 Hey, Aloha, and welcome back to the Think Tech Hawaii studios. Happy holidays from the Security Matters Hawaii episode. Today we've got Bill Bozeman on the line with us. He's remote. I'm bugging him during his vacation time, and we're going to peer into the security industry from, I think Bill's probably one of the insiders. If you don't know Bill, he's all over the industry from India. Bill, thanks for interrupting your holiday celebrations there and joining us for an episode today. Glad to be, Andrew. Look, I've got on my red holiday shirt, like yours. Yeah, you're red. I'm red. I've got a red background. I don't know if you can see, but it will be a good looking episode. Hopefully we can do something valuable here. I thought we kind of do a year in the year in review. So if we look back to early in the year, Tech had a new home. You know, we started off there. Are there shows earlier? It seems like that sort of leads off the year for me. I don't know. Are there other things that go on? We have BLC, I guess, going on early and the great conversation. So when the year started, sort of what did you see churning out there that, you know, maybe set the tone for the year? Well, I think the economy was good. And despite what's going on in the stock market, I think the economy is still pretty solid. Although I attended the financial meetings in New York last week and, you know, there wasn't quite as much optimism going forward as I saw at that same meeting last year, Andrew. So no, we had the economy going for us. But you're right. Tech is the first larger show over a thousand of the year in 2019 in March. Yeah. So last year it seemed like when we went to great conversation, there were finally, you know, some a little more input from the integrator community. I think there's been, we've seen a lot of M&A merger and acquisition sort of activity. And, you know, I think there was finally a concern from some of the integrators being voiced about our, how prepared are we for these larger enterprise customers that are going through the digital transformation. You know, what's our integrator community doing? What are our manufacturers doing? What's your take on that conversation? Well, I mean, the M&A continues to be hot. I think as the interest rates raise, if they continue to raise the rates, things will slow down a bit. I mean, I'm not an economist, but that's pretty much common sense. But I mean, last year, I mean, 2018 was extremely active, right? Both on the vendor side as well as on the integrator side. You know, I can't really say that that's a good thing, nor can I say it's a bad thing. It's just something that we deal with. So, and sometimes it ends up being, I would think, probably good for the end user of the products. In other cases, maybe not so good. You know, there are some incredibly good independent physical security integrators. Very, very good. I mean, in some cases they can do miraculous things that even the large giant roll up conglomeration experts can't do. So, I mean, that isn't going to stop things. It's going to keep going on as long as that money's available. I know we were talking a little bit about some of that valuation practice that goes into, you know, what makes those integrators valuable to buy. I know sometimes it's just geography. You know, the big guy doesn't have someone in Canada, so he buys someone in Canada or whatever it may be. But other times it's the true value of that company or some intellectual property that that company has. Do you see the smaller guys gearing up to be sold? Is that a popular topic of conversation? I mean, we don't view it that way out here where we're at, but I don't know the conversation on the mainland, you might say, on these smaller, you know, 10 million and under kind of companies, you know, are their owners content to just kind of keep cruising along? Well, you know, 10 million and under is tough. You know, the due diligence that goes into these deals is significant even for the smaller ones. So the, you know, the cost ratio of evaluating a company, it makes it a lot easier if they're 10 million enough. Having said that, they are strategic buyers. You know, many years ago when I sold my company, that was to a strategic buyer, and I was very strong in one vertical. They really wanted to be in that vertical. So you've got your strategic buyers, you have your financial buyers right now. They're both active. But you know, the really small integrator, the two, three million dollar integrator, it's a tough road to hoe unless you have a strategic buyer. Yeah, that's it. But the multiples, the multiples are fairly good right now. You know, for the integrators that have a respectable, you know, EBITDA, a five, six, seven, eight percent EBITDA, then the multiples are quite solid. Yeah, it's interesting. It seems like most of, you know, most integrators I know are obviously PSA tech members and they, it seems that they love the industry so much that there's, no one's pushing the sell. Like in other words, it's, what else would they go do? So you might as well work for yourself. You know, the, I know you and I have pushed long and hard about adopting some cyber practices and I know we're now talking about those get delivered in sort of a managed services type of package. Do you, do you, do you think we're going to start to see more bite off on that or what's your, what's your, what's your feel there? Cause, well, let's start from the beginning of last year to the end or from the beginning of 18 to the end of 18. What do you, how do you, how much influence do you think we had? Let's, let's just kind of go with that, that route. On the, on the cyber side you're referring to. Yeah, yeah. Yeah, I think, I mean, it's been an amazing, you know, in all the decades that I've spent in this business, almost, almost four decades now, I think I see the fastest change I've ever seen for a specific discipline. I mean, you and I were on the early bandwagon and we, we just didn't have much traction. Possibly we were early, early to the race. Yeah. But I mean, right now everyone takes it very seriously. I think there's confusion on the part of the integration and quite frankly confusion on the part of some of the manufacturers, although they have really stepped it up in this last 12 months. I mean, you and I were both there when both the integrators and the manufacturing, you know, slash vendor community really didn't express a whole lot of enthusiasm for getting involved and doing what we felt was the right thing to do, you know, regarding cybersecurity. I don't, we're really not getting that pushback now. Now we're getting a little bit more, oh gosh, what do I do? How do I do it? Other than immediately, when do I do it? So that's been rapidly, you know, accepted in this last 12 months. I think everyone knows they need to step it up. It's just how do you step it up? Yeah. And so I'm trying to think when was that big cyber congress? Was that in 16 or 17 when we, when that was the far, I think that was your vision to put that together. Was that in 16? That was, yes, that was in 2016. Yeah. And we really have a lot of people, you know, walk away from there with concerns, but maybe, maybe a little confused. So, you know, that's why the Cyprus cured event that came the year after that was, I think, much more in line with the needs of our community. Okay. And so when you, when you're talking today, so I still, you know, the integrators that I speak to are, I think they're in that mode that you said how do you think that they're operationally that their owners are ready to give spend money on some of these higher level certifications and the understanding of their people? Because it's a bit of a, of a spend, you know, that they haven't had to absorb. Do you get that feeling from our owner community? You know, I get mixed, not mixed signals, but mixed opinions on this. I think, first of all, I'm pleased to say because simply because, you know, people like you, I mean, being the chairman of our cybersecurity committee, I mean, you have been, you know, fabulous getting this message out to the integrator community into the vendor community as well. I don't believe there are any PSA integrators that are totally clueless and don't get it zero. And that's, I feel very, very good about that. And once again, I compliment you and our cybersecurity committee for accomplishing a lot there. However, I do not see the majority of the PSA integrators, which I think, you know, you and I would agree are pretty much the cream of the crop in the physical security world with the best products and high technology capability. However, most are focused on protecting themselves, you know, from from from getting cybersecurity insurance to learning the base on how to protect themselves to partnering with companies who can protect their own company. Yeah. So some see this that everyone sees the threat. Now, the opportunity, the opportunity, a smaller percentage see Andrew. And I think that's going to change. I mean, the some of the MSSP products that we're that we're bringing to the forefront will allow the physical security integrator to participate in the opportunity part in the profitability. However, as of today, I would say that is the majority. But the good news is we have everyone is concerned and stepping up to the plate, protecting themselves, etc. But not everyone is saying, I think I might be reselling the cybersecurity services that PSA is bringing. Most will take a wait and see attitude. I would say that you and Christine, quite frankly, are somewhat of an exception to the current rule. It's that that's promising because I recall people in in 16 at our event, people that I respected quite a bit telling me that cybersecurity was a fad. I was like, I don't think this was a fad. No, no. Yeah, I think everybody realizes the everybody realizes the the threat. No one is is saying it's not me. No one is saying it's not my problem. Everyone is saying it's a huge problem and we are part of this. We are. We can be part of the problem and we also can be part of the solution. That's the group that sees the opportunity. Not only potentially could they be part of the problem, but potentially they can be part of the solution. And therein lies an incredible opportunity for the physical security integrate. And by the way, this just isn't Bill Boseman's opinion. I mean, this is opinion of cybersecurity experts that we've had done lengthy due diligence with that dug in and understand the capabilities of a traditional physical security, you know, integrator. So it's a partnership though. Yeah, it's also different as you know, it's a different type of partnership that an integrator would have say with an enterprise access control product. Or an enterprise VMS. It is a different type of a partnership. It's actually a closer partnership. Yeah, and it's it's interesting. I've talked with folks that are trying to figure out how to bite off all of that, that IT work. You absorb the work stations and all the endpoints and others more like myself are really interested just protecting the equipment that we've dropped in on a network. But then you've got these sort of shared responsibilities in a network. Managing that's a little more difficult perhaps. So, you know, I think it's going to be fun to watch. I'm glad I'm glad that, you know, you're seeing more people stepping up and wanting to play from our industry. I think it's only going to help. You know, there's there's a lot of other industries out there. The pro AV industry is going to have to come aboard. They have the same problems and they're not as quickly identified with security risk as security folks are. You know, we sort of live in that environment. I saw a really interesting article on on the adoption of a more of a risk based approach for assessing the supply chain itself of which, you know, our our integrator community is a part of that supply chain. So as they start to vet our organizations out and we get some of those results back, I think we're going to start to see from from the Homeland Security perspective. You know, how do we really grade out, you know, and and then some of these will have some real numbers to put to the sentiment and the feelings that you and I have, you know, and we'll find out who's really doing things and who's talking about it. And, you know, maybe it's the big guys, you know, maybe it's the little guys hard to say is, you know, I know ADT bought a big, a big cyber company that they sort of rolled out as well. Do you have much visibility on how that's going? Do you know what they're doing with that? If I'm not mistaken, Andrew, I think they bought two. And I believe I believe that their, well, of course it's ADT, right? That is the, you know, it's a cliche. They are the 800 pound gorilla. Yeah. I believe that they're focusing on the residential market and the smart home market have allowed them to offer this as part of their monitoring services. You know, if there was the burglar and the fire alarm in the home and the controlling of the stats and also protecting your home and then possibly some FNB business and small medium sized business. I don't see them as being an enterprise player, but, you know, just like the PSA integrators have this amazing customer base. Look at ADT's residential base. Yeah. I mean, it's the largest in the world. So they have, they have a built in customer base. The customers, the residential customers have now are realizing that they are at risk. So there's a perceived need there. So I think ADT's program makes a heck of a lot of sense. Yeah. Hopefully we'll, we'll see that adoption to continue to spread awareness to maybe take it from the home back to the business. Tate, we're going to cut to break pace and we're going to pay some bills. We'll be back in just about one minute with Bill Boseman. Hang on. Hey, Stan Energyman here on Think Tech, Hawaii, and they won't let me do political commentary. So I'm stuck doing energy stuff, but I really like energy stuff. So I'm going to keep on doing it. So join me every Friday on Stan Energyman at lunchtime, at noon on my lunch hour. We're going to talk about everything energy, especially if it begins with the word hydrogen. We're going to definitely be talking about it. We'll talk about how we can make Hawaii cleaner, how we can make the world a better place. Just basically save the planet. Even Miss America can't even talk about stuff like that anymore. We got it nailed down here. So we'll see you on Friday at noon with Stan Energyman. Aloha. Aloha. I'm Wendy Lo and I'm coming to you every other Tuesday at two o'clock live from Think Tech, Hawaii. And on our show, we talk about taking your health back. And what does that mean? It means mind, body, and soul. Anything you can do that makes your body healthier and happier is what we're going to be talking about. Whether it's spiritual health, mental health, fascia health, beautiful smile health, whatever it means. Let's take healthy back. Aloha. Hey, Aloha, and welcome back to Security Matters Hawaii. We're talking with Bill Boseman, president and CEO of PSA Security. And we're just trying to revisit 18 and some of those trends and some of the things that we're pushing on our industry, things that were important. Bill, we were discussing that push from cyber and how that sort of started to wake, I think our integrators up, definitely woke our manufacturers up finally. And we want to get into maybe how those services get delivered, which is really typically more of a managed services type of platform. And I know you've got a vision for how our guys can get from sort of break fixed to managed services. So give me your take on the implementation of that. What are we going to try to do to lead the industry from a PSA position? Well, Andres, we've reported to the board and the bank as we dig into this. And our program, by the way, gets rolled out. We do a soft rollout in January with a hard deep dive rollout at PSA Tech in March and November. And it isn't just cybersecurity. Cybersecurity is one part here. I mean, we have video surveillance, access control naturally, which are our core competencies and cybersecurity. So all of them delivered in a managed services environment. So we have been delivering enterprise and small and medium sized business standalone systems for quite some time. And of course, now they're on the network, but still the it's a different business model, Andrew. And we I feel, and it isn't just Bill, but a lot of people who studied the industry feel that the industry is moving in a direction. It's a freight train and isn't going to stop. Statistically, here is what we are estimating for our group of systems integrators of approximately 200 of the 300 integrators that PSA supports our physical security integrators with the other 100 being pro-AB. So we feel that we are suggesting that they slowly migrate to a managed services business model, which will improve their cash flow, will improve their finances and absolutely improve, dramatically improve the exit valuation and their borrowing capability. We're suggesting that they migrate 20% of their business in 18 to 24 months. So that's 24, 20% of their revenue run rate over an 18 to 24 month period. We're not suggesting that they abandon their traditional model. Absolutely not. We're suggesting that they slowly migrate into a managed services business model. 30% is better than 20, 50% is better than 20. And we have statistics from the financial community saying that that is a very, very good move. In addition, Andrew, as the purchasers become younger, it is a model that they are more comfortable with. It makes sense, the whole CAPEX equation. I mean, it makes a lot of sense and that's where things are going. The vendor community, excuse me, just like with cybersecurity, is somewhat slow to provide the products, but as we both know, the products are there now. The bandwidth is also there now. So there really isn't a good reason not to take a very close look at models like this. You're getting customer demand, you're improving your cash flow, you're improving the finances of your company, including the exit valuation. That's really something we're really pleased about. We originally will go to market, right now we have 14 partners that will allow our integrates to adapt to this model, both in cybersecurity, video surveillance and access control. Okay. Yeah, that's good. So we've been doing that ourselves, which is a great success. I mean, the model works really, really well. I know the customers who, like our DOD customers, talk about cloud, but they're not ready to consume security that way yet. But our commercial base, if I could move it all to that direction, I would definitely be doing that. I think it's a great time. I'm glad that there's a push. So talk a little bit about the training. I know that I've got a book that I've got to get read before tech about transforming your business. I think that came maybe to Christine from the board. But what kind of education are you going to try to get out there for our community, in particular our PSA member community, owner member community? Well, you know, that's part of the challenge and that's what we've been working so hard on. It's not, it is a different model. I would say that the technology really isn't the challenge. The challenge is that it's a different type of a sales cycle. There's a different compensation program for the sales representatives. The cash flow model is very different. How you recognize the revenue is different. The attitude that the bank is going to have towards this type of an operation versus a traditional contract or pay operation is different. So these are all areas that we'll be educating our integrators about. You know, from compensation to the different type of contract you need to use, different type of sales technique, possibly even different sales people from the traditional enterprise sales people. So it's a full package. If you're missing one piece that can slow up the entire process. So it is a full package and we're excited about rolling it out. Yeah, I think there's a half day or an all day session or something like that. I mean, so I'm looking forward to that. Do you, did you, did you see good adoption? Has that, do you know about the signups yet for that event that a lot of people jumped in already? I don't know how it, I don't know if you hear that those metrics back already just announced. It's early in the registration game, but here's what I can tell you. The original room that was set aside in Denver for this, I went back to the team in Denver who was coordinating the logistics. And I said, it needs to be a bigger room because I'm very confident the room will be filled up. You know, it's the day that the show, actually it's the day before the show opens officially. So it's the night of the day of the open. So yeah, I'm expecting, you know, several hundred because I think even the integrators, and this is what we're preaching. Even if you're not interested in making these changes, you need to understand why others are. So you understand what the competition is doing. Not just what you're missing, but what you have to deal with. Yeah. When your, when your competitor comes to that end user with a completely different model, and that may be very little, almost nothing up front. And you're going in with a six-figure upfront requirement. Yeah. You have to understand, you have to understand these financial dynamics. So you can stay afloat. Yeah. I think it's so critical to always understand that that landscape is changing all around every integrator. So whether you want to play or not, you better understand who's playing in that realm. Good point. Yeah. Yeah. So outside of maintenance services, as we get into 19, I mean, we'll have that good focus early at tech. We're going to have Cyber Secured Forum down in Dallas in July. What else do you think we should expect? You did mention, you know, the economy, you know, with interest rates rising, things could be changing. I know we usually get our economic update there from our friends at NSCA when we go to BLC. What's on your horizon? I know you're talking about some of those financial circles. What do you see for 2019? Well, like I said, the meeting I just attended, and I'll be attending another in February in Florida. It's just, I would say, more cautiously optimistic, Andrew, than covertly, you know, optimistic. And of course, you can see that with, you know, I mean, right now the government shutdown, which we're currently experiencing as of today. Let's hope that this is resolved and doesn't drag on, you know, until 2019. The trade war comes up, Andrew. I mean, it's impacted our organization because we, you know, our numbers have been reduced with, you know, reduced with some of the Chinese products that we represent. So you've got the trade war. You've got the interest rates rising. So you have this uncertainty, you know, that I think may have some people inclined just to put the foot on the break and pause things. And that's why I believe that there's some concern. I think once we get one or two of these resolved, that things will loosen back up because overall, I mean, the numbers for most companies are looking fairly good. Yeah, it seems like. I'm not sure. I'm not sure it justifies. I mean, some of these companies losing, you know, 10, 20, 30% of their value, some of the tech companies. Yeah. Yeah. I mean, I'm not an analyst. I'm not a financial analyst, but I think overall we're, the economy's not that bad. Yeah. And I think for our industry, there's a, we have a massive backlog. And I know a lot of the integrators do. So, you know, that's a, that's a, it's an important point that we've always been a little bit resilient as an industry. You know, when the economy goes bad, crime goes up and security's busy and when money to spend. I mean, it's an interesting, interesting industry from that perspective. I hear people say that. I don't necessarily agree with this, Andrew. I hear people say that the security industry is recession proof. Yeah. It's not recession proof because we're seeing that in the 80s, right? We saw that some even in the 70s, but I do believe it's recession resistant as compared to say, let me pick something. Retail. Luxury vehicle. Yeah. Luxury vehicle. Jewelry. Fancy cruises to Europe. But security, security has become so important. I mean, I, this is, you know, I was quoted this saying this, you know, a long time ago and it really is true. And it's become more relevant than more accurate statement now. But I mean, we have both been in this business a long time and we really have gone from the outhouse to the penthouse. I mean, you just don't, you just don't build a facility. I would say in the world without taking security into consideration. Yeah. I mean, when I got in this business, we were security with an afterthought. Wow. It is no longer an afterthought. Yeah. And believe me, it is up to the, I mean, security is, it is in the C suite. It has the attention of the C suite. It has the attention of the legal team. It's a very big deal and I don't see any change with this. So, you know, sometimes adversity and as you mentioned crime, terrorism, I mean, things that are just have a negative feel to them. They are in fact, you know, in some cases, I mean, you just can't get around this. They're drivers for our business. Yeah. Well, we are fortunate that we're here to help. I hope our clients feel that they're fortunate to know us and know of the efforts that PSA puts out and the rest of our integrator community, our manufacturers, all of our friends out there. Bill, I really appreciate you taking some time during your holidays to speak with us today. And join me next week. I'm going to have some folks in here from the IEEE. We're going to talk about their role in all of this technology. And you guys stay safe out there. Aloha.