SSI’s 2014 Industry Forecast: Protection 1’s Tim Whall
The January edition of SECURITY SALES & INTEGRATION includes our annual industry forecast as a cornerstone of our special 2014 Industry Forecast Issue. For the piece, I interviewed 25 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 Under Surveillance blog posts.
What do you see being the top technology changes and challenges for 2014?
Tim Whall: Enhanced use of interactive will present one of the biggest changes. We are just on the surface today of how we are using interactive services to create more of a “lifestyle” for security products and services. There is so much more to come. Geo-fencing is really in the infancy of use. Quite frankly, the bigger win will be when the data accumulation and the decisions made from the data analytics automatically impact the lifestyle use. Consumer desire for great mobility, along with affordable smart appliances such as tablets, phones, etc., and consumer demand for content creates the opportunity for several things. These include: great demand of interactive and video services – primarily driven from consumer entertainment such as IPTV, Video on Demand, etc. will help influence security expectations; faster adoption across all transport companies to 4GLTE – thus creating a level playing field and driving more commodity pricing, which will further drive adoption of interactive services/mobile content; and new entrants into the security industry.
New entrants present additional opportunities and certainly some challenges. Entrants on the manufacturing side will drive competition and require a faster, more agile approach for the more traditional manufacturer. It will also bring new manufacturers and software designers that have more consumer design and electronics background. Both of these influences will be good for consumers and dealers – albeit putting pressure on traditional manufacturers. New entrants on the dealer side such as Comcast and AT&T, among others, will bring more awareness of “what security can do” for the consumer and therefore help create demand via their high marketing spend and appealing message to consumers. This will present challenges for smaller dealers looking to compete as new entrants leverage deep pockets to subsidize consumer acquisition. The promise of higher RMR for these interactive services represents both opportunity and challenge as security dealers see their average RMR increase with new customers, but may find it hard to sustain over the traditional long tenure of a security customer’s life.
What are the top business operations issues for 2014?
Whall: For manufacturers, speed of innovation and change will be an opportunity and certainly a challenge. Our industry has long been slow to change. With new entrants from the consumer electronics world, think 2GIG, Qolsys, Alarm.com, etc., traditional manufacturers will see consumer research, insights, demand and agile development processes become more standard, whereas before, manufacturers would go to a tradeshow or show up at a dealer’s door and say, “Tell me what you want,” and then roll it out at the following year’s tradeshow. Open architecture will allow third-party services to develop services on top of hardware and suddenly dealers are not beholden to the equipment manufacturer anymore, but rather the software provider. Another challenge equipment manufacturers will find is their ability to keep up on the hardware side for all the possibilities on the software side. For every data point that software will want to collect, there will need to be a collection device – and new ideas will continue to emerge in 2014 which will challenge existing providers to keep up or keep interest in small, emerging market opportunities. These small market opportunities may give way to footholds for new equipment entrants.
For dealers, a change and challenge certainly worth mentioning would be the impact on health-care costs, particularly for smaller companies that suddenly find the 15-20% increase in this expense creating pressure on their margins. In addition, the consumer experience in the cellphone industry may find its way to the security industry, which could end up creating a slew of changes, opportunities and challenges for any size dealer. For an industry with little customer upgrades or changes, dealers may find themselves unprepared to deal with the demand for “free upgrades” for the latest and greatest technology every one to two years. This could drive greater switching among dealers or extend customer life by locking customers into on-going contracts with upgrades based on services they want.
You see any major standards issues for 2014?
Whall: Uncertain of the changes it will create, but certainly with Intertek taking a much stronger push to get the certification business in the U.S., there will likely be some type of impact on the security industry or, at a minimum, for UL. A challenge that both UL and Intertek will face is how to keep up with the exponential advancement of technology. For many new services, agencies are ill-equipped to certify the products/services thoroughly.
What type of year are you anticipating overall?
Whall: I anticipate 2014 to be a very strong year for all players in the industry for the following reasons. Manufacturers should experience solid growth as the industry continues to grow both in market penetration and in consumer demands for the latest and greatest technology. The sun-setting of 2G will drive product sales not normally expected at this point in the customer lifecycle. As increased advertising in the industry raises awareness to new target audiences, dealers will see both an opportunity for growth and an opportunity to exit; therefore, I do anticipate some consolidation in the industry. While technology was neither a reason to stay in or not, the speed of advancement and required investment in customers may lead smaller, tenured dealers to focus more on commercial segments and/or sell their accounts/business to other growing entities.
What are some pressing security industry issues you expect to remain unresolved?
Whall: The false alarm rate will continue to be an unresolved, yet hotly debated topic in the industry. Enhanced verification technology is an area the industry must continue to focus on vs. traditional “process improvements,” for example Enhanced Call Verification. The sun-setting of 2G is another biggie.
What might surprise people in 2014?
Whall: The challenge of 2G for security dealers will be either waiting too long or starting too early. With industry attrition rates around 15%, starting too early means investing in customers that won’t be there three years from now. Waiting too long means not being able to address the needs of existing customers when the time comes. Each dealer needs to access their capabilities, their customer base, and their strategy to address it in the most f
inancially sound and operationally responsible manner. Another surprise could be verified response coming to your town. Having a particular market switch to verified response may pose a risk to a local company. Being aware of what is happening locally with regard to your jurisdiction is important, as well as engaging in ways to advance technology and reduce false alarms.
Anything else you would like to add about the New Year?
Whall: If I were to zero in on one specific topic I believe crosses nearly every area discussed above I would say it’s innovation of new technology. The speed, interactive nature, consumer demand, new entrants both within manufacturing and integrators/monitoring providers, along with regulation around new technology – primarily interactive capabilities – will prove to be of great focus in 2014 as well as a strong catalyst for change, challenge an opportunity.
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