Virtual roundtable: Monitoring in the cloud

What are the benefits? Who’s jumping onboard?
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Wednesday, September 7, 2016

YARMOUTH, Maine—In the past few years, several providers have introduced monitoring center software that will enable central station infrastructure to sit in the cloud. Proponents of this software say it can reduce the cost of entry for new monitoring stations to start up, bring new capabilities to existing monitoring stations and make it easier for end users to set up proprietary monitoring stations.

Security Systems News invited three central station software providers—Rod Coles, CEO, Bold Technologies; Cliff Dice, CEO and president, DICE; and, Jens Kolind, president and CEO, Innovative Business Software—to participate in a virtual roundtable to discuss the benefits and ROI of the central station move to the cloud.  

Security Systems News: Can you describe the ideal company that would benefit the most from moving monitoring to the cloud?

Coles: The ideal candidate can vary quite a bit, as our cloud solution is really a full-featured enterprise Manitou system. This means the system is highly scalable and can accommodate any size implementation. The larger centers will see a financial benefit when they are looking to upgrade their current infrastructure. Moving to the cloud alleviates their need to outlay large amounts of money for upgrading hardware such as computers, receivers, and a PBX system, and software such as operating systems and database systems.

Smaller sites and integrators will see the benefit in the upfront costs. Many of our customers are now able to begin monitoring alarms in a UL-listed facility with minimal investment in equipment such as servers or receivers. Compared to a traditional on-premises installation, where a company would need to purchase receivers, PBX systems, phone lines and a server, there are minimal initial costs.

Dice: Really we are finding that there is no difference in the clients as we have integrators, installing alarm companies, dealer centers, answering services, PERS centers, and voice call centers all equally coming to the cloud center. It’s not really about the type of company or even the size, as we have clients that have come aboard and that are 500 accounts and one recently with 160,000 accounts. The real question is: Does the company struggle with all the new technologies and security issues in having their own centers? I find that if companies have strong IT teams then they tend to be less likely to say ‘We want cloud.’ They might go part-cloud however. Now companies that aren’t that strong in IT, which really is 99 percent of the alarm industry, are the ones that cloud is perfect for. Another factor is if the company is adverse to capital expenditures, which is traditionally alarm companies who have been acquired by an investment company. Cloud removes the capital investment and places the cost in an operational expense. This also hits most of the alarm industry. We also have Fortune 100 companies, retailers, and end users hosting their systems as well. For them, they don’t have to go back to corporate and ask for money to replace servers, receivers and such. 

Kolind: In our experience there are four ideal candidates for cloud-based monitoring infrastructure:

I. Those that must invest to meet the new UL827 requirements. The expense of upgrading infrastructure is likely more than moving to a hosted environment. This is particularly true for those central stations that need geo-redundant locations.

II. Those that wish to start monitoring their own alarms, but do not have the infrastructure in place. Examples include retail chains, multi-site corporations, school districts, security integrators, and alarm dealers.

III. Those that wish to take the headache out of managing their own infrastructure. This is particularly true for proprietary central stations. The surrounding corporate structures often do not understand the complexities of monitoring infrastructure or operating 24/7.

IV. Businesses experimenting with new services requiring professional monitoring. They will want a low-risk option, without significant up-front investment. They may need third-party support initially, but often want the option to monitor their own accounts when they have enough accounts.

Security Systems News: What kind of front-end investment is required and what kind of ROI should integrators and their customers expect?

Coles: Because the upfront cost is so minimal, the ROI is almost immediate. Because you are paying-as-you-go, the system also has immediate scale-up availability. Another advantage is all features offered by Bold Manitou are available through the cloud solution, and users do not have to purchase individual modules like a traditional on-premises solution.

Dice: Well, really, there isn’t any front-end investment. Many of our clients that switched over had no upfront investments. We do charge new clients a startup fee, which includes training, but I wouldn’t call that an upfront investment, so you are dealing with pretty much zero versus if they want an owned system the capital investment is six figures. This is why I say that for companies that are adverse to capital expenditures cloud is the way to go. Here’s an example: If the company installed its own equipment and does not go cloud, the payback on the equipment was more than 80 months. Plus, the equipment needs to be replaced at 60 months, so you can’t really compare the owned versus cloud, which is what everyone does. They say, “Well if I have to spend $1,000 a month in cloud and there is no upfront, how much is owned if I buy it?” The answer many times is to own their own equipment, which is $80,000 up front and $500 a month is licensing fees.

So, as you can see, looking at a five-year example of what would be paid: cloud=$60,000 and owned=$110,000. Then the cloud is an operational cost that hits expenses each month, so you get the tax benefit, whereas the $110,000 of which $80,000 of that is on the depreciation schedule, and only $30,000 is operational expense. The impact to the bottom line and cash flow at a company that goes cloud is huge. And you realize that the owned company has to replace that $80,000 every five years and the cloud has no more expenditure. So let’s look at a 10-year ROI example.  The owned would have spent $220,000 of which $160,000 is depreciated, and the cloud is $120,000 all expensed.

Kolind: ROI will depend on the expense of the alternative. I cannot therefore give you a specific ROI that a normal customer would expect. However, I can illustrate why it should be attractive to the types of organizations set out above.

Central stations requiring a new location are likely to invest at least $250,000. They will need a secured building that meets UL827 specifications. They will then need to buy generators, battery power supplies, and redundant communication lines. On top of this are receivers, servers, automation software, and client PCs. Finally, they will need fuel replenishment services for the generators, maintenance contracts for the battery suppliers, and IT and maintenance staff to manage the rest of the infrastructure.

In comparison, setting up a new location with UL-certified central station hosted services requires: an operator room that meets UL827 specifications (secured space in a good quality office building); redundant Internet connectivity, for example with two broadband/cellular routers ($1,200); client PCs ($500 each); battery backup sufficient to operate for 24 hours ($5,000 for around three PCs); a hosted automation service (SBN Cloud starts at $500 per month).

Security Systems News: Reflect on the past year and your central station/cloud offering. Have you had any important milestones? How do you think the physical security industry is doing in terms of the movement to the cloud? Is adoption of cloud-based models happening, accelerating?

Coles: Over the last year we have had several milestones that we are very proud of, but I would say the biggest would be completing our UL listing. The physical security industry is showing exceptional interest in the cloud and the possibilities it can offer. Now we can allow companies to move to the cloud completely or in a hybrid mode.

The timing of when customers move their business to the cloud has a lot to do with timing on their current telco contracts and the age of the existing hardware they have in place.

We believe the cloud-based model is being adopted in the industry. This is something we always saw as a natural progression. It only makes sense to take advantage of the redundancy a data center can offer. When you pair this with other technologies, such as the telco service OneTel provides, it makes a lot of sense from a business continuity perspective as well. Once UL embraced the idea, it really allowed for the hosted model to take off.

Dice: We announced at our users group meeting that we hit some major milestones with our cloud center. We hit 1 million alarm signals per month, and 2 million voice minutes billed per month on our voice cloud services. We also announced at the users group conference in April that we hit 35 percent of all Dice clients now have some form of cloud products from Dice, and that 22 percent of our clients are completely hosted with no servers or software on their site. It’s staggering growth in the cloud center for multiple reasons. First, it was only a year ago that we only had a couple of companies in the cloud, and from our standpoint we make twice the revenue through cloud services, so moving 22 percent of companies to the cloud increased our revenue by 50 percent. On the negative side, we have found it challenging to keep up with the growth and the stampede to the cloud. We project by the time we do the next users conference that percentage will be north of 70 percent or more. And we think by the third year we will no longer have installed and owned systems in the field, but everyone will be cloud hosted.

Kolind: The past year has primarily been education for the traditional central station market. Existing central stations may be nervous in trusting others to deliver their core infrastructure. They may assume that giving up control will lead to less flexibility and a degradation in service. They may assume that cloud-based infrastructure is not secure. They may assume that because they can touch the servers and receivers they are better able to fix issues.

While I understand the sentiment behind these assumptions, they are unlikely to be true. In fact, they are likely to be exactly the opposite.

SBN Cloud is hosted in Tier III + data centers. The same data centers host some of the most secure government and medical IT services in the country. Staff with decades of collective experience support our receivers, telecommunications and automation. Partners deliver flexibility, for example, by managing the dispatch data. I am sure my competitors will give you a similar story.

I do expect to see wider adoption within the existing central stations in the coming years, as services mature and trust is built. This is evident in the discussions we had at this year’s ISC when compared to 2015.

Most successes in the past year have been with those who know us, and those that do not have the baggage of infrastructure. SBN Cloud forms the infrastructure behind several personal safety businesses. We are in a trial to support campus active shooter lock-downs. And within the next few months we expect SBN Cloud to become the platform for a new tele-medicine service.