Eight steps forward and one sideways for the security industry

How new technologies drive business model innovation
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Monday, December 9, 2019

The security business is in the midst of upheaval, with tech giants like Google and Amazon offering consumers the tools to set up and operate their own secure smart homes. And, the rise of IoT gadgets is further redefining the industry. However, if the last several decades serve as a guide, change and upheaval are the norm for security professionals. New technologies shift solutions and business models, and give both installing dealers and consumers new opportunities and experiences.

Nest, Ring and other products are just the latest in a long series of developments that have changed the way security professionals approach the market. To put recent disruptions into the proper context, I offer eight other technology changes that altered—and ultimately enriched—the security industry:

1. Wireless obsoletes wires

Security installers used to run wires from the basement of a customer’s home and throughout the house to connect components to the alarm system panel. It was a complex, time-consuming process. 

With the availability of reliable wireless sensors, installers were suddenly able to set up a system in a fraction of the time. While the charge for equipment went up, it was offset by a greater reduction in labor cost. This faster installation meant dealers could install more systems in a day, which was the initial opening that enabled volume security.

(ITI introduced its patented Learn Mode as the first reliable, simple-to-install wireless to the security industry in the early 1990s. Ademco eventually followed with their 5800 series, which set off a patent battle.)

2. Self-contained panels make it all-in-one

Even after wireless eliminated sensor wires, home security systems still required wires to connect the keypad user interface to the CPU. The self-contained panel solved this by bringing the UI and the CPU together into a single unit. This was the other major disruption that cut dealer labor costs by enabling multiple installations in a day.

In addition, reliable wireless initiated the security business-model pivot from the labor and equipment revenue focus to a monthly monitoring revenue focus. And the low-labor, rapid installs catalyzed the fast-paced door-to-door summer sales model, spearheaded by APX, which ultimately became Vivint.

(In 1996, ITI introduced Simon, the first high-volume, self-contained panel to both the dealer and the summer sales markets. Ademco, which eventually became Honeywell, followed with Lynx.)

2.5 The cellular setback

Self-contained panels brought on a problem. Since they needed to be mounted where the consumer would interact with the panel, they were no longer near the alarm panel’s communication link, which to this point, had been the phone line. Traditional panels were mounted in utility areas next to the phone line. But now, self-contained panels need to be 100 percent outfitted with cellular communication. 

Cellular added significantly to the cost of account creation and maintenance. Likewise, cellular technology requires expensive updates, and most companies also need to set aside approximately $5 per month, per account, to fund the cost imposed by the next cellular technology sunset, including parts, labor and lost opportunity.

3. Interactive services enrich the experience

Consumers were accustomed to basic arm/disarm control of home security systems via keypads on the wall. Then, early interactive services introduced control of security and basic automation remotely from computers or phones. However, the convergence of interactive services with the smartphone changed everything. 

The screens of iPhones and other mobile devices offered users a rich user interface, enhancing the ability to control their systems remotely. This combination enabled dealers to increase their revenue by offering additional services, and the trend continues as more homeowners seek to control their lighting systems, video doorbells, thermostats and other smart gadgets via their phones. Interactive services dramatically increased the recurring revenue value of saleable alarm contracts, which had been launched by Monitronics and ADT in the late 1990s. 
(MicroStrategy (which became Alarm.com) started working with Interlogix (formerly ITI) in 2000 to integrate interactive services into both the Simon and Concord panels. Alarm.com was launched on Interlogix panels in 2003. Note: this 16-year-old innovation is shutting down at the end of 2019.)

4. Old systems get in touch

As interactive services and the smartphone user interface expanded the consumers’ user experience, control panel manufacturers were under pressure to give a similarly rich experience at the panel. This led to the shift from keypads and small LCD screens to the now pervasive touchscreen on front of a self-contained panel. The richer, touch-based screen paralleled the smartphone experience, supporting increased consumer perceptions of usefulness and value.  

(2GIG launched the GoControl touchscreen self-contained panel in 2009.)

5. Translating the past to the present

Historically, homeowners that already had security systems were viewed as unlikely candidates for system sales. However, the opposite proved true; if they are near or past the end of their previous service contract, they are often open to enhanced services from a new provider. But the existence of the old system inhibited the sale, as the homeowners felt they were buying yet another system, and the dealer couldn’t take advantage of the existing system. 

Enter the innovative Translators, solving this by keeping all the existing wireless sensors in place, and translating the signals to the dealer’s new high-functionality panel. Taking over existing accounts with Translators became a deliberate business model for many dealers. 

(Resolution Products (now Alula) launched and the patented wireless Translator line in 2010.)

6. First telephone, then cellular, now internet

Early in the industry, alarm signaling used public telephone lines and when cellular arrived, it provided backup communications. But with landlines disappearing and cellular communications gradually taking over, the sunsets of various wireless standards present a new problem. To the rescue is IP communications over internet connections. The IP connection means constant, reliable, sunset-proof connectivity, which is of growing importance as IoT devices drive the internet as the primary home technology channel. In the U.S., we see almost 90 percent penetration of reliable broadband in our market which wasn’t true just 10 years ago.  

(IP Datatel (now Alula) pioneered the Broadband Alarm Transceiver (BAT), IP-based alarm communicators, in 2007.)

7. The hub: sitting at the source

Self-contained panels combined the UI and the CPU into a single unit, which sped up installations. But two forces pushed towards the hub-architected panel. First, the self-contained panel demanded mounting in user-convenient locations, nowhere near the phone lines. This drove the Cellular Setback (mentioned earlier), with its $100 burden, and still provided no backup. Second, the smartphone was solidifying as the primary user interface. So, the hub-based panel was launched, locating the CPU next to the IP connection, and leveraging the smartphone as the predominant user interface. If cellular was used, it was the consumer’s desire for backup, not the dealer’s cost of connection. 

(Resolution Products (now Alula) launched and patented the Helix hub-based panel in 2014, which is now the Connect+.)

8. Instant upgrade for old panels 

With recent product introductions, dealers will be able to maximize their revenue by breathing new life into traditional security panels. New innovation enables old panels to participate in all the industry’s automation and video advancements, as well as provide the ability to replace every old keypad in a house with new, rich interface touchpads. In this way, installers can offer their customers dramatically advanced functionality that won’t sunset along with cellular standards, which are outfitted for today’s new IoT devices. 

(Alula launched the BAT-Connect in 2019 to lead this transformation of old panels to a modern, interactive experience.)

Summary

Security professionals must remember: constant change and disruption is the norm. The industry has been changed by technology, business models and people. In the security industry, it has frequently been the same people involved in almost all of these disruptions. Rather than setting security professionals back, these changes virtually always open up new opportunities.

The rise of DIY security and the moves of tech giants don’t spell doom for installers. Rather, it’s just the next day in the life of an industry that evolves and grows constantly. If anything, the pace of disruption will continue to accelerate. As the recent shutdown of Interlogix shows, security providers need to continually embrace new technologies and partners who can innovate and help them succeed. 

Brian Seemann is an EVP of Alula. He and other Alula principals originate from industry hallmark companies: ITI, Interlogix, GE Security, Resolution Products and IP Datatel. They were instrumental in many, if not most of the major industry changes chronicled in this piece. Connect via LinkedIn.