The Industry Paradigm Shift Continues

On May 19th of this year I wrote in this blog space about a paradigm shift that I have perceived in our industry. I commented on how it appears that many manufacturers of electronic security equipment are moving their focus more towards the end user than ever before. Lack of dealer loyalty, whatever the root cause, is the impetus for this shift.

This week I interviewed an insider at MDI Security Systems. This person explained to me about the new stance that MDI has adopted in which some, not all, of their projects will now be installed by their own employees. This “sell directly to the end user” model was brought about precisely by the factors that I mentioned in my May 19 post. MDI, if you’re not familiar with them, is an access control systems manufacturer out of San Antonio, Texas. MDI has been around for many years and has a very large install base of legacy systems. They have primarily, but certainly not exclusively, been successful in the Fed Gov/Military vertical market. This legacy install base acts as a catalyst that intensifies the dealer disloyalty phenomenon. High profile, especially government owned, legacy systems attract dealers looking to cash in on system adds and changes. Would be dealers come out of the woodwork with promises of new system sales, if only they can have the legacy adds and changes business too. All to often the new business sales never materialize as the dealer continues to sell his other primary equipment lines for new jobs but enjoys the lucrative legacy system adds and changes business that the manufacturer was going to get anyway, with or with out the new dealer. This very scenario has prompted MDI to decide that in certain circumstances they will sell direct to the end user and install the equipment themselves. This is certainly not the first time a mainstream manufacturer in our industry has adopted this business model, but it usually means disaster for the company. Unless you are one of the very large integrators like Honeywell, Johnson Controls, or Siemens it is nearly impossible to adopt this end user direct model. This is likely because the reaction from your remaining dealer base will be swift and decisive. Nothing will send your dealers packing to the competition like a confirmed rumor that you are now competing with them. As they jump ship you cannot replace the revenue with end user sales fast enough to keep up.

I’m not offering a position for or against this end user direct business model, but I do find it interesting that MDI has the courage to try it. It may be born of desperation, but it will be interesting to see if they are successful in this new, and possibly evermore popular, business model.