The real price of security solutions: James Kelly looks at how sensible procurement can help operators minimise whole-life costs…
With a record-high volume of passenger journeys on Great Britain’s railways in 2016/17 it is of paramount importance that rail operators ensure the security of transport hubs and their assets, as well as the safety of employees and passengers. However, worryingly, businesses in all industry sectors do not always place enough importance on ensuring that they have robust security strategies, policies and procedures in place. In addition, all too often, those responsible for procurement make security-related purchase decisions on the basis of initial purchase price, rather than quality. This can often lead to sub-standard security products and services, which may prove more costly in the long-run or may simply never meet the organisation’s requirements.
This is an issue that has long been of great concern to former chairman of the BSIA, Pauline Norstrom, who spearheaded a research project commissioned by the BSIA which culminated in the publication of a white paper on the issue earlier this year. The paper titled The (Real) Price of Security Solutions – a white paper on the challenges of buying and selling high-quality solutions, was authored by Dr Terence Tse, an associate professor of finance at ESCP Europe Business School, and explores the price versus quality debate from the perspectives of both buyers and sellers of security solutions.
Get what you pay for
Unsurprisingly, one of the paper’s key findings suggests that end users would find it far more beneficial to invest in high-quality security solutions. As the old adage goes, ‘you get what you pay for’ and low-cost solutions can often result in them being low-capacity, creating further unwanted costs down the line should an incident occur. Such costs can include direct losses, such as financial costs associated with the incident, and indirect losses, such as costs over and above the immediate costs resulting from the incident. Even if a major incident does not occur, other costs can arise, such as premature replacements where new systems are needed sooner than expected.
The ‘real’ price of a security solution can come to light when something goes wrong, such as a failure in footage being recorded or an alarm not correctly alerting the right personnel to an incident. This compromises the reputation and safety of the business, and defeats the whole purpose of investing in a security solution in the first place. However, despite this notion, shrinking budgets can push these risks to the sidelines; but it is not just end-users that are putting price first, with many existing suppliers and new vendors responding to such budget constraints by offering lower-priced solutions that can be at the expense of standards and quality.
‘I have been in the industry some 16 years, and before that, in tech marketing across a broad spectrum of sectors’ said Norstrom. ‘During that time, I have watched and experienced the manufacturers race to the lowest selling price, compromising on materials and functionality to do so and often at the cost of UK jobs in the process. I have seen the industry rush to the cheapest price to win the bid, with companies offering solutions at very low margins and being left with substantial additional costs they cannot cover. In addition, end users are often provided with an inferior solution which does not solve their problems.’
Simon Adcock, chief executive officer of ATEC Fire and Security – and a sponsor of the white paper – explained that: ‘Every buyer’s motivation is to obtain best value, and value is a balance between quality, performance and cost. So far, so good, but many buyers define cost simply as price. To further compound the issue, they are not able to define quality in the context of what they are buying. So if value is a function of quality, performance and cost, and the buyer doesn’t understand cost or quality, how likely are they to achieve best value?
‘In the absence of being able to define value, many buyers will take the lowest price from the company they feel can meet their requirements. Sometimes this works out just fine. However, sometimes the buyer’s organisation ends up spending far more in the long-term, or putting up with a system that’s unreliable, or just doesn’t meet their requirements,’ explained Adcock.
Where low-quality security solutions can incur higher direct and indirect costs, conversely, high-quality solutions can be of great assistance in minimising whole-life costs. This is because they tend to be better at preventing incidents, and if problems do occur, these solutions are far more capable of managing and handling the situation. As a result, end users of high-quality security solutions are likely to face lower direct and indirect costs over the lifetime of the solution.
The white paper also suggests that using high-quality security solutions may actually increase business opportunities for an organisation. These ‘security dividends’ include:
- increasing the efficiency of the business because good security is geared towards preventing incidents that may cause loss.
- increasing the attractiveness of the business to customers as it will be viewed as more reliable and resilient in the face of unforeseen events
- demonstrating that the business is a good corporate citizen as it can handle more issues, thereby reducing the demand on police resources
- increasing the employee retention rate of the business as most people prefer to work in a safe environment.
Commented Adcock: ‘Security technology can sometimes deliver significant operational benefits where the impact is more measurable/certain and the benefits easier to quantify. Budgeting and decision making for these solutions sits above security, but improved security can be a major beneficiary. An example would be CCTV cameras used to monitor operations on an aircraft stand, or an identity management solution that allows more efficient allocation of expensive city-desk space.’
Many end users often ignore or fail to address the necessity of having a thorough understanding of their requirements in terms of security solutions. If anything, given that risk management is critical to business continuity, end users must be clear on (and able to articulate) the needs that they want to meet, and use them as the basis of their purchase decisions. It can be highly beneficial for end users to work closely with security suppliers when making their purchase decisions, particularly where those responsible for procurement do not have the specialist skills to detect the risk within their organisation. The rationale is that many of these security providers have extensive experience that can help end users to identify and pinpoint their needs.
‘Every single engagement that we [ATEC Fire and Security] have with a client follows a seven step process,’ explained Adcock. ‘The first four steps of that process are a structured programme in which we learn about the client, their needs and environment. We help them to identify opportunities to create value within their organisation through reducing operating costs or even improving their service to customers.
‘Only when we get to step five do we begin to design, and in our experience, that’s where most suppliers start. Of course, because we’ve spent the time to agree the customer’s requirements, we have a solid foundation for our design, and we have to be thorough, right through implementation and support, to ensure those requirements are met.
‘And as we get more engagements with a single client, we build a deeper understanding of their operation and can identify more opportunities to create value,’ concluded Adcock.
The paper sets out recommendations for both security providers and security buyers through checklists which aim to help security buyers make better informed purchase decisions and security providers to better demonstrate the value of their offering rather than compete on price alone.
The full white paper can be downloaded from the BSIA website.
James Kelly is CEO of the British Security Industry Association