Industry gives mixed views

Friday, February 1, 2002

While security industry analysts expect General Electric's plans to enter the security market will create opportunity in the long run, security industry professionals still expressed mixed reviews about the conglomerate's expected entrance.

Through interviews and a recent Security Systems News NewsPoll, industry professionals said they worry about how well GE and other large conglomerates who recently completed manufacturer acquisitions will serve the industry. Others saw GE's entrance into the security market as a compliment to the industry and a sign of things to come. (See NewsPoll results)
"I think we will see a lot of small manufacturing folks in very niche areas popping up," said Jeff Kessler, a business services analyst with Leman Bros. with a specialization in security.

Kessler expects more specialty service providers and manufacturers in the coming years as companies look to compete against the giants but set themselves apart. "There will be room for a lot of small entrepreneurs to start up an equipment business that would cater to small companies," he said.

It's a lack of service and doing business with a manufacturer that has its own installation arm that has David Roos, president of Genisystems in Beaufort, S.C. worried.

"I think the entrance of large corporations in the security industry is a validation of sorts," he said. "My fear is what it will do to the rest of the value chain. I prefer to buy from distributors with whom I can personally relate, not some drone at the other end of an 800 number. What I fear most is their entrance in the installation end of the chain."

Jerry Crosby's concerns echoed those of Roos'.

"These mega-sized conglomerates have only one focus, the profit and loss statement," said Crosby of Reliant Security Systems in Eugene, Ore. "Most, if not all, have grown not by service and performance, but rather have purchased small independent companies that had direct linkage to their end user. They will quickly shed these divisions, when performance does not meet expectations. Thus the open marketplace with peer competition will be lost."

Though many said they worry about the future of the industry with likes of Tyco, Honeywell and GE buying up manufacturers, others in the industry expect to see some benefits from GE's plans to purchase Interlogix.

"Somebody at GE got a whiff of what the security industry can mean to them when GE attempted to buy Honeywell," said Brian Havekost, senior security engineer with VSE Corp. in Alexandria, Va. "Interlogix/ITI will be a good fit for GE. This gives GE a good market to push GE 'smart home' solutions."

Norm Adelman, from Alarm King in New Jersey, expects dealers will benefit from brand identification by using products that may be branded with the GE name.

Van Mekeel, general manager of Time Warner Security in Albany, N.Y., anticipates the industrial will benefit on the financial end.

"I believe the recognition and interests by large diversified conglomerates is a compliment to our industry, resulting in greater acceptance from financial institutions and the inclusion as a value added service with developing technologies from other service providers," said Mekeel.