Can Alarm Dealers Survive the Battle to Control the Home?
The Z-Wave Alliance is a consortium of more than 200 independent manufacturers that build wireless home control products based on the Z-Wave standard. Mark Walters, chairman of the group, joins the conversation to discuss the increasingly competitive home automation/home security landscape.
Many traditional security providers are of the mind that telecoms and cablecoms won’t be able to sustain a high level of customer support for their home automation/home security services, and therefore will ultimately fail in the space. Your thoughts?
I don’ think the telecoms and cablecoms have the depth of experience that the traditional security providers have. They don’t have the years of experience. Their business model is a national one where usually the traditional security provider has an involved local presence, even if they are part of a national company.
On the other hand, the traditional security providers can’t offer HBO and Showtime. They can’t bundle entertainment with voice, Internet and security. People want deals and consolidated services. The solution is for the security guys to help service the telecoms and cablecoms. We need to see partnerships, not competition that just drives everyone’s margin down and ultimately leads to poorer service for everyone.
What can security dealers do to help fuel the growth in home automation among their clientele?
The main challenge is building consumer awareness of the value of home automation. Another challenge where the awareness is already there is that the focus has often been to try and sell entire lifestyle solutions, instead of point solutions that solve a specific need such as letting the housekeeper in on a specific day and time. This can be too expensive and complex, so both parties shy away.
Security dealers need to be demonstrating and selling the value of point solutions like remote thermostat and door lock management, automated lights for energy, safety and security improvements. Don’t aim for every system or device in the home with one shot; instead, solve one problem at a time and leave the door open for later expansion. Get the foot in the door and then work over time to develop a larger footprint.
How big of a threat do you view do-it-yourself home controls offerings are to professionally installed systems?
I think they are different markets. Some customers don’t have the appetite for another monthly payment regardless of the value. They want a self-monitored DIY solution. Others have no desire or skill to DIY a system. Total market penetration of security systems in North America is less than 20% of homes, but over 90% of homes have some technology like broadband or cable/satellite TV.
In my mind, this leaves plenty of market potential for both DIY and professionally installed systems. I think professional installers are going to have to change their practices and focus more on lifestyle and less on security. Don’t go for huge RMR monitoring contracts, keep this down and focus more on new services and service. The market has RMR fatigue; this is where bundling with some other monthly bill might help. Keep the number of monthly payments down and give at least the perception of discounts for bundling.
Do you know roughly the percentage of Americans who want the ability to monitor their homes while away? What market trends will affect self-monitored vs. professional monitoring?
I would guess virtually everyone would like this capability; it is just a question of awareness, accessibility and cost. According to a recent study by the Consumer Electronics Association, U.S. penetration is already at 1.7 million consumers, with plenty of room for adoption growth. The percentage of monitored solutions is forecast to increase, and I agree with that forecast.
While there’s certainly been an increase in DIY home automation products, the CEA research showed that 67% of consumers preferred professional installation over the DIY route [27%], which in most cases points to a professionally monitored solution. Both the professionally monitored and the self-monitored solutions will see growth as awareness increases due to the large advertisers like AT&T, Verizon, Vivint, ADT and others. As solutions become easier to install, the self-monitored solutions will also grow in popularity.
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Home automation is the primary function of Z-Wave. What are a couple key technical reasons why home security systems have been easily adapted to make use of a Z-Wave network.
The No. 1 reason Z-Wave is so dominant in the home automation industry is interoperability. Our customers — whether they are the security providers or their end-user customers — value the opportunity to purchase end devices from more than one supplier. Z-Wave is the only technology with an ecosystem of interoperability across many manufacturers’ products.
Another reason Z-Wave is so successful in this market is that the technology has been developed over the past 12 years to serve this specific market — control and monitoring for SMB [small and medium business] and residential applications. We use the 900MHz band, so we get superior range, wall penetration and power consumption in these applications. We don’t have to compete with Wi-Fi, Bluetooth and other 2.4GHz technologies.
Z-Wave has been adopted by virtually every major security panel provider and by all of the residential door lock, thermostat and lighting control manufacturers. This is due to its performance and cost advantages relative to any other wireless technology for these types of applications.
What is the penetration of Z-Wave-enabled products in the commercial sector versus residential market? What market trends and uses for wireless products in the commercial space do you project?
In the North America about 80% of Z-Wave products go into the residential market. The remaining devices predominantly go into hospitality and SMB. In Europe this is more along the lines of 60% residential and 40% hospitality and SMB. In Japan it is virtually 100% commercial.
We see more and more remote management and monitoring being used in hospitality and SMB, with the driving factor being energy conservation. Wireless is used due to the fact that is can be installed and maintained with minimal disruption to the business.
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