The 80/20 Rule is Alive and Well

by Dan Dunkel - President, New Era Associates

Published in Today's Systems Integrator

The Pareto Principal originated in 1906 from Italian economist Vilfredo Prateto's observation that essentially said 20 percent of the wealthy owned 80 percent of the land. It has been modified through the decades and today we understand it as basically 20 percent of the people/tasks are vital while the remaining 80 percent are trivial. I think this principal accurately reflects the current and future state of the security convergence market.

Personally, I am convinced that five years from now, 80 percent of the traditional physical security vendors, large and small, and their channel partners will be marginalized or out of business totally. They will be displaced by the accelerated focus on open systems, standards and R.O.I models being promoted by IT vendors and increasingly being purchased by their decades long contacts within IT and senior management. Major IT vendors control the enterprise purchase cycle.

Agree or disagree, the funny thing about the 80/20 rule is that basically everybody thinks they are in the top 20 percent. This, of course, is impossible. So I have devised a test for the physical security industry to examine your understanding of the competitive threat from IT vendors. Are you aware of recent news that has a huge impact on your businesses moving forward?

These headlines occured between April 17-21 and are copied exactly as they appeared in the press. They are in no particular order of importance but all have an impact on the security industry:

1. Cisco to invest US $16 million in Video-Encryption Company WideVine Technologies

2. GE Security selects Sun Identity Management Suite to deliver combined IT/Physical access solution; OEM relationship to deliver seamless security solution for Fortune 100 companies and Department of Defense

3. Tech Data U.S. Helps IT Resellers Break into Physical Security; Physical Security SBU Established and Leading Manufacturers Signed

4. Big Brother Goes Digital
Physical Security Gets Plugged Into The IT Network.
(Cover Story, VARBusiness)

Let's review:

1. A major IT gorilla, Cisco, continues to buy leading edge technology in the sweet spot of the physical security market.

2. A former, yet still formidable, IT gorilla, Sun Microsystems, is partnering with a major physical security provider, GE, to establish OEM ties and sell solutions through mutual channels.

3. One of the largest IT companies worldwide with a 20+ billion-distribution business and over 90,000 customers just established a security convergence SBU to assist IT integrators selling physical security products.

4. The cover story in VARBusiness warns their large IT integrator subscriber base not to miss the opportunity in your customer base.

If 20 percent of the physical security industry reads the VARbusiness website, I would be surprised. However, this is the bible for the IT integration community, along with CRN (Computer Reseller News). These websites provide valuable insight into the nature of your new competition. I suggest you bookmark and read them.

While we are on the subject of reading material. I just picked up a fantastic book: CLASSIC DRUCKER by the editor of the Harvard Business Review. It is a compilation of the work of Peter Drucker, arguably the greatest management thinker of all time. I want to quote a passage from Drucker because I think it sums up the problem that a lot of physical security executives have today, and conversely IT executives don't. It is from the chapter titled: "What Makes an Effective Executive":

" Problem solving, however necessary, does not produce results. It prevents damage. Exploiting opportunities produces results. Above all, effective executives treat change as an opportunity rather than a threat. They systematically look at changes, inside and outside the corporation, and ask, "How can we exploit this change as an opportunity for our enterprise?"

This is exactly the question the IT vendor community has asked and their answer lies in exploiting the security convergence opportunity. Unfortunately 80 percent of the physical security market today continues to ignore this trend or views it as 5 to 10 years away. In hindsight this will prove to be a terrible business decision.

Are you one of the TOP 20 percent?