Is wholesale monitoring market stagnant?

Thursday, July 17, 2008

WELLINGBOROUGH, U.K.--A report released by IMS Research on July 10 forecasts the wholesale monitoring market would grow by less than one percent by 2011. The report compared the growth of wholesale monitoring companies that monitor accounts for independent dealers to that of companies that monitor their own customers. This is the first time IMS has conducted this kind of research.
Niall Jenkins, the report's author, partly attributed the minimal growth of wholesale monitoring to the consolidation and reduction of independent dealers. "Independent alarm dealers are selling off to companies of a bigger size who generally offer their own monitoring services, at a loss to the wholesale monitoring market," he said.
The report also notes that wholesale monitoring companies have less potential to earn additional RMR even when dealers add new services to customers' accounts. "It's difficult for [wholesale monitoring companies] to increase their RMR just purely because they don't have contact with customers," said Jenkins. "Anything that's been sold additionally has been sold by the alarm dealer, so wholesale monitoring companies can charge a little bit more, but it's not significant."
Efrain Saenz, director of monitoring services at Counterforce, one of UTC Fire & Security's monitoring stations, agreed that wholesale monitoring companies are struggling to find ways to increase their RMR. "If I go back to a dealer and increase their rate, then they're going to say that they don't want to add that service. So we have to find a way to offer those services remotely or through automation so it doesn't impact our cost," Saenz said. "If we can get to that point with future services, then we might be able to benefit, but other than that, the dealer is going to benefit more than we are."
The report also notes that many wholesale monitoring companies are expanding services including PERS and remote video monitoring. "PERS is being embraced more by the smaller wholesale guys who are looking for new market opportunities and PERS is a growing market," said Jenkins. "Most of the bigger wholesale guys aren't really focusing on it, but it's got huge potential as the population becomes older and people want to stay in their own homes."
The report forecasts that remote monitoring will grow at more than seven percent, year over year, by 2012. Saenz said Counterforce is working hard to incorporate remote video services to its dealers, but doesn't know how much additional revenue it will generate for the company. "To be honest, I don't know if I want to offer third-party remote video for $4- to- $5 a month like the rest of the market is doing," he said. "At some point in time I have to go back to the dealers and tell them that I'll do it, but I can't do all these other services because it's a cost for me." Saenz said in order to cut extra costs, his company is encouraging dealers to use their Web-based services to enter data for customers and do their own accounting remotely. "That's the direction we're moving in order for us to support those low prices to be able to monitor them," he said.