up and operating, that we lost track of time. And it flew by.
Sal: Yeah. It’s funny. I don’t know if I just put up a wall about 9/11 and just kind of bury it down, but I noticed that this morning, I was thinking about the show, thinking about what we were gonna talk about, and in talking about how changes in going forward, and it was just, “Wow, this year just seemed to fly from us.” But anyway…
Jim: Well there’s gonna be a lot of parallel, there’s gonna be a lot of parallels between 9/11 and what we’ve gone through this year, because any time… When you have chaos, no matter how bad it is, creates opportunity and it creates the needs to adapt and we went through that after 9/11, and we certainly have been going through that big time now.
Sal: What’s that saying? No good crisis can go to waste. Gotta do what you gotta do. Hey, let’s talk about changes. In the show today we wanna talk about changes and opportunities and challenges that are coming up. Let’s start with changes. We’ve looked at the security design and operations over the year, buildings were built to be able to get thousands of people into it. Now we’ve got COVID, now things are changing. What’s your opinion on this? What do you think is gonna wind up the long-term effect of this? We go back to normal or do we start… Or is this the new normal?
Jim: There is no normal… This is not the new normal nor was the old normal “normal” [chuckle] We’re gonna have a different environment going forward, even after you’ve got the herd immunity and the vaccinations are out there and whatnot. The impact of this economically is gonna have a long-term effect, certainly on the real estate market, most immediately. But the businesses that are in those operations in the brick and mortar offices or whatnot, they’re under great pressure now to save money.
Jim: They have been shown that they actually can keep their business going, to a degree, with remote employment, and a lot of people have acclimated to this remote employment, from the employee’s perspective. So I don’t see that going back to the way that it was, for multiple reasons. And I think that the adaptation to that is going to accelerate the acceptance of a lot of new approaches to security and new technologies with the…
Jim: Again, the premise being the big four principles of security is identity and access, and communications and storage, that’s the core of what we have to remember, that we’re trying to adhere to. The “Whats” that we used to have in the old days, whether it’s video systems, physical access control systems or what have you, those were means to an end. They’re not an end in and of themselves. And now, that the work environment is so different, we’re going to be re-looking at a lot of how we do what we do in order to attain that security.
Sal: There’s so much downrange stuff that’s gonna ultimately come from all of this, and I think it’s gonna be a good indicator as to what those changes are gonna become, namely building codes, right? If you take this downrange a bit, buildings were originally built to get as many people in it as possible, the elevator systems were designed to get thousands of people up and down in a hurry, and now what we’re looking at is obviously way less people coming into the buildings, way less usage. It’s gonna be interesting to see, maybe not in 2021, I think it’s gonna be too soon but 5, 7, 10 years out, do we wind up changing building designs? Do we wind up making it so that you have that six-foot separation and the designs are included in that? And I think that’s something that we may wind up seeing, but it may be, again, it’s gonna… Nothing is gonna happen in 2021 upfront.
Jim: Well, lessons learned From 9/11, again. Building codes changed after 9/11, for egress from buildings and for communications and notifications to tenancy, Local Law 26 in New York and all the requirements there for the emergency stairwells or whatnot. And a lot of the sensory technologies that came out after 9/11 that were looking at not only criminal activity but terrorist activity, we’re gonna have the same thing that’s gonna happen now. This is not the first infectious pandemic that we have ever had and it is not the last. So in addition to the resiliency of companies not being completely dependent on getting all their people into a central location or into a building, I think they’re going to make sure that they are not caught with that down the road and yes, consideration in building design and in the way businesses conduct their business, to be able to adapt to less concentration of employees in a single location or in operations, like we had earlier this year. I think that’s gonna stick with us. And again, depending on what happens with the senatorial elections in Georgia, we’ll see how aggressively the potential of this, all this reconstruction from the Green New Deal, which [chuckle] I think we had… This year we had the greatest reduction in CO2 emissions in the past, I don’t know how many hundred years or whatever, but it was a big decline and there’s been a lot of advances toward greener buildings and more sustainable buildings and whatnot.
Jim: But if we really go off the edge and start knocking buildings down and trying to reconstruct them without windows and what have you, that’s another good way to get people to not wanna come into the office, is if they’re gonna be in a cubicle where they can’t see outside. So we don’t know. I think there’ll be… If the Georgia senators hold their position and we really do have some bipartisan government, I think we’ll have a reasonable approach to that. And economically, businesses won’t be as throttled with enormous new taxation ’cause that’s a whole other animal in how 2021 is going to change, because if we go down that road, then that’s the last punch. That’s the last straw. How many businesses have been basically operating on a shoe string here for nine months? And if they turn around now and are hit with that radical taxation, and of course increased rent by landlords that are also being hit with that, then we’re gonna be in for a very tough 2021. Tougher than 2020.
Sal: Tougher than 2020? Economically tougher than 2020.
Jim: No, we could learn from this and we could have a positive, but if we go off the deep end now and really smack down our economy with crazy taxation, it’s gonna create even more of a flight out of the cities than we’ve already seen, and there’s a hysteresis to that, you won’t see the full impact of that to our economies for a while. But it will come, water will seek its level.
Sal: Let’s get into challenges. And let’s talk about de-funding the police, right? We’ve actually had a couple of shows that we’ve done where we’ve touched on it a little bit, but looking forward into the new year, what kind of impact are you looking at that de-funding the police, what that’s gonna do to private security, what that’s gonna do when there’s no response agency to call?
Jim: Well, all of the systems that our customers deploy for physical security are dependent on counting on the fact that public law enforcement is there, if they do have an incident. That’s a whole other animal when you no longer can count on that. And if I listen to the banter and the news media now… And again, we’re doing this podcast here a few weeks here yet for those Georgia elections, you’re hearing a number of number of politicians trying to walk back that vernacular, [chuckle] even Obama got on and said that that’s a cliche but it’s not practical. And then he got hammered by that from the extreme left. If they’re slow-rolling that, because they don’t wanna jeopardize the elections in Georgia but aren’t really serious about slow-rolling it, and if they do win those seats and push that, that’s gonna be a whole other animal, that’s gonna be on top of all of the other challenges that we’ve had to overcome in 2020.
Jim: And then if you… I mean, just look at the numbers, look at the numbers out there in Minnesota and in Minneapolis, the crime statistics, you know, homicides are doubled, car jackings are up like 300% or something like that. And this is only the beginning. I even notice when I’m driving on the highways now. How many times do you get passed by somebody doing 120, ’cause they figure there’s nobody there that’s gonna be pulling them over? People will take advantage of getting away with what they think they can get away with. That’s actually the worst long-term impact that we could have. We’ll overcome COVID, we’ll get the vaccines, what have you, but man, this craziness about de-funding the police, which has really nothing to do with improving policing, and what have you, it’s all about a different political agenda out there, and they’re just using that as a vehicle, in my humble opinion.
Sal: Hell, and the thing that gets me, obviously coming from law enforcement I’m gonna have a biased view of it, but if they really wanted to do it… And I said this a couple of times on a prior show, if they really wanted to improve policing in the cities, there are a couple of things that they have to do that they just don’t have the appetite to do. You get very upset when an officer winds up making a split-second decision and uses his weapon and shoots somebody, the reality of life is that the officers don’t get the type of training necessary to be able to make those informed decisions. You want them to react to the same standard as a US Navy Seal, but in the interim you give them a couple of weeks of police training, you put them out and you, twice a year, you ask them to qualify with a weapon. Yet you just don’t… And you don’t wanna get them to the point… Politically, we get it, you don’t wanna get them to the point where they become proficient with a weapon, because if they did they’d use less bullets and kill more people. So what do they wind up doing? Just “Okay, let’s give you a gun, but… ”
Sal: And they limit the amount of training that you really get with it, and it’s something that you have to constantly practice. And it’s not something that they’re doing. And it’s just one of those really frustrating things for me. I think the other thing they really need to do is to go through the selection process a hell of a lot better. I know we had talked about this on a prior show, you mentioned that if you start lowering the standard… If you can’t get the quality people that you want you start lowering the standards to be able to get the bodies, and when you start lowering the standards to get the bodies, what do you expect the end result is going to be? And that’s an incredibly valid point.
Jim: Well, even if the rhetoric of de-funding the police ends up being just that, and that’s rolled back a little bit, the impact already has been, as we talked on an earlier now, is the retirements, the early retirements. Or the people just leaving policing…
Jim: ‘Cause they’re so fed up with the fact that there’s no career opportunity there, and for those that are in there feeling as if they’re trying to do a good public service and have chosen… There’s a lot of other places they can make more money than in policing. But if they feel… It’s one thing if you feel appreciated, but you take that away, you have this animosity from the public sector to them, you have a feeling that they’re not gonna have truly a livable wage that they’re gonna be able to support a family on or what have you, and then you’re gonna… Like you say, you’re gonna start out with a whole very, very young, inexperienced, new workforce, and inevitably they’re gonna have to lower standards to get that many people in that quickly and the result is not gonna be good, and this all translates into greater risk for the public and for the businesses that are trying to have a secure future, whether it’s a work environment in the brick and mortar buildings or businesses or even for the home, because now you’re gonna end up with people that are with companies that are gonna have a greater degree of concern for their staff, not only just their executive staff, if they are working from home… Where are they living, are they living in these cities where crime is spiking through the roof?
Jim: It’s one thing, the investment in security systems is not only for their physical assets but for the safety of their employees. Well, they gotta be concerned about the safety of their employees, even if they’re working from home, and what is that environment?
Sal: Yeah. So that’s sort of a great lead into the next question and the next topic, being we got a new crisis, new technology, right? Inevitably, every time there’s a crisis, we joke about it all the time, “No good crisis should go to waste,” we see new technologies emerging and we realize that a lot of times there’s just not a good value to it, or it’s just not sustainable, right? The thing just sort of peters out, the company that produces it took the money and ran, they’re out of business and you’re stuck. Coming into 2021, new technologies and new crisis, what do you think about all of that?
Jim: Well, I think that the security industry has had a history of being very slow to adopt new technologies, they wanna see it proven, they wanna see it in theater working before they move to it, but I think in 2021, as we saw right after 9/11, we’re going to see a much more aggressive adaptation of new technology to address these new threats. You just need to be careful that we’re still watching those four core principles of security and not get caught in the bad mistake of looking at something that has great convenience but is sacrificing security for that convenience.
Jim: It doesn’t mean that we have to hold on to some of the old legacy physical solutions, whether… In the old days we had, in analog video, we had Matrix-switching systems and what have you, and that eventually moved into digital and we didn’t need a lot of those old platforms anymore. We’re going to have a lot of re-looks at the solutions that we’ve got out there now, and they pour a lot of money into maintaining some of these legacy systems in buildings that have hundreds really, not thousands, of people now in them, do you maintain that all going forward, or do you see this really as an opportunity to evolve and to deploy new solutions that are more flexible and economical? But again, don’t sacrifice security for just convenience.
Sal: Not only that, but one of the challenges coming up because of the crisis, because of the advent of this new technology that’s being rushed to market or things that are being sort of jury-rigged to work together, you wind up with a very aggressive sales force that’s going out and they don’t have your best interests at heart, they’re not looking to ensure that your security is there, ensure that long-term goals are being met. They’re doing it for a market share, right? They wanna promote the convenience of it, but at what expense?
Jim: Well, there’s a process called scenario-based testing, which is really an appropriate vetting of solutions of new technologies and technologies that integrate with other technologies for an overall solution, and I think that we’re going to see in 2021 is a greater partnering between security consultants, design consultants, integrators manufacturers and end users in recognizing that we’re in a great period of change with a convergence of IT and OT going forward. And we’re only going to be successful if we do that together and truly vet these solutions and have all the stakeholders behind solutions that are appropriately vetted rather than just… We learnt that bad lesson back right after 9/11, chasing shiny objects, all of the “Whiz bangs” that came out, the early, early generations of analytics and biometrics that “We’re gonna find Osama in the Super Bowl” back in 2001, and what have you, and a lot of those systems were deployed in, they were completely overhyped, they didn’t go through that vetting and testing process. The companies and agencies wanted to be perceived as thought leaders, and they wanted to be deploying the latest technology, figuring that that was what the public wanted to see.
Jim: Well, what the public wants to see is real security [chuckle], they want it to work. And look at what we had along the border back then, with the initial deployment of throwing all sorts of technology at the border but there was no real coordination with The ConOps of how those systems were to be used. So I trust We will not make that mistake this time, because although it’s 20 years ago, there’s a lot of people in the industry that still remember that, and we’ll have a better vetting process here going forward. But yeah, there’s, with social media and whatnot, there’s all sorts of direct reach-outs from manufacturers, software companies, trying to peddle their latest whiz-bang and what have you, and it’s gotta go through the process, it’s gotta go through the vetting of the industry to truly reduce the risk of an end-user making an investment in that. And of course, the end-user’s gotta be confident about if he’s deploying these solutions, what is he protecting and why is he protecting them? You know how… He needs to be confident about his business plan going forward, and he has to also be taking into consideration the fact that security systems alone are not going to provide complete protection, he does need to rely on law enforcement. So that variable…
Jim: That’s the first variable that has to be settled, I think once we get into January, if we can flush that out so we’ve got some surety going forward, you know, that we are… That we do agree, at least the majority of us agree, that we are a country that have a rule of law, and we are going to have law enforcement that enforces those laws, and if the laws are gonna change, well, that’s the legislative body that’s gonna do that. You just can’t have these rogue politicians deciding what laws they’re gonna enforce or not.
Sal: You know, it’s funny… As we’re gonna take a break, we’re gonna go into the next section opportunities, but thinking about everything that’s going on and obviously getting ready for this show, one of the thoughts that came into my mind when you talk about security and we talk about the rule of law and the constitution, and it’s amazing with a lot of… And I’ll just flat out say it, a lot of the trouble makers that we have today, and the people that are stamping their feet and screaming about the Constitution, have never once had to raise their hand and swear to defend the Constitution. And if we had more people doing that I think we’d be in a hell of a lot better place today. But that’s just an editorial note just from me.
Sal: Let’s talk about opportunities. What are some of the things CEOs can expect to take advantage of. Increase is going to be in risk possibly. What are some of the things that you’re seeing?
Jim: Well, I think it will provide an opportunity, again, as long as they have comfort that they’ve got a good business plan going forward and that we can count on the rule of law applying, it is going to be an exciting time for the vetting of these new technologies. If we thought that the vetting of the COVID vaccines went quickly, I think we’re gonna see parallels here in electronic security, with the tremendous advances that have been made in analytics and in communications, particularly communications and solutions that are much more hardened now against all of the cyber threats that we’re seeing now in last few weeks, even more visibility of how aggressive these nation states are in trying to attack our intellectual property and what have you, and infiltrate our businesses and our government. So the focus on secured communications will be, I think, tantamount going into 2021 and beyond, and that’s really gonna shed the light on the vulnerabilities of a lot of the old legacy infrastructure that’s out there, so for manufacturers and integrators and end security consultants, so there’s gonna be a lot of business here going forward. We just gotta make sure that we don’t wreck the economy so that we can take advantage of all these opportunities and I think improve the overall security landscape for all the stakeholders.
Sal: Having been the CEO of a private company, having been the CEO of a public company, and having gone through mergers and acquisitions, overall good opportunity for companies, is it good for the industry?
Jim: It can be both ways. I think sometimes… What I hope to not see in 2021 is if the small businesses, which have really taken… I mean, the big businesses have been doing great, right? Look what’s gone on in 2020: The big box stores, the social media giants, these guys are all doing gangbusters, it’s the small businesses that have really suffered. I don’t think anybody as seriously as the restaurant owners and what have you, which seemed to take the brunt of these shutdowns.
Sal: Oh those poor guys, they’re just… I don’t see how they come back.
Jim: And then you got some, on the security integrator side, you have a number of companies that have really focused on some of those vertical markets and real estate and what have you. I hope that the mergers and acquisitions aren’t… Because some of those businesses are just so back up against the wall that they’re throwing in the towel. Because the entrepreneurial spirit and the talent in those small businesses always has been the backbone of the security industry. It’s a healthy industry when you have large multinational corporations providing electronic security solutions, guard services, what have you, but you also… The industry has benefited from basically the gene pool that comes from those small, many times, family-owned businesses. I mean, the security industry pre 9/11 was really, really talked about as a cottage industry, because it was so diverse, so many small companies providing that security. But they had good trusting relationships, that’s where the term “trusted advisor” comes from.
Jim: I remember when we went public, back 20-some-odd years ago, and the investment banker said to one of my customers, he says, “Well, why do you do business with this little HBE? You could be doing business with a lot of the other really, really big companies.”
Jim: He says, “Because I know that I’m the most important thing to them, and I’ve got Jim’s cellphone and his dad’s phone. And if I know that I need to get a hold of them, I don’t care whether it’s Easter Sunday or Christmas or whatever, I know that I can do that.” There’s a lot of those relationships out there from those small businesses with clients, even with large customers that are very important, and the ecosystem of employees, technicians, project managers and whatnot, to lose that or interfere with that because of this evolution now, this evolution revolution, of the disruption that we’ve had from COVID and these shutdowns would be a loss. I hope it doesn’t happen. We’ve been pretty resilient in this industry. One thing about the security industry that you can say that the poor folks over in the restaurant industry have not had, security industry, unfortunately, is always a growing industry, there’s always more bad people, and they’re always coming up with new ways to do things, whether it’s career miscreants or terrorists or now it’s political anarchists and what have you, you just… Every day it’s something else.
Jim: So no, there’s no shortage of a need for security. What there is a shortage of at times, and we have to keep the education going, is to make sure that the security that end users are looking for isn’t a mirage, it’s not just something that’s, again, for convenience and it’s catching up on the vernacular of the day but hasn’t gone through the appropriate vetting process. So the seasoned talent in our industry, from the technicians and the installers and the project managers, and the really smart people that we have, and the manufacturers and what have you, and also in the consulting industry, I think there’s a great team there, that can work together and really improve the lot for all of us going forward.
Sal: Alright, so in the last two minutes, quick answers, alright? What should buyers be expecting in 2021 from alarm and security companies?
Jim: Without a doubt, they’re gonna be getting the hard pitch, because there’s a lot to pitch. So it’s not just self-serving. We’ve had an unusual time in the security industry where so much of our collaboration and networking is done at these in-person conventions. And we haven’t had one of those really in over about a year now, a year and a half. So when we really can get back to a degree, like I said we’ll never go back to a full normal, but we will get back to more collaboration and what have you, and I think that it’ll make it easier for the vetting of these solutions because, again, those scenario-based testing and the processes I talked about, to truly have end users touch and feel the technology. They’re staying abreast to a degree online and with Zoom conventions and what have you, but there’s just something to be said for seeing this live and really making sure that somebody is fully engaged with you when you’re making a presentation that you just can’t get all of that, doing that virtually. I think they’ve moved ICES west now to July.
Jim: Hopefully, that will be… That will come off… It will be far enough into the vaccinations that people will be comfortable with being able to go and attend that, and end users as well. But I think that will be the first step to get us back, to get the industry back to collaborating the way that we have so successfully in the past. So much for one-word answer. [chuckle]
Sal: So much for the two words, yeah.