Strategic alliances are relationships between businesses meant to create value in a mutually beneficial way. In the security industry, alliances involving manufacturers are common, but for integrators there are only a handful of alliances. Integrator alliances are a good way for mid-size integrators to grow and differentiate themselves from “big name” brands. We reached out to them to learn what they see as the major benefits of this form of cooperation.
A strategic alliance is a relationship linking two or more organizations meant to create and capture value through mutually beneficial sharing of technologies, skills, products, markets, etc. Alliances can turn potential competitors into allies and help small and medium-size players leverage the size of the whole network.
Airline alliances such as Star Alliance or One World are quite well-known. In the security industry, partner programs are the most common example of alliances. Either in the form of a technology partnership where different companies work together to develop a new product (e.g., an analytics company working together with a VMS vendor) or a channel partnership — of a manufacturer working together with distributors.
a&s reached out to two integrator alliances to hear about their thoughts about this form of cooperation and its usefulness for systems integrators (SI). We spoke with Bill Bozeman, President of PSA Security Network, and Alan Kruglak, President of National Security Integrators and Principal of Genesis Security Systems. PSA Security Network is the world’s largest electronic security cooperative. As a cooperative, it is owned by the SIs themselves. The company is owned by 130 integrators in the U.S., Canada, Mexico, and Puerto Rico. National Security Integrators is a network of 15 integrators in the U.S. and Canada. Even though these alliances are different in size and governance structure, the benefits they see are similar.
The Benefit of Alliances
There are three approaches to acquiring new capabilities: build, buy, or borrow. Businesses can acquire new capabilities through internal development using their own internal resources or using consultants (build); they can acquire another company that has the desired capability (buy); or they cooperate with other firms to build the new desired capabilities (borrow).
Building your own capabilities requires resources which might be out of reach for small and mid-size integrators, and even if the company has money, buying another business often leads to acquiring more than is wanted or needed. Alliances are therefore a sensible alternative for an integrator wanting to access the capabilities they need, whether to extend their reach or benefit from group buying size.
When Do Integrators Seek Alliances?
In the U.S., most members of integrator alliances are mid-sized companies with revenue of US$8 to $12 million a year. In this stage, many companies reach a point where further growth/development is constrained by specific capabilities difficult to develop on their own.
For security integrators developing markets in new locations is the main driver for seeking alliances with other integrators. Dealing with national accounts is lucrative for integrators but can be a stretch of their financial abilities and personnel.
“I used to own a large integration business which was sold in 1995. When we got into business again we had a problem dealing with national accounts. We now have an organization of 15 companies to take care of national customers and have offices all over the country. The alliance allows me to leverage the members’ geographic distribution and have the outreach of a $250-million company,” described Kruglak.
PSA represents a total of 230 integrators (of which 130 are owners in the co-op) with over 600 offices all over North America. “Officially we are a purchasing co-op but that is only one of the things the organization does. Education and national deployment are as important as our buying power. In fact the integrators themselves will say that education and national deployment are the most important,” said Bozeman.
Are you ready for an alliance?
For integrators that decide that an alliance is the right way to achieve their goals, it is recommended that they ask themselves the following questions. A positive answer increases the chances that the company’s corporate culture is ready for collaborating with external partners.
- Does the company have a good internal communications framework? This will help facilitate information flow between all the parties.
- Is the company able to assimilate new ideas and work procedures from outside?
- Does the company have strong project management skills?
- Will it be able to manage projects handed over from another member?
- Is there an appropriate person(s) to manage collaborative effort?
- Is there top-level willingness to commit to collaborative effort? Without top-level engagement the alliance will not be long lived.