Overcoming barriers of Indo-Pacific markets

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Bruce Croxon (00:18): Welcome back to the Export Impact Podcast, brought to you by Export Development Canada, EDC. I'm Bruce Croxon and your host. And today, I've got the pleasure of sitting down with a talented business leader whose Montreal-based company has quietly grown into one of Canada's most successful global tech brands.

Michel Chalouhi is the vice President of global sales at Genetec, a world leader in video surveillance and access control solutions. We're gonna get into what that means in a minute. Under Michel's leadership, Genetec has expanded its presence to 159 countries, providing enterprise security, public safety, and business intelligence solution for a rapidly changing world. Today we're gonna dig into Michel's international growth strategy, hear some of his stories from the field, and get his take on emerging trends in physical security and cybersecurity. Also, joining us on the podcast today is Diane Belliveau, regional Vice President East Asia, and Oceana at EDC.

I’d like to begin today’s episode by acknowledging that we’re recording from my office in Toronto, which is on the traditional unceded territory of Many Nations, including the Missassaugas of the Credit, the Anishnabeg, the Chippewa, the Haudenosaunee, and the Wendat Peoples, and is now home to many diverse First Nations, Inuit and Metis. We value taking this moment to deepen the appreciation of our Indigenous communities, wherever we are, and to remind ourselves of our shared debt to Canada’s First Peoples.

Michel, Diane, welcome to the podcast. Great to have you both with us today. Michel, I'd like to start with you. For listeners who aren't familiar with Genetec, can you give us a quick overview of the company and what you do?

Michel Chalouhi (02:07): Sure. So Genetec is a company that was founded by 97 by Alexander and still very involved today in the business, visionary founder Pierre Racz. We're located in Montreal here in the techno park around Montreal. The company, mainly develop software and its physical solutions software, so around video and access control, endlessly recognition. These are the three pillar technologies that propel the company. Genetec has been privately held since its inception to this day. And if you look at where we are today around the globe, we are about, we call it in 15 countries where we have 10 regional offices and what we call five R&D hubs around the globe. That's where the footprint is and where the company is, where we operate and where our solutions are used. We're looking at about 160 countries where the solutions are deployed and the typical type of customers, I mean you go anywhere from retail to critical infrastructure to citywide surveillance. This is where the solutions are gonna be deployed. Just to get an idea of the footprint of the organization today is about 2300 people strong. So a big R&D hub around Montreal. And then like I mentioned, sales, marketing, operations around the globe.

Bruce Croxon (03:17): So bring it home for us a little bit. Give us a typical customer or two by sector and tell us a typical suite of offerings that I might subscribe to as a customer.

Michel Chalouhi (03:29): So listen, if we're talking here about Asia-Pacific, in particular, I can give you what got us on the map a number of years ago, which would start around city surveillance. So what you'll traditionally have is either office emergency management systems or an nine one system, or actually the PD that is gonna have a central system that is either gonna monitor and surveil different areas of the city. And to that system you're gonna have different subscribers, right? So different entities around the city that are gonna subscribe. For example, you might have baseball fields, stadiums, public hallways, they're gonna have their security installations.

Security mainly for us back in the day was video. Today it's video and access control. So when we say video, it's everything that has to do with video recording. So video recording and obviously live. So if you look at instances like that, for example, you'll have Genetec that is gonna be a central system of that that's gonna bridge and bring those cameras in and allow for the different city to operate and to conduct their investigation, their different investigations.

Bruce Croxon (04:28): So it's interesting just when you're describing that you'll go into a market, for example, ahead of having the baseball stadium as a customer, set up the infrastructure for surveillance in this case around the entire geo area, and then turn to the ultimate end user customer and say, we have this, would you like to subscribe to our service? Is that what you've basically described?

Michel Chalouhi (04:52): You got it, but you can do it both ways.

Bruce Croxon (04:54): That is cool. So you're investing ahead of the curve?

Michel Chalouhi (04:56): So you can do it both ways. That's the interesting part about it. So there's the way where you can get the end users first and then have it brought back. And there's other ways where you can start with essential deployment and get other end users say, Hey, if you want to interconnect here and there and you want to get your systems manager operated, that's one way you can do that.

Bruce Croxon (05:13): But either way, it sounds like a collaboration.

Michel Chalouhi (05:16): The platform has been built on collaboration. One of the first features that we introduce is called, interestingly enough here Canadians is called the federation feature. And what it does is it brings different independent systems together, but the ability of each independent system, the management of each independent system stays within the control of that entity, right? So that's what we built on. That's actually what got us our claim to fame.

So if you go back, I think I go back to 2004 where the first large install, interestingly enough, was not a city, it was a good infrastructure, it was an airport and it was, I mean for the viewers here, Paris Airport, I think everybody knows today that that's been probably our longest standing customer. You go back a number of years and 150 camera system back in the day was considered a big system. And then Paris Airport came on board and said, you know what? We'd like to migrate our 8,000 camera or 9,000 camera system on IP and then back then we're like relatively a small footprint, said, Hey, yeah, there's a way we can help you do that. And this was the first attempt to us to go to scaling the solution, pushing it forward. So that was customer number one.  And from there we became a reference.

As far as the airports go, they said, Hey, if Paris is using Genetec, we can use Genetec here and there. So that was part A of the adventure. Part B of the adventure is what I was talking about around cities. What's interesting around that is in the early, early Genetec days we had OEM partners. So where the company was too small to have that global footprint so we had a couple of OEM partners that helped us seed the solution around the globe and by OEM, I mean really private labeling. So taking the solution, putting their brand on it. So we had a couple of partners around the US, a couple around Asia Pacific, Europe and one of those partners got us into some of the big cities in the US as far as, hey driving that solution in there. So this is how we got into those cities originally and this is how we're able to expand on our solutions moving forward from that point forward.

Bruce Croxon (07:08): And as you mentioned off the top, the company's been around since '97. I'm assuming that goes to the health I think of the organization. So let me go out on a limb and assume something that when you land a customer of that size with that kind of investment, I'm assuming that you tend to hang onto those customers. I mean it's one of those tough to get a customer, but when you get them, they're with you for a long, long time unless you do something drastically wrong. Is that the appeal of the business model?

Michel Chalouhi (07:37): Most of the customers, end user customers that we have today that I'm mentioning here or that we're referring to here are still with us, right? So land in '04, land in '05, fast forward 25 years earlier, they're still around. So that's one. Another critical part of this, probably Bruce that I should have mentioned, the go-to market of the company has been key to the success. Yes, you can develop the best software in the world, but if you don't have the right partners to help you take it across the different regions as far as how you install it, how you commission it, how you service it, that you're not gonna go too far.

So very, very early on we have a huge network of system integrators or partners that helped us both in a local market, domestic markets and international markets. And when I refer to some of those cities, some of the partners also helped us get an audience with those cities to get the solutions pursue. Because you have to understand that the software that gels everything together, which is probably the strategic part that preserves your investment in the different pieces of hardware, is just a small part of the equation when you're looking at an overall capital cost of solutions like that. So when your network goes in, when your cameras goes in, when your infrastructure goes in, and then you look at the software, the key component to put that together is where we come in.

Bruce Croxon (08:49): It's a competitive market out there, particularly when you're down to negotiating on hardware. What is it about your software that allows you to stay ahead of the game?

Michel Chalouhi (09:00): So that evolves throughout the year. So if you go back again, originally it was something that scales, right? So like I said, go back 100 cameras or 100 doors was something that was relatively big and then we jumped into thousands and 10 thousands and our biggest customer to this day deployed about 200,000 sensors globally. So that scale was one.

The other thing, and that's relatively important as you start expanding into different markets, a ton of camera partners out there, a ton of access control partners out there. So the ability to integrate them and get their feature set and the performance of their devices up in the platform is also key. So what we call our platform is what we call an open platform. Open platform means that you can take ingest video or handle access control from multiple vendors. So our ability to build those, also technological relationship with those different vendors around the globe throughout the years was also key.

So when I talk about go-to-market partners as far as, that's one aspect of it. The other aspect is obviously the technology partners. If you go anywhere from Korea to Sweden to Germany where you're talking about haka cameras or access cameras or Bosch cameras, they're all Genetec partners today. It means their edge device interconnect back to that central software where we're able to...

Bruce Croxon (10:13): Yeah, you don't care what anybody uses, you can accommodate it?

Michel Chalouhi (10:16): To a certain extent. Obviously there are, and specifically today, the security and cybersecurity top of mind. So there are things that we do from the devices that we bring in to minimize the risks.

Bruce Croxon (10:27): So can you make use of my old Polaroid by chance or Kodak cameras?

Michel Chalouhi (10:32): This is probably a little outside of the scope of what we're trying to do.

Bruce Croxon (10:36): Obviously, you're global; big, big market, 159 countries. How do you go about identifying new international markets to break into and balance the opportunities, risk when it comes to international expansion?

Michel Chalouhi (10:50): So on that front we've been very fortunate and by fortunate I mean we've had the opportunity to work with multinationals early on. So multinational will take you into directions or will bring you into different markets where you don't necessarily have a footprint. You start in Brazil somewhere, they have installation in Zimbabwe and Oman and you're not set up there. So that takes you there. That's part number one. So as you look at multinationals, they're probably a reason why we invested into expansion in the international market. That is probably one.

The second one I touched on was the OEMs that we had in place. And if we look at, for example, Australia would be a good example. Australia, we've been actually, if you look at the Asia region, Indo-Pacific region in general, Genetec's been present there since, call it 2002. It was an OEM partner that was present there that landed a small opportunity somewhere in Japan. And then the recipe is the same. A multinational goes in, multinational attracts partners, partners get ramped up to speed on the solution, they adopt the solution and start expanding it into other verticals. And then is that once those two are established is where we pull in the resources to inject in the region.

A good success story of that again India. India probably go back; 10 years, we had one person in India, today we have 20 people that cover India. And the interesting one, and you asked me to bring it together in the beginning and I was gonna get to that India example because that is a super interesting example. The way we got on the map in India was they referenced a customer that we had in the US. It was a citywide surveillance that we had in the US. They looked at it, said this is something we'd like to replicate. So they looked at it, they said, Hey, I want to do that in Hyderabad. Hyderabad is where we got in so we became referenced there. People were able to point at it, say, Hey, Genetec is installed here, if it works for them, there's gotta be something good that we can take out of it. And now fast forward 10, 15 years, India's probably the fastest growing region for us.

 From '23 to '24, if I look at just the growth around India or even the first half this year will double 200% growth all everything pulling into the right direction and that team continues to propel. So this is how we look at it. And the third aspect, just to continue to answer your question fully Bruce, is what drives us there is obviously the present, the opportunity that that could represent for us, right, from a growth perspective.

Bruce Croxon (13:06): Well yeah, I mean India is a massive, massive market and opportunity. So I'm not entirely surprised you've landed there; that you've been able to crack it and make it work is impressive but the size of the market, no doubt. Diane, switching to you for a second. How is EDC able to support companies like Genetec as they expand internationally, particularly in the region that you represent, the Indo-Pacific region?

Diane Belliveau (13:32): EDC is present across Canada to be close to the Canadian company. So in every major city and other cities. Also across the world, we have offices across the world and Indo-Pacific particularly we have 12 offices. We ramped up in the last couple years, especially in Indo-Pacific as Michel is referring to the growth opportunities in Indo-Pacific. And they are important for Canadian companies. By 2030, the middle class in emerging markets of the Indo-Pacific will be five times greater than the middle class in the US and in Europe. It is a group of 40-ish countries with more than 4 billion people in 47 trillion in economic activity. It's too big to ignore. So Canadian companies need to be there or have an eye on it.

What we can do to help with those 12 offices we have across the Indo-Pacific, we are building, we have built and we continue to build a network of relationships; whether they are bank relationships, they could be client, future clients, they are the embassies, the Canadian embassies, you name it. EDC has a suite of financial products to mitigate financial risk and to support growth around the globe for Canadian companies. Those products include credit insurance, they include bonding and they also include loans; loans in Canada but also loans across the world to Canadian companies and to their buyers as well. So that's how we can help Canadian companies.

Bruce Croxon (15:18): Do you like to hear from companies when they're thinking about launching a successful already established product into the region or do you like to hear from them after they've been there and floundered around a little bit and they've got some more specific questions and needs identified? Or are you agnostic to either?

Diane Belliveau (15:37): Well we would prefer early on to help them get to the right places if we can help there is always good that discussion can happen in Canada, it doesn't have to be in market, can be in Canada and we'll explore our networks and see what their needs are, be able to put them in contact with the right people perhaps in market. If they're not there yet, we have also all sorts of market intelligence products that we make available to Canadian company, online, different things. This is one of them as well that Canadian companies can listen to and learn from other Canadian companies as well.

Bruce Croxon (16:19): Out of curiosity, I've been meaning to ask because a number of companies we've identified as part of this or talked to as part of this theories have ended up actually with EDC as an equity and/or debt partner. Is that all done out of Canada or do you actually have a facility down in the Indo-Pacific region to facilitate debt from there and equity investments from there for your team looking at it as the one being closest to the market?

Diane Belliveau (16:46): You're absolutely right Bruce. We have in Singapore a unit that includes underwriting, that includes specialization like legal counsel, ESG reviews. That group is growing, growing very fast. So to date, we can do loans, lending from Singapore, the equity is still all done from Canada, but it's a fluid communication between our offices in Canada.

Bruce Croxon (17:14): And I would imagine they rely on your perspective when trying to identify the strength of an investment by how much opportunity this particular product or service would have in your region. That paints a very cohesive picture.

Michel, back to you. Can you share a specific example of a market that was particularly tough to crack and how your team was able to overcome that? Anyone in particular come to mind?

Michel Chalouhi (17:43): Sure, there's actually a couple, one that is very recent, so maybe before I jump into that, I meant to jump on on Diane's comment earlier, just from a Genetec perspective on the EDC side I mentioned credit insurance. That's been the typical projects that we go after. Very heavy on initial capital and typically the partners that go through those initial rounds are small. So EDC Canada plays a very valuable role in that perspective to help us lift those opportunities off the ground to begin with. And that's been across the globe, not only across the Indo-Pacific region across the globe, we've been relying on that and that's been very welcome as support.

To go back to your question Bruce, around markets that have been particularly tough to crack, the one that comes to mind to me is Japan. So even though we've been in Japan for probably 20 some years now, it's still very opportunistic. I think what we are missing in Japan, the motion for us to get into a market is to land that first reference account and the space we're at, the type of opportunities we're at is then landing that reference account. So last year was probably a big year for us where we're able to land at a reference account that obviously year one will propel their revenues from something that is relatively insignificant to something massive that you have to deal with and then attracts both the partners and the other end users with it.

So Japan was one. The other one I mentioned was India. India was also very, very hard for us to get into. Again lending that reference Hyderabad account and then you can pivot to the reliance of this world, the Adani of this world, everything follows as soon as you land that reference and start to build that.

The key, the investment and staying there and being committed to it. We've worked with partners that think that can run international business as they ran it in Chicago or New York or Montreal. It's not really the case. The cultural aspect and how you go about it and the way you get entrenched and try to develop those market very, very particular.

Bruce Croxon (19:33): Diane, back to you for a second. I mean as we are recording this, the global trade negotiations and where we stand vis-a-vis our largest previous trading partner, the US, are still very much up in the air. I'm assuming that the country is turning more and more of its focus to ex-USA expansion. But what are some of the biggest challenges that Canadian companies are facing today or are they getting to be less now that we're turning our attention to other regions of the globe other than the easiest one which was south of the border.

Diane Belliveau (20:07): Although you put your finger on on the nail, the geopolitics that we're seeing for a number of years now are very fluid, they're volatile, and now they've become unpredictable. I mean what's going on in the US who could have predicted that a couple years ago that has an impact on supply chain, we've seen it. The military issues in Ukraine and Russia have had an impact on the supply chains and the geopolitics with China as well. This also affects the relationship, the supply relationships that we have in place, the supply relationships we've had in place in the US for centuries. This is being affected and also, globally, it affects the digital security and that's where Genetec has a very bright future in that global space because those alliances are reshaping, if you will.

So those are all challenges for Canadian companies. It's not easy to pick up when you're 95% exposed to the US. 95% of your sales are in the US to pick up and turn around and pick a new country and develop new relationships and new supply chain. So those I would say are the challenges Canadian companies are dealing with. The diversification, the cost of diversification that comes with it. And it's important for Canadian companies to find partners. EDC is a good reliable partner to help them through that diversification journey.

Bruce Croxon (21:42): And not to harp along on this theme, which has become quite painful to discuss, but I mean it used to be in many ways so much easier. You poke your head up, you say well we've got the biggest market in the world just to the south, English speaking same time zone, let's go. Not so easy now, right? So even more important that the benefits and services that EDC can bring to the table and other parts of the world come into play. So yeah, thanks for addressing that.

Just back to the product side and the company side, Michel, like we are in interesting times, it's tough to argue that the times aren't more dangerous. And it's funny, I had the chance to interview our past prime minister Stephen Harper not too long ago on stage and I asked him directly, I said, in your time in and around political office, have you ever seen a time that's more fraught with potential peril, et cetera. And he was very quick to respond that in all of his time he has never been more worried about global security and threats. So bad news for the planet, potentially good news for companies like Genetec as we market products and services to combat this.

What are you, from a business perspective, most excited about that maybe wasn't an opportunity that existed five years ago? Is it AI related? Is it the blend between physical and cyber? What are you seeing happening out there that's a boon to what you guys are about?

Michel Chalouhi (23:11): So there's a big hyper on AI right now, but the way we look at it, we don't look at it as AI, we look at it as IA, right? Because I think AI is at the end of the day, is just a tool. So what we use it is to become more effective, more efficient, and what we do for us, there's a couple things that are top of mind in there, but the most important one of the all is to keep the human in the loop, right? So as far as how you use those tools specifically around solutions like ours, what you're trying to get to is minimize the disruption, minimize the amount of time it's gonna take you to look for the evidence you're looking at or investigation you're looking at. And there's tools to do that. But at the end of the day, you don't want the machine to make that decision for you because there's a lot of things that you know it cannot do. It's not gonna distinguish clearly, I mean to be blunt between life and death and there could be situation like that.

So even though there's a lot of hype around AI, the way we look at it and the way we look at that responsible AI part is we call it intelligent automation. So let's use those tools to get that information front and our platform will provide you with the interfaces for the human to be able to make that call. That's one.

The other one the exciting times for us. Obviously security business as a whole, you are correct. It's unfortunate when things go bad typically is where people start pushing investment into the security. It's an unfortunate nature of that business. That being said, there's a couple of things. Is this traditional security industry, the IT or information system and security are in two different divisions. Any organization you look at that there's a security division and there's an IT division and we're seeing those two get closer and closer together.

Today, they don't talk, right? So when you talk about convergence of physical security and logical security, there's still a lot of company that are at two opposite side of the conversation on that one. Where we come in is we bring those two together, right? So when we're having conversation about putting our system in place, we can have the conversation as well with the security folks as with the IT folks. And when we're talking to the IT folks, then you are getting all the proper norms to be put in place about how you harden your platform, what are the security policies you need to follow and so on and so forth. Ensuring that the security system that you're putting in place is actually secure at the end of the day.

So these are the couple of things that are obviously top of mind for us. You also hear about cloud and cloud technology to me, again, another tool. At the end of the day, it's what is the most efficient way to deliver those solution. Whether you house your servers or you have them hosted somewhere, at the end of the day, it doesn't really matter as long as you know, the end user is able to perform what they have to perform without worrying what the underneath plumbing looks like.

Bruce Croxon (25:41): Well as long as it's all secure, is the word of the day?

Michel Chalouhi (25:45): 100%. 100%.

Bruce Croxon (25:48): So listen, we have to wrap. I mean this has been great. In closing though, Michel, what advice would you give short version to other Canadian companies looking to expand internationally, especially in businesses that are complex or heavily regulated like security and public safety?

Michel Chalouhi (26:05): Yeah, so always the first thing, I get that question often, the first thing is having focus, right? Jumping from on one opportunity to another and say, hey, a thousand camera here, a thousand door there and not focusing on it, super dangerous, right? So pick a market and just drive a focus on that market. Do not underestimate the efforts; when we talk about, so the video surveillance is one point, the access control and the intrusion part is another one that we offer. The amount of time it takes to get the solution certified to local standards is something that will cost, will take time and will cost money that should not be underestimated from day one. And the third piece to me, always find good partners; go to market partners, technology partners that are gonna help you in there. If you try to do it alone, probably that's going to take you a little while.

Bruce Croxon (26:50): So don't rewrite the map, right? I mean there's people are already doing that. And Diane, similarly, what advice would you give to Canadians who are in international expansion mode in this day and age?

Diane Belliveau (27:03): Well, you know what? I think Michel has really nailed it. And from my perspective, which is a financial one and also a government of Canada, one would be pretty much the same thing. I think first of all, have a solid business plan. Wherever you go focus and business plan, it's you just can't spread yourself thin. There's not enough time to do that for companies. And going international also means time zones, jet lag, night calls, morning calls. It's important to be strategic about it all, otherwise you're gonna run out of time and and spread yourself way too thin.

In this day and age, also, always keep informed on the market. Intels. Make sure you're on top of all of that because it's sneaky these days. The geopolitics, they sneak up, they can surprise you and you have to have a good sense of what's going on in the markets that you're targeting or in which you're already operating in. And finally, you have to be prepared for disruption wherever you are operating. And you have to have good networks, good strong networks in Canada abroad, and those partnerships and networks, they will be there when you need it. When they come in handy, they work together. It's collaboration. That's how we operate with our Canadian companies, with other government partners in market and in Canada in support of the Canadian companies.

Bruce Croxon (28:31): One thing that's become clear to me in this conversation is how good a partner Genetec and EDC have been and why, you know, because of the complex nature of your business and because of the challenges that we hear a lot about but you guys have lived firsthand. So very appropriate that the two of you are on this podcast together. I thank you both for taking the time. It's been a real pleasure and look for this to come out because I think it'll probably be one of our more listened to ones just given the experience of the people on the phone. So thanks very much again guys.

Michel Chalouhi [29:02]: Thank you, Bruce.

Diane Belliveau (29:02): Thanks, Bruce. Thanks, Michel.

Bruce Croxon (29:05): Thanks for joining us today on the Export Impact Podcast. If you enjoyed today's episode, we'd love for you to subscribe, rate, and leave us a review on your favorite streaming platform. Until next time.