ENGLEWOOD, Colo. — Providers of professional home automation systems can expect “stiff competition in the coming years” in the wake of Alarm.com and Comcast’s acquisition of Icontrol, according to a research note by IHS Markit.
In transactions that were finalized March 8, Alarm.com acquired Icontrol’s Connect platform and its DIY solution, Piper. ADT is said to be the largest customer for the Connect platform. Comcast/Xfinity acquired Icontrol’s Converge platform, which powers smart-home solutions offered by Comcast, along with several other cable companies and telcos.
Honeywell, a competitor in the connected home space with Icontrol and Alarm.com, had sued to block the merger, which was first announced in June 2016. Honeywell claimed a combined company would violate antitrust regulations. However, the litigation ultimately failed. According to court documents filed this month, Honeywell “voluntarily dismissed” its complaint with prejudice, meaning the company cannot pursue antitrust claims in the future.
IHS Markit estimates that Comcast represented about 2% of the American residential remote monitoring market, valued at about $13 billion in 2016. Moreover, professionally monitored smart home accounts will surpass traditionally monitored accounts in 2022, when about 9% of all homes will have a professionally monitored smart home (up from 1% in 2011). This trend places additional emphasis on the need for a robust smart home platform to remain competitive, according to IHS.
“Considering that professionally monitored alarm systems comprise only 23% of all residential households, both Honeywell and Alarm.com remain well positioned to take advantage of existing connected home conversions as well as the market that is untapped,” writes Blake Kozak, a principal analyst for research firm IHS Markit who covers smart home and security technology. “Connected alarm systems for residential applications are forecast to grow at a CAGR of 18%, reaching $7.2 billion in 2020.”
The IHS research note continues:
Emphasis on software and interface
Perhaps the merger’s real significance is the realization that software and platforms require equal or more emphasis compared with the hardware. Many intruder alarm manufacturers have had to do a 180-degree turn on strategy because hardware is no longer going to win business.
In essence, the scope for innovation in technologies used in intruder alarms equipment is limited. The software platforms emphasizing hassle-free, user-friendly interface and seamless integration possibilities with existing equipment open the path for innovating product offerings and attracting new customers. Continued success of intruder alarm providers will depend on their ability to integrate their products with multiple platforms. Despite the clear trend toward openness, some manufactures are looking to diversify by offering both closed and open hardware (systems), such as with Interlogix’s UltraSync.
The platform, user experience, ease of setup by a dealer and continuity of product design are now critical for success. This is exactly what the likes of Comcast, Alarm.com and Vivint have been focusing on over the past 12 months. Comcast has been rolling out a more unified look for its products while integrating its voice-controlled remote into its home offering.
Alarm.com announced Insights Engine along with a potential drone program and Vivint has also created a unified product look with its own Sky Platform for advanced automation. Companies that have been focusing more on product and not ecosystem and the interface, have been losing.
Solution offerings getting creative
Lastly, Alarm.com announced the acquisition of ObjectVideo on March 14. The significance of this acquisition is the ability for alarm.com to focus on the hardware side and to potentially build out its much-discussed drone program by using the advanced analytics provided by ObjectVideo.
This acquisition is also interesting compared with Honeywell’s acquisition of RSI Video Technologies in March 2016. The Honeywell acquisition helped them draw out their DragonFly program, which supports dealers with a hybrid approach of DIY installation with professional monitoring.
Reaching new customers remains the long-term challenge
Overall, smart home is a fragmented market and consolidation will help dealers reduce the number of systems they have to be trained on and also help consumers by reducing the number of options available.
Although this merger may reduce the dealer opportunity for various competing platforms, such as Honeywell Total Connect, the USA is only at a penetration of about 23 percent of homes.
As the industry reaches near saturation of converting existing monitored accounts to smart home accounts, industry players will have to find a way to expand penetration beyond existing accounts. This expansion will occur through systems with intuitive interfaces and advanced analytical capabilities, not through hardware itself.