The January edition of SSI includes our annual industry forecast as a cornerstone of our special 2015 Industry Forecast Issue. For the piece, I interviewed more than 20 of the industry’s most knowledgeable market analysts, business experts, security dealers, systems integrators, supplier representatives and trade association directors. Some of their perspectives can be found in the magazine article, with the balance of their assessments appearing in separate blog posts.

Featured in this installment: Ron Davis, president, Davis Mergers and Acquisitions Group

What do you expect to be the major security technology shifts for 2015?

Ron Davis: Nobody would ever accuse me of being a techno geek! Having said that, all one has to do is walk the floor at a typical ASIS show and you would soon realize that technological advances are making everything faster, smaller, more versatile and even more integratable. I envision that some of the traditional larger alarm/security companies along with the mid to large integrators are going to start hiring “futurists” to help explain and understand what new technology offerings are going to mean to respective companies.

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The pace of change is going to be so rapid that even technology people are going to have difficulty keeping up. It seems that more and more devices, among other things, eliminate human interface. The challenge for senior management is will be to know which one of the technological changes to put their human and financial resources behind. Recently, it was shown how relatively easy it is to pirate telephone conversations, video images, electronic signals, etc. While some of the technology may help with existing problems, it may also, inadvertently, create new ones that may be more difficult to deal with.

What do you expect to be the major security business and operations catalysts?

Davis: Both alarm dealers and integrators will continue to grow. Residential dealers will begin to look more and more like integrators, will have to start worrying about dealing with privacy laws, and, will in fact, have to deal with exactly what many dealers have been looking to avoid: automation. Maybe a better word would be integration, integration of disparate components and parts to form a single operating system. The challenges will be different, certainly more intense, and today’s alarm company will in fact become a home integration company.

Commercial dealers will continue to explore new and more innovative ways of creating RMR. Most likely through contracting T and M services to be annual service contracts. Overall, the industry will continue to expand and thrive. Pricing and margins should remain good, thus providing great EBITDA opportunities for integrators, and an ability to increase RMR for traditional alarm dealers. Monitoring providers are going to become increasingly involved in the false alarm issue, and probably at the end of the day, it will be the monitoring centers who deal with the issue, passing the costs on to the alarm companies who contract with them. I think little by little, we’re going to see more activity in patrol services and alarm response by private security. This will start more in my high end communities, and will eventually filter down into other communities providing security services.

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What do you expect will prove to be some business differentiators during 2015?

Davis: This shouldn’t come as a surprise, but, at the end of the day, service. Really, good service will be the determining factor between good companies and not-so-good companies. I’m not just talking about service calls or installations, I’m talking about the whole quality of communications between the alarm companies and their customer base. I see more and more Internet-type services being offered as optional security protection to customer basis. Think protection against Internet predators, particularly those that prey on children and teenagers. We are helping such a service provider, and packaging those services for marketing by alarm dealers to their customers. Bold software customers will soon have the opportunity to be among the first to offer these services.

What type of year overall do you anticipate for the security industry?

Davis: Looking into my crystal ball, I see a few opportunities out there on the M&A side. I see one of the top five traditional security companies selling in the coming year. I see Vivint doing something exciting and unexpected in the next year. I see 10% of the top 100 companies in the industry selling, in the next year. I see multiples dropping slightly, but still being higher than they’ve ever been. I see more consolidation at the wholesale monitoring level. And speaking of wholesale monitoring, I see a whole plethora of new services being added at the central station level. Wholesale monitoring will become a real marketing play; do I hear SAI [Security Associates Int’l] alumni singing the chorus of “The Impossible Dream”?

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