The future is here

Saturday, January 1, 2005

Thank you to the California Alarm Association for having me speak at your annual event. I was asked to talk about what I think the future of the industry will look like. Here’s a synopsis of what I said:

Try to look at this industry as just a business, separate of the alarm industry, for just a minute. Some of the largest national and global companies in the world have taken up residence here. How do they look at this market? I believe this depends on where their opportunity is, but ultimately their goal is business growth.

Most of the established players in the alarm industry look at growth as developing recurring revenue. I’m not convinced that these global companies look at recurring revenue as their Holy Grail. Now that doesn’t mean they don’t, but most have amassed size, share, position and costs, and they must significantly grow their sales to meet their business goals, whether they are privately or publicly held.

Sure many can streamline manufacturing efficiencies, thus lowering operating costs, which effectively increases profits. But public companies are under incredible pressure to realize hearty profit expansion, too. To do this they must grow the size of the market. Growing the size of the market is good for all, but where do they see the opportunity to do this? Again, it depends on their market direction.

Government business is one area given the events of Sept. 11, 2001. But the government is simply not spending a lot on electronic security. Plus, most of these players entered here before Sept. 11, so they saw value before this horrific event. What they may have seen - and if they didn’t then I’m sure they see it now - is that a solid part of our market is capturing video, voice, audio and moving and managing this data. Expansion can come throughout the end-user community by offering additional benefits with the products they sell in both the commercial and the home market space. This does not mean it will be done without the support of an installation channel.

This is a fundamentally different view of our in-dustry and the resellers’ job than the way the alarm industry has viewed it. This is not to say offering expanded benefits to consumers will not open up new monitoring and recurring revenue models. But this perhaps means a bit of a shake up in the current reseller community.

This opens the door for new resellers to enter our space who understand networked systems, moving, collecting and managing video, voice, audio and data. On average these resellers don’t understand risk management and the liabilities associated with security, yet. But generally, the traditional reseller here doesn’t understand moving and managing data, yet. If you haven’t thought about this, and I know personally that many of you have, then it’s time to think about this now.

Building automation folks can add feature and function to their customers’ businesses by installing or using the products you install in a broader way. For instance, cameras can watch the manufacturing line for slow downs and tell the line manager to add a hand in a section when trouble develops. And, what if sensors can keep an aging population of baby boomers at home lowering health care costs?

Multi-milliondollar IT houses are now looking to be resellers in our space. And this opens the door to a plethora of technology companies to design new products and software to make all sorts of things happen.

I read my subscriber database and it tells me lots. Microsoft has subscribed, as has Oracle. Every satellite and cable communication company is watching and they get the recurring revenue model. They’re busy developing a customer base in Voice-over IP! Do you see the connection here? They aren’t reading Security Systems News to figure out what security systems to buy. We report the business of this industry and they, too, are looking for market expansion and what this industry has to offer.

The next few years will be evolutionary, with continued consolidation and new entrants in the manufacturing and reseller community. We will reach a balance point of new and old before just eventually going to all new. There will be new products and application software with new features and functions. Some will be complicated, others will be plug and play.

You will not wake up tomorrow to find that the digital revolution is over and you didn’t have time to prepare for it, if you start now. There will be security experts, but security and life safety will have a larger definition and look differently than today. The future of the industry looks bigger and more integrated in both homes and businesses, to me.
Carol Enman
Publisher, Security Systems News