Where do buyers of security think the industry is going post licensing? From the October print issue of Professional Security.
Anna Hutton-North of guarding and support services firm MITIE reports results of research exercise commissioned by the company.
Few would argue that the past nine months have witnessed some of the most significant changes in the UK manned guarding sector. Consolidation has taken place throughout the industry; and the industry regulator, the Security Industry Authority (SIA), has driven through the compulsory licensing of all front-line security staff. The question now remains what is happening within the industry post-regulation. MITIE has recently commissioned an independent research exercise looking at what buyers of security felt post-regulation in relation to procurement, buying decisions and future trends within the security industry.
March 20, 2006 will live long in the memories of those occupying board room seats within the UK’s guarding industry. Faced with intense competition and pressure from clients looking to replace traditional guarding activity with new technology, executives were working hard to meet the requirements laid down in the Private Security Industry Act 2001. In addition, the challenge of meeting the deadlines imposed for obtaining membership of the voluntary Approved Contractor Scheme (ACS) became a No 1 priority, whilst in parallel senior security management sought new opportunities to differentiate what had increasingly become a commoditised purchase.
For many, ACS was seen as the new paradigm that would allow a select group of companies to gain a commercial advantage within the market. The expectation being that prospective customers would identify these businesses as the ‘elite’ whose commitment to training and licensing would mark them out as leading the drive towards improved standards, whilst also being flexible by employing officers who were still awaiting the physical receipt of their actual licences.
However, as the number of suppliers meeting the requirements for ACS has rapidly increased, questions are being asked as to whether the current level of in excess of 220 approved contractors represents the success or failure in the scheme.
The recent survey carried out on behalf of MITIE has highlighted that the benefits that the suppliers experienced were not necessarily shared by the buyers. The results of the research findings are summarised below.
Profile post-regulation?
Buyers were initially asked to identify the traits they associated with the market leaders in the security industry after March 20. The responses outlined the perceived characteristics. The strengths of the dominant players were seen as size, wide spread of geographical locations, in-depth knowledge of the industry and the breadth of the services they could offer; all of which gave a ‘comfort’ value to buyers. The scale however did have some drawbacks for the buyers, there were some areas that the performance of the market leaders was lower than expected. These focused on the lack of personal touch and poor service delivery; where the larger entity was divorced from the day-to-day on-site contacts.
Influences
The buyers involved in the research had very clear views on what influenced the decision making process. There were two equally dominant factors. Firstly that the supplier was reliable and secure, that the organisation was reputable and would deliver; highlighting the importance of the ACS accreditation. Secondly that it was the people and working relationships that made the difference. The strength of the supplier’s team, from sales through to delivery, was significant. Buyers recognised that people made the difference, and believe those suppliers who invest in training and development of managers, sales teams and officers were actively responding to client expectations.
Pricing was still seen as an important issue, but it was value for money, based on company and the quality of people, rather than direct cost. It was identified as the third most important aspect which illustrates the changes happening within the industry since licensing. The offering is now being recognised as a professional offering rather than a pure commodity, and buyers are making more educated decisions based on alignment between supplier and buyer corporate fit.
The fourth influencing factor was whether the company was a market leader. The ‘comfort factor’ of buying from one of the market leaders was captured in the profiling section; and the research highlighted the importance buyers placed on this. There was an obvious reassurance in buying from company that had a national recognition. The ACS may well help to build on this degree of reassurance for those larger suppliers who have become approved contractors.
Two specific ACS questions were asked about the changes in procurement following on from licensing and the bundling of services in the future.
Future procurement?
The previously held belief was that only a limited number of suppliers would achieve approved ACS. This would have meant fewer players in the market able to differentiate their offering rather than competing solely on price. However the large number of suppliers who are ACS approved is reflected in the results. Buyers are not seeing ACS as a decision making criteria. Over half felt there had been no change in their procurement and a further quarter believed it had changed only slightly. The overall feeling was that the decision criteria remained as company, team and price.
Will ACS encourage bundling?
The question was asked whether manned guarding and electronic systems would be bundled. As the manned guarding sector was seen to be becoming more professional and credible, there is an obvious potential to link this up to the electronic systems to procure one integrated bundle. The response from over half of the buyers was that the procurement of manned guarding and electronic systems would remain separate. A third felt that ACS may prompt them into bundling electronic and manned guarding services together at the point of procurement. The remaining 10 per cent were undecided on whether there would be any bundling as a result of ACS, feeling it was too early to tell whether there would be any changes.
The overall conclusion appears to be that the ACS would not be changing the current procurement methods of either manned guarding or electronic systems.
Where is the industry going?
The final question focused on where the market was going. The security industry is seen to be in a healthy state with a good growth potential. It was seen that the suppliers were becoming more professional, particularly as a result of the new Approved Contractors Scheme being introduced, and the role of the officer was seen as having greater credibility due to the introduction of Licensing. The buyers identified that there was a definite trend occurring in the use of electronic systems over the manned guarding within the security strategy, with the increased usage of CCTV and of access control via cards replacing officers.
The other major change predicted in the security industry was the consolidation of suppliers so that the market would become more polarised between the large national players and the smaller niche companies. This is already occurring within the industry where companies are acquiring competitors; one prime example being MITIE’s acquisition of Initial Security earlier this year to become the second largest manned guarding company in the market.
Summary
The overall summary of the research was a positive one. Buyers believe that the Approved Contractor Scheme is a benefit within a strong growing market, but that it is not affecting the way they procure security. It is a base line requirement, rather than a differentiator. For the suppliers who have achieved ACS they have demonstrated to clients a commitment to developing a professional licensed workforce that helps fulfil the two main buying criteria of company reliability and team relationships.
