星空传媒

In the second instalment of our predictions for the future direction of security provision in the UK, Bobby Logue examines the key drivers for development, outlines the consolidation process ahead and explains how businesses鈥� growing security requirements will ultimately lead to the adoption of holistic 鈥榮ecurity toolkits鈥�.

There鈥檚 little doubt that the threat of substitute services such as remote monitoring, electronic alarms, access control and CCTV will limit the price guarding companies are able to charge for their security solutions.

Monitoring technology alone is developing at a rapid pace and, in turn, becoming more and more cost-effective as an end user solution. Any excessive increases in the cost of security guarding would open the door for electronic services to take over a considerable number of functions currently being performed by dedicated officer teams.

In short, a challenge is being laid down before security guarding companies, who will inevitably have to develop their business in the electronic systems arena or otherwise form strategic alliances. Manpower will not become totally obsolete, but its use will be substantially reduced. There will be a growth in the response and mobile patrol sectors, with companies reacting to alarm calls and providing a limited physical presence on site.

As far as the threat of new entrants is concerned, the guarding sector currently has a low entry threshold, thereby allowing companies to open their doors for business with little capital investment. Regulation will become a barrier to entry, in particular by way of the voluntary Approved Contractor Scheme (ACS) administered by the Security Industry Authority (SIA). Further, the infrastructure needed to ensure a proper level of client service 鈥� encompassing vetting, training facilities, CCTV Control Room operation and other operational processes 鈥� will also form a natural barrier to entry.

Labour and substitute services or products will become more dominant, while the present power base enjoyed by purchasers of the security service will recede. Meantime, inevitable consolidation in the marketplace should reduce rivalries. Similarly, a higher cost threshold will lessen the threat of new entrants to the sector.

Put simply, if the security guarding industry fails to actively work towards restructuring the outcome will be a continually weak industry. One that suffers from lack of investment and shows poor returns for all stakeholders.

The different actions of the competitive forces as defined by Harvard University鈥檚 Professor Michael E Porter, influenced by the key drivers, must determine the future of the guarding sector. The key drivers shaping the industry are likely to be the cost of legislation, regulation and the resulting wage inflation, industry consolidation and a growing security requirement among the buying fraternity.

Tackling the labour shortage

The BSIA has estimated that the cost of licensing courtesy of the SIA and its approved agents will amount to 拢600 per officer in Year One. The cost of regulation will not of itself be a driver for change, but the resulting wage inflation most certainly will be.

It is clear that there is presently a shortage of labour, and that can only be aggravated by disqualification through prior criminality and any failure to meet the required training qualifications. The deficit in manpower will require guarding contractors to compete for labour in different arenas, and so they will have to look towards offering higher wages. That wage inflation will carry over to the end user.

Speaking at a recent conference on regulation organised by The Watch Security, BSIA chief executive David Dickinson estimated the cost of labour could increase (in some cases, and in certain regions) by as much as 10%-15% in Year One of regulation.

The ACS is to have a cost element attached, which we believe will be levied on a 鈥榩er employee鈥� basis (although the fine detail has not yet been announced). Inevitably, end users will start to examine alternative 鈥� and more cost-effective 鈥� security solutions combining manpower with technology.

A 2002 study by Securitas Security Services examining the guarding market transition across Europe (and outlined in its Annual Report of that year) highlighted the fact that as wages increased, labour churn decreased and the market moved from a presence-based, low-cost security officer to more focused services (including value added, patrol and response services and electronic security solutions).

As global market leader, Securitas shares a responsibility for the industry鈥檚 development. There is a strong connection between employee training, service quality and compensation. To ensure continued growth, Securitas always tries to improve upon each.

Part of this effort focuses on ensuring that security officers鈥� wages are near the average for industrial workers in several countries. Consequently, this results in employees with greater competence, a lower staff turnover, enhanced services and, at the end of the day, a far more satisfied and settled client base.

Drivers behind market development

The Securitas report states: 鈥淲ages and product mix drive growth and profitability. In an undeveloped market, the demand for security services is linked to low prices and simple security services. Wages and training levels are low, with high employee turnover as a result. Average wages in such a market are often less than 50% of those for industrial workers. The market grows slowly, with low margins present.

A 2002 study by Securitas Security Services highlighted the fact that as wages increased, labour churn decreased and the market moved from a presence-based, low cost security officer to more focused services (including value added, patrol and response services and electronic security solutions)

鈥淲hen companies in the market begin to take responsibility for the latter鈥檚 development and structure by increasing wages and price levels, the market develops further. The product mix changes as customers begin to demand more specialised services. Training levels also increase. The result is that fewer officers provide more services of better quality to the client base. Growth climbs, but consists largely of price and wage increases.

鈥淓mployee turnover is significantly lower, which also contributes to greater customer benefit. Markets in this development stage also have better profitability than less-developed marketplaces.

鈥淚n a developed market, wage levels have stabilised at a level as high as 90% of the average for industrial workers. The larger part of the growth increase is now volume gains. Customers complement physical guarding with technical monitoring and alarm systems 鈥� so-called 鈥榗ombined solutions鈥�.

Moreover, Time-Sharing services are increasing, providing solutions adapted to customers鈥� risks and willingness to pay. Markets in this stage exhibit higher overall margins and better profitability. Employee turnover declines still further and the competence level rises among officers, who can now provide specialist services with a greater degree of quality in the service content.

鈥淚n the US, officer wages are about 50% of the average for industrial workers. In Europe, they have risen to 60%-80%. For the Nordic countries, the corresponding figure is between 80% and 90%. The US market is characterised by an employee turnover of 70%-75% on an annual basis, while in the major European countries this figure stands at 30%-40%. In the Nordic states, 5%-10% turnover is the norm.鈥�

The removal of the UK derogation on the Working Time Directive could be implemented at some point next year, and would result in working hours across the security guarding industry moving from 56 or more hours per week to 48 or even 42. There have been various headline-grabbing articles in the national newspapers of late but, to date, there has been no indication of what changes 鈥� if any 鈥� will be made to the Directive.

Consolidation in the industry

Over the past six years, Infologue.com has been closely monitoring the activities of the Top 100 security companies operating in the UK (based on turnover). Significant consolidation has occurred, and this process is likely to gather pace over the next year or two.

We estimate David Dickinson鈥檚 calculation that the industry will consolidate to 200 companies (a theory he espoused at a recent Reliance Security Services conference on regulation) is credible if not conservative. Over a period of five years, we feel that figure could drop to something in the region of 50 companies once regulation has taken hold.

Three factors will be the driving forces for consolidation: the ACS, mergers and acquisitions and companies that close down. In respect of the ACS, approved contractors will have a lead time in which they may deploy 鈥� under certain criteria stipulated by the SIA 鈥� unlicensed security operatives whose licence approvals are being processed. We firmly believe that, without the ACS 鈥榮tamp of approval鈥�, it will be virtually impossible to legally deploy security operatives.

If you take into consideration the fact that the entry bar to the ACS is set at a reasonably low level, we forecast that anything up to 500 companies will join the scheme. In other words, almost double the estimated number of 260 companies accredited to ISO 9002, BS 7499 and BS 7858 quality standards via UKAS-accredited verification bodies.

Obviously, there is a distinct gap between the pricing aspirations of buyers and sellers. That discrepancy is further exaggerated as regulation begins (given that training and vetting requirements are an absolute necessity). Companies compliant with SIA regulation procedures 鈥� both mandatory and voluntary 鈥� will be attractive to industry consolidators. Those contractors who have failed to implement proper quality and training standards will be forced to comply with those same requirements or sell at a low price.

We are currently predicting that the number of forced sellers or companies which could close may be as high as 2,000 (within a period of two years), while the number of quality sellers could be as high as 450.

The current service offering

The current security guarding industry has evolved into a multi-tiered sector, with companies developing their services in various ways based (in the main) on end user demand.

Some contractors feel there is a requirement for a specialist company focusing solely on holistic security provision. Others are suppliers of guarding services alone, while some offer a range of facilities support services covering both manned security and electronics. Among this myriad of service offerings there are (and will be) varying levels of service with no direct correlation to size or service offering. These factors have given rise to a divergence of functions performed by frontline security operatives.

An important area is the development of skills within security companies to undertake holistic risk assessments and provide solutions using the entire "security toolkit"

The common thread is that those operatives are security officers to both the end user and members of the public but, in reality, they fulfil very diverse roles. Unfortunately, the varying skills bases are not formally recognised. Therefore, purchasing considerations and wage levels are normally focused on the presence officer.

Security 鈥� particularly in the presence tier 鈥� is viewed as a grudge purchase, and is perceived to add little to the value of the client organisation. This is the main reason why the industry is presently characterised by a low wage, low performance culture.

If consolidation leads to the eventual existence of around 50 security companies, one of those areas under most threat will be the first tier static presence security officer (whose numbers account for 60% of the guarding market 鈥榮plit鈥�). In a number of cases, they will be replaced by electronic solutions or otherwise mobile response teams.

Then there is the value-added officer. This is the second tier. A fast-evolving sector in which the security officer adds value to the client鈥檚 business through developed knowledge and accumulated skills. These skills include the use of electronic security technology, interpersonal skills or facilities-based services.

The police support officer鈥檚 services could range from scenes of crime support through to wide-load escorting on the UK鈥檚 roads, etc. The facilities-based officer, meanwhile, is given additional tasks not directly related to security but which add value to the end user鈥檚 business through the effective use of that officer鈥檚 time.

Last 鈥� but by no means least 鈥� are key holders, patrol officers and shared services. This is the function where mobile officers are tasked with patrol duties and also key holding response services to alarm call-outs. It is possible that this function could be extended to alarm response in place of the police (although ACPO representative and Lincolnshire Police assistant chief constable Peter Davies stated at this year鈥檚 IFSEC Exhibition that the police service currently has no intention of ceding first response duties).

Shared services are where an officer is shared between more than one client on a time-charged basis. As we have seen, Securitas refer to this as Time-Sharing.

We have no solid indication as to the relevant size of each type of service provision, except to say that our initial research indicates that there could be a 70-22-2-5-1 percentage split between the five functions. The difficulty is that the service offerings could emanate from the same company.

It is our firm opinion that, as the market refines itself, there will be a more distinct demarcation between each. It is interesting to see that, in the development of its European markets, Securitas has noted a movement away from the presence officer to other categories wherever improved wages, better training and enhanced service delivery have become the norm.

Growing security requirements

Of late, a great many businesses have been reviewing their security arrangements due to the need for swift solutions to problems from petty theft, violence and drugs in the workplace through to global terrorism. Previous arrangements are starting to prove totally inadequate in the light of growing attacks (from varying threat sources) on commerce and industry.

Having recently visited the IFSEC and Essen Exhibitions, we have witnessed at first hand the growing range of security solutions on offer. There is a burgeoning realisation that a security guarding presence falls short of the defences needed to foil today鈥檚 criminals.

There has definitely been a change of mindset. On more than one occasion, SIA chief executive John Saunders has asked the question: 鈥淚s service bought, for example, on the basis of 鈥榮ix people, 24 hours per day鈥�, or because 鈥榃e have a building and people to protect, so what is the most effective solution鈥�?鈥� We believe that this question is at the core of the security guarding sector鈥檚 future, where buyers and suppliers of guarding services will begin to review how they might 鈥榮ecure鈥� rather than 鈥榤an鈥� a given installation or site.

Interestingly, the joint Confederation of British Industry (CBI)/QinetiQ Business Security Survey 鈥� the findings of which were unveiled at last year鈥檚 CBI Annual Conference 鈥� make it crystal clear that companies鈥� security concerns take many forms. 23% of company directors surveyed are most concerned about business continuity, and the fact that plans put in place had not yet been tested.

The same percentage of respondents pinpointed the need for constant vigilance and doubts surrounding their ability to detect (and then respond to) threats. The fact that they believe existing security plans might not be adequate accounted for 20% of replies, and vulnerability to IT attacks 15%.

10% were concerned over transport infrastructure and travelling worker security, while the remainder focused on the general safety of their employees.

It is most likely that those security companies providing the best converged security solution from the 鈥榮ecurity toolkit鈥�, and which meet end user needs, will be the ones to prosper

Lack of police involvement

Client organisations are becoming increasingly aware that they can no longer completely rely on the police to provide security support services. Richard Childs 鈥� former chief constable of Lincolnshire Police 鈥� recently provided a stark picture of how policing in the future may well be focused more on community-based issues and less on the needs of business. He also speaks of greater reliance from business on the wider police family, which of course includes security companies.

How might we define that wider police family (also commonly known as the extended police family or the wider security family)? Childs offers his own explanation.

鈥淚n essence it means increasing the numbers of 鈥� and the background from which 鈥� those who can positively impact on levels of crime, disorder, social disharmony and even serious criminality actually emanate. The strap line might read: 鈥楢ll hands to the pump鈥�.

鈥淚t is not a model that is specifically about everybody becoming a police officer, or indeed organisations turning into mini-police forces 鈥� although in some of the more extreme models it is just that 鈥� but rather it is about, much more formally than before, increasing the numbers of people and organisations who could share the same (or at least similar) visions about society. And how that society should behave and work in collaboration and partnership with the traditional organs of the State to present a united, co-ordinated front with the overall aim of enhancing social well-being.鈥�

Introducing the 鈥榮ecurity toolkit鈥�

In essence, there are five key elements within the 鈥榮ecurity toolkit鈥�. Physical security 鈥� barriers and turnstiles, etc. Guarding (be it in the form of static guarding, key holding, mobile patrols or close protection, etc). Electronic solutions 鈥� encompassing alarms, CCTV, remote monitoring and access control, etc. Fourth on the list is procedural security. In other words, processes that 鈥榞lue鈥� the security organisation together (including protection against IT risks, the Duty of Care to employees and other salient areas of profit and asset protection). Then there is consultancy, which is essentially concerned with providing a knowledge base and advice about an increasingly fragile environment.

Changes that have already occurred 鈥� such as the increases in global terrorist activity and business crime 鈥� allied to forthcoming changes to the costings of security guarding will act as catalysts for a fundamental re-examination of current security arrangements. It is most likely that those security companies providing the best converged security solution from the 鈥榮ecurity toolkit鈥� (and which best meet end user needs) will be the ones to prosper. Customers with a medium-to-high level security risk should gravitate towards this kind of service offering. Also likely to succeed are security contractors providing an holistic 鈥榖undled services鈥� offering with added value.

It is likely that customers with a medium-to-low risk will move towards this type of offering in order to deliver cost savings. The latter could well become susceptible to price pressures. An important area is the development of skills within security companies to undertake holistic risk assessments and provide solutions using the entire 鈥榮ecurity toolkit鈥�.

Developing educational programmes

Organisations such as The Security Institute could well play a vital role in developing educational programmes that deliver the required competencies.

Already, there are excellent examples of the fusion of the various solutions in the 鈥榮ecurity toolkit鈥� enabling end users to select the very best solutions.

In the London Docklands, for instance, there is a facility where access is controlled by physical barriers with back-up from airlock capsules and a dedicated security officer in the Control Room. There鈥檚 a further operation in the north where five buildings within walking distance of each other are closed at night, and access and response is provided from a sixth building in the complex.

All that said, the change of focus towards the provision of total security as opposed to the supply of only manpower means that end users are rarely turning to security guarding companies for the required expertise.

A lack of knowledge has arisen among providers and users of outsourced manned security. For example, in the case of end users the in-house security manager has sometimes been replaced by a facilities or site services manager. For their part, outsourcing operators have not encouraged high security skills levels for their frontline management. This has led to a narrowing of focus within the industry, resulting in manning being the core issue rather than the provision of security. In turn, this has led the industry to be divided into different core constituents.

Buyers have been forced into sourcing solutions separately, while the competitive and suspicious relationship between the constituents of the security guarding industry rarely produces an overall security solution.