One Houston, Texas-based wire specialist already sees electrical contractors moving into the security market. "Electrical contractors are becoming multi-faceted," said John Myers, president and CEO, Houston Wire & Cable Co. "Instead of just doing his normal electrical work, he also is pulling in access control, security and fire alarm and safety cables, as well as the voice, video and data cables. They are coming to the counter of the traditional electrical distributor and in some cases finding out that the distributor does not carry those products and has been going over to the ADI and specialty distributors to buy them."
Myers said Houston Wire & Cable has a line of wiring for residential and commercial security wiring applications that electrical distributors can sell to electrical contractors. "Distributors are searching for a single source," he said. "We put together a product line for that."
You can break down the security market into four distinct areas: access control; burglar alarms; fire and smoke alarm (life-safety) systems; and closed-circuit television. In 1999, security dealers/distributors sold $7.36 billion in burglar alarm systems alone, according to Security Distributing and Marketing magazine. While residential and commercial/industrial applications exist for all of these systems, the bigger security specialists tend to gravitate toward the commercial/industrial side because as the systems become more complex and require more customization, software programming and troubleshooting, the profit margins increase.
One Chicago-based wire distributor who supplies cabling for commercial security systems said electrical contractors can get into the security market by building relationships with the manufacturers' sales reps and security dealers to find out how they can get some subcontracting work for cable installation. Rich Galgano, vice president, Windy City Wire, Inc., Chicago, Ill., said while it's common in the security market for security distributors to have their own installation crews, they do sub out work, particularly if they need a union contractor on a job site.
"In Chicago, if it's a non-union shop they will have to sub the work out to a union electrical contractor. They will pull the cable and send their guys in to do the terminating, the testing and the software. These security companies focus on the software, and the troubleshooting is where the money is, as opposed to the installation and the cabling. A lot of these guys don't want to mess around with it. They just want to get somebody who can get in there and pull the cable for them."
Union membership can be a big selling point in this market, agrees Bill Aaron, systems specialist, Guarantee Electric, St. Louis, Mo. Aaron said the fact that Guarantee Electric is a union contractor in the heavily unionized St. Louis market is a big selling point for security dealer/distributors looking to subcontract installation of their systems.
"It has been a great selling point," aron said. "We can offer the subcontract labor to the vendors so they can better utilize their people for the programming, testing and servicing."
Aaron said Guarantee Electric has been in this market for years through the HVAC and temperature control work it has done, and that the company has seen the security and fire alarm market grow quite fast over the past three years.
Electrical contractors may also be able to capitalize on some market turmoil now underway in the security wiring industry. For many years, much of the installation work was done through ADI, a large distributor owned by Pittway Corp., Chicago, Ill., a large manufacturer of security products. ADI sells Pittway products and, as a "captive distribution arm" of the corporation, it recruits local installers to install these products in security systems.
According to industry sources, this scenario left other manufacturers of security products and distributors of their products scrambling for whatever business ADI/Pittway did not get. "If you weren't a Pittway guy, ADI would play with you, but they would sub you at every chance," said one southern New England manufacturers' rep now looking to build a business in the security market. "You were relegated to some sort of second-tier operation."
The picture seems to have changed when Honeywell bought Pittway earlier this year. According to several sources from within the security market, Honeywell isn't happy with ADI's performance and is looking to sell the company.
There will be a channel shift," said Byron Brewer Jr., vice president, Northeast Marketing Group, Wallingford, Conn. "It will open up the channel to other non-Pittway manufacturers who had been selling through a hodgepodge dealer network. The dealer's universe tends to be as far as a tank of gas."
He has found manufacturers of security products to be very willing to consider alternate methods of having their products sold and installed, and that's good news for electrical contractors.
Brewer cites one market study that 35% to 50% of the wiring pulled for security and cable television is already being pulled by an electrical contractor. He said it's a market that electrical contractors won't find to be too foreign. If electrical contractors are hanging motion sensors to turn lights off, it's really not different than hanging a motion sensor to turn an alarm on.
"From a wiring perspective, it is generic. It's just what feature packages you need to have-identifying who is in the building, how you alert someone and where you alert them to. Once you get all the hardware in, it's just software issues of plugging in features."