Analysts Outline Challenges for ‘Re-energized’ Bosch Security Systems
My cover story for SSI’s September issue talks about Bosch Security Systems’ 2013 renaissance of sorts with a higher profile from recent years and the launch of 110 new products this year. While the feature centers around my extensive interview with Bosch executive Jeremy Hockham, I posed some questions to industry observers to attempt to get a more broad perspective of the German-based security equipment manufacturing giant.
Several investing analysts I asked confessed to not being expert enough on Bosch to comment, but fortunately SSI Editorial Advisory Board members Sandy Jones and Bill Bozeman were gracious enough to participate. Although not included in the Q&A below, when I asked SSI Board member Mike Miller about Bosch Security, he stated: “They are supportive of the state alarm association in Washington; their traveling motor-home demo is awesome; they have great networking presentations; they have forwards and backwards compatibility, which is a plus for legacy systems; and they do well in developing spec writing for A&E plans for planning centers.” Now let’s see what Jones and Bozeman had to say …
Being that Bosch is German-based, what are the advantages and disadvantages of that insofar as making headway in the U.S. security market?
Sandy Jones: Often non-U.S. companies expect to successfully grow their American business but don’t understand the customer, channel requirements or how to invest in providing support outside of their own country. Unlike those companies, Bosch has made the investment in the U.S. with people, products, training and support. Additionally, many of their well-established products are American products and businesses obtained by Bosch through acquisitions.
Bill Bozeman: I see this mostly as a natural variable. The only disadvantage would be when a specification calls for U.S.-manufactured products or a percentage of U.S.-based products. I do not see any advantages.
How high of a priority do you believe the security business is within the vast, diversified Bosch hierarchy?
Jones: Companies that invest in R&D as Bosch does design for a specific market, then leverage their R&D dollars by repurposing the technology into other areas. If you look at their other core markets, i.e. automotive, consumer, energy management and health care, you see there are clear opportunities for Bosch to provide innovative new products and solutions for both the residential and commercial security markets. In fact, it should be noted that Bosch introduced dozens of new security products in the past year, one of which received a New Product Showcase award.
Bozeman: The market opportunity dictated the interest. Bosch is a huge company and they make great products, however, I doubt the CEO is worrying too much about video surveillance and alarm panels.
How does the nature of the security industry differ from other Bosch interests? What are the synergies?
Jones: Smart companies realize that while they can’t be all things to all people, neither should they be focused on just one market. Bosch is diversified in a few key markets, which is a good place to be. While security is not nearly as large as their automotive market or other more mature markets, it is a logical growth market for Bosch. It not only gives them an outlet to leverage their technology investments from other markets, but security remains a top priority for many buyers and has proved to be a more resilient market than others during economic downturns.
Is the Bosch name where it needs to be from a security brand awareness perspective among installing companies? End users? What about its relationships with them?
Jones: The Bosch brand is well known and respected in many areas but perhaps not top-of-mind when it comes to security at the end-user level. The good news is they have done no harm, foir example launched unproven products that turn out to disappoint the installer and cause problems for the end user. While Bosch has made a significant investment in new products recently, they still have to invest at many levels such as education, marketing and specifying to capture more of the U.S. market share.
Bozeman: The brand is top-notch, as with all Bosch products. Everyone knows Bosch.
What do you see as Bosch’s competitive advantages in the U.S. electronic security marketplace?
Jones: They are a well-funded successful company that knows how do business globally. Although they have yet to change the security market, they are clearly in a position to do so. Their new products have been in a variety of areas but most notably the development of a comprehensive line of IP video products. Imagine if they leveraged their telehealth products for the residential market or their “things and services” [Internety of things] software business, which focuses on mobility, energy and building, manufacturing and financial services, in the commercial market. If Bosch felt the opportunity justified such investments, they could potentially shift the commercial security market not just by just making acquisitions of scale, but by using their vast resources as a nearly $70 billion business to find an affordable solution to taking closed proprietary legacy systems to an open environment.
Bozeman: Their reputation for quality, their financial stability, their reputation for service and overall solid reputation.
Looking at Bosch’s entrance into the electronic security industry acquiring Detection Systems/Radionics some 12 years ago, does that legacy hinder or help Bosch in today’s marketplace?
Jones: Bosch coasted on these once top U.S. security brands, and there is only one way to coast, which is downhill. While they might have taken their eye off the security business for a while, I see that changing now. They have a re-energized, new U.S. leadership and have made the investment in technology; but only time will tell if that will make the difference they need.
How do some of the other key acquisitions over the years (Philips, Extreme, etc.) play into that?
Jones: They have an extensive camera line and had some big project wins with their night vision cameras, but I don’t know how successful they have been.
Bozeman: They were both part of the Bosch video surveillance build out. The acquisitions jumpstarted Bosch vs. a slow growth organic approach. The good news is Bosch has administered quality control and service for both acquisitions. Consequently, they have improved performance and service.
How aggressive do you see Bosch in either acquiring security businesses? What are some of the weaker or missing puzzle pieces? Access control?
Jones: Yes, they are missing access control and there are several excellent companies that they could acquire. But to me the key gap is fire. Like the other major conglomerate security suppliers, they need a fire control and device company. Fire was a key target for GE when they were doing their roll-up and then became the crown jewel of GE’s business when they sold to UTC. There are so few well established fire companies of scale that, if possible, this is the gap Bosch needs to fill first.
Bozeman: Access control is a big hole in the Bosch line, in particular an enterprise offering. Several independents are still out there, and a few have a nice offering. However, Bosch seems to have backed off on
the acquisitions as of late.
A few years ago, Bosch Security reduced its marketing and cut back on its tradeshow presence in the U.S., why do believe that was? Financial, strategic, old products?
Jones: Part of what you describe had to do with Bosch, but another part had to do with the shift in how people buy, in the value of tradeshows and cost per lead. Bosch continues to be a big supporter of ISC West, as the show management has invested in making the show important and worthwhile to exhibitors and attendees. Also rather than a booth, Bosch has made a significant investment in their truck, which gives them a tool they can use all over the country and all through the year, not just at a couple shows per year.
Bozeman: My guess is they did a cost vs. productivity study and determined the associated cost could not be justified. I did notice they had a huge showing at ISC West this year.
Bosch bounced back this year with a vengeance with 100+ new products. What do you make of that and its future in this industry?
Jones: It shows they are keenly interested in growing the market, and have the management who can and are repositioning to become a force in the market. With that said, they will need to keep investing in building their brand and give integrators and end users the reasons to change.
Bozeman: I am familiar with the line and it is very strong. Their focus on IP will assure they stay a key player in our space. Overall, Bosch is a first-rate surveillance provider.
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