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Security firms expect bigger business from outsourcing trend

Rudijanto Contributor Jakarta

Although incidents of robbery -- especially of individuals who have just withdrawn large sums of money from the bank -- have increased in recent times, attacks on armored vehicles carrying cash either to refill ATMs or for companies has become a new and very real phenomenon in Indonesia.

In addition to rising crime rates, terrorist threats will continue to be a major concern for both individuals and companies in the country. These unhappy circumstances have, however, become a blessing in disguise for local security companies.

President director of security company PT Hill Konsultan Indonesia Nick Duder admits that growing security concerns have contributed to an increase in demand for the company's risk management and security services.

Indonesia's security-service market is indeed huge. In fact, the largest part of the market remains untapped since most companies still prefer to handle their own security issues, rather than calling on external forces.

"The total market is big but the outsource market is still relatively small. It takes time for people to change their attitudes and start to outsource their security needs. Large national banks started to outsource, but the total volume is still largely in-house," Bill Thomas, the president director of Securicor Indonesia, told The Jakarta Post last week.

That is why even after the Sept. 11 terrorist attacks on the World Trade Center (WTC) towers in the U.S., little impact on the local security business was apparent.

"Since the Sept. 11 attack on the WTC towers in the U.S., our business here did not increase significantly, while in other countries, particularly Hong Kong, our business grew by 10 percent," Bill says.

Local companies tend to boost their in-house security by employing more security guards rather than outsourcing security services from professional security-management companies.

Under the global trend that emphasizes the value of outsourcing, Indonesian companies are slowly learning to outsource their non-core businesses, including security services. Awareness of the value of outsourcing is indeed growing, but at a very slow pace.

The factor that hampers this outsourcing trend is that mergers of corporations, especially banks, have created a surplus of manpower. Instead of laying-off these people, corporations prefer to transfer them to security units within their main body.

Such moves not only create unprofessional, untrained and unselected security personnel but also tend to increase crimes within corporations.

President Director of PT Secom Indopratama (Secom) S. Rahardja said that 74 percent of criminal incidents in Indonesia involved insiders.

"In fact, the biggest threat nowadays does not come from outside but mostly from inside corporations, namely from employees themselves," he said.

The outsourcing itself benefits corporations by giving them more time to focus on their core business. Aside from this advantage, outsourcing tends to be cheaper than maintaining an in-house security force.

"Outsourcing is cheaper because you pay for what you get, while in maintaining an in-house security unit, you pay for what you have -- and what you have is usually more than what you need," Bill of Securicor said.

Meanwhile, Director of PT Teknodev Inti Utama (Teknodev) Charles Aryopati said that the total cost of outsourcing is far cheaper than maintaining in-house security personnel, which can be more costly due to training and equipment.

"Many Indonesian companies are still hesitant to follow the trend. They prefer to do it step by step," Charles said.

Outsourcing non-core businesses is already a global management trend. Slowly but surely Indonesian corporations will start to follow global footsteps in the management of their businesses.

With crime on the increase and the threat of terrorism, Indonesia has become the ideal market for security companies. Even under this current condition, Bill admitted that his company enjoys an average annual growth of 10 percent in terms of revenue.

Another company, Secom, revealed 20 percent growth per annum, though Rahardja admits that his company experienced stagnant growth during the peak of the Indonesian economic crisis between 1998 and 1999.

Teknodev reveals that it has enjoyed a 75 percent growth in alarm monitoring services and 10 percent in security guard services -- with clients from state-owned and national banks.

However, competition in this growing market is tough. Nick admitted that competition has never been greater.

And Charles believes that companies with poor services will not be able to survive.

Only the companies with the best security systems will grab a big market share. Almost all security companies boast that their systems are the best and the most secure. However, clients are the best ones to judge their performances.

Outsourcing security to professionally managed security companies might be the trend of the future, but security service companies still have to work hard to gain trust and market confidence.

As a part of efforts to gain acceptance from the wider public, security companies still have to prove that they are as indispensable as insurance companies, especially in these uncertain times.

"There are losses that insurance company cannot cover or prevent, for instance, the loss of opportunity and reputation," said Rahardja.

The need to educate the market is certainly the task of all security companies that want to grow in Indonesia. But the most important part of this education is a concrete action to protect client's property, reputation, and business opportunities.