Security Business Leaders Speak Up About What’s Ahead for the Industry, Part 2

In January, Doug Yarger, president of SouthCross Security; Michael Alfano, president of greensite Security; Jesse Foglio, president of First Response Security; and Michael Gibson, president of Mulhaupts, shared their thoughts on some of the biggest issues in the security industry during a roundtable discussion at Resideo CONNECT 2023.

This month, they continue the discussion, looking ahead to what’s next for their security businesses, their thoughts on the proliferation of artificial intelligence and much more. 

What are the hottest technology trends you have your eye on in the physical security industry?

Alfano: AI, for us, has really given us the opportunity to provide a different level of service. So, we have some retail clients, and we’re now offering them something called Business IQ.

If they want to know how long someone’s staying in a certain aisle…if they want to know gender so they can market differently…if they want to know if somebody is standing at the counter for too long, we’re using AI in that case, and it has helped us tremendously.

Because it’s not just security now. As Doug said earlier, it makes us more sticky. Because we’re offering a whole other level of service.

Another trend is live monitoring, which is something we’ve started to get into with AI. So, if you’re on a property when you’re not supposed to be, that will trigger our monitoring center. And now an operator is talking live to a person who is on a property and who shouldn’t be. That’s a big trend. I think we’re going to see that more in residential, as well.

Yarger: What we’re working to continue to do is just integrate more services. And we find that we’re providing more value for our customers and giving them a better picture of what’s going on at their properties. Just increasing on that seems to be a trend.

Foglio: There has been a lot of talk about drones and robots over the last few years. But AI, and specifically video analytics, has shown up and had an incredible impact on the security industry as a whole. We’re using a lot of AI-driven cameras, which allows us to provide proactive video monitoring to clients with great RMR.

I think, as AI continues to evolve, we will continue to benefit in ways that make our business more efficient and effective which will provide a better service to our clients. Any dealer who intends to be around in five years should be embracing the newest technology available.

Gibson: AI has and will continue to enhance products in the camera space both commercial and residential. We are listening to what our customers are wanting and talking to them about things that they would like to be able to have a system do and then finding how we can make that work for them. AI will mean that we will need to do more training and gather a lot more information.

Do any of you have any reservations about AI or do you feel like the upside is pretty much unlimited for your security business?

Alfano: I think, for the human in me, there’s a concern that it’s going to affect jobs. But the businessperson in me knows it’s going to enhance business, and it’s going to enhance security as it is now.

Yarger: I don’t see a downside to it. And I don’t think it can be regulated. And I don’t think asking the government to put regulation on it will accomplish anything. It’ll just be more government. I think it’s going to work itself out.

Foglio: I think of the question in a couple different layers. The security industry, in general, has embraced many things AI is offering. The positive impacts AI provides certainly outweighs the negatives, but that is not the case for every industry.

Many entrepreneurs and investors are projecting out five to 10 years to determine which businesses they will invest in today, because AI advancements will certainly change and/or eliminate the need for some industries altogether. However, I’m struggling to see how it can be fully regulated, so that is yet to be seen.

Yarger: Jesse, you have your own central station. One of the trends that we’re seeing with the central stations is they want to use automated voices to respond. They want to reduce the amount of human operator interaction. And so, that’s a version of AI that’s creeping in.

And I think it does threaten the traditional business model, because if you go down that road, at some point, you become automated. And it really changes who the provider is. Do you see that as a threat?

Foglio: You mean to have AI replace live operators?

Yarger: Right. Because it’s a different product, right? If you go down that road, then don’t you end up comparing yourself to a DIY? So, you’re getting an automated voice that says, “You have a break-in.”

Foglio: You are correct, the large central stations have already embraced it. If you are paying the monitoring center to manage users, the zone list, the EC list, and also be able to dispatch and communicate with the client using AI – I don’t know that I see that as a threat because it’s more efficient and should come with some cost savings from the central station that is passed on to the dealer.

If a dealer wants live operators, maybe they choose to pay a higher price for this service and the central station could offer both options. Live operators play a key role because they know the alarm industry, they understand customer service, and they use critical thinking in their role every day.

Someday, AI might be able to match or even exceed everything a live operator can do, and when that time comes it will be a decision each dealer has to make. I’m seeing ‘live chat’ options on websites using AI to answer simple questions, and if you want to speak to somebody you request it and get transferred to a live person. So a balance of both is probably going to become the norm.

Alfano: You can look at the automotive manufacturing business, right? Initially there were people on an assembly line, which at the time, was the innovation. Now these manufacturers use machines and AI to do the same job. People adapt, and find other positions to work in.

Gibson: I don’t have any reservations about AI; I am just concerned about how fast it is coming at us and how it can or will integrate into so many areas of our business. You mentioned central stations. We have two and, yes, that at some point in time will have some kind of an impact.

How would you assess 2023 overall for the physical security industry and your security business?

Yarger: I think it was a year of growth. I think it was a really positive year. Coming out of the COVID-19 years, people have a newfound respect and appreciation for what the industry can provide. And I think we’re seeing the adoption rates go much higher than what they’ve been — the traditional 20% in the past.

 Alfano: I agree — growth and more opportunities. You know, what had to all be creative during COVID-19. And I feel like that has lasted. I’ve changed my business to kind of go along with that.

And now that we’re not in that model anymore, I just feel like the opportunity and the growth is tremendous. There’s always opportunity; you just have to be laser focused on it.

Foglio: I would agree with what these two have said. My perspective comes from the Pacific Northwest and the unrest that we have, but we have had a good year and I think we will continue to trend upward.

Ten years ago, you could go talk to 20 prospects and maybe 10 of them had thought about taking proper security measures. Today, you go talk to 20 prospects and 19 of them tell you they have thought about security…and one is just lying to you.

There is a budget set for it. It is top of mind now in a way that it just wasn’t 10 years ago, partially due to all the big players spending huge amounts in advertising.

Alfano: And social media, I feel, plays a huge role: social media and Google and reviews and things like that. I’m from New York. Go down any block, everybody has a video doorbell. Everybody. Whereas, 10 years ago, that was not even heard of. That part, to me, has been incredible.

People know now — they’re familiar, they’re aware of what’s out there and what they may want to use to protect their home. That part of it is really incredible to me.

Gibson: 2023 [was] an interesting year! I said earlier in my comments that getting people has been an issue that has held some of our growth back. The other thing that we keep an eye on is not only looking at growth in revenue but what we have had in the growth of expenses.

We have had a large increase in staff cost to keep our experienced people in place. I talked about it earlier to keep up with all the price increase on products, fuel cost etc. does have an impact on the bottom line.

I look at both growth and cost to see what difference it makes in our year. Growth is there; we just have to keep a lot of balls in the air.

With crime stories being covered so much more frequently on the news these days, people are more anxious than they used to be, aren’t they?

Alfano: Think about it, right? You can go on your phone — on Instagram or Facebook — and if there was some terrible tragedy, someone has recorded it. They’ve posted it, and they’re talking about it. So, it raised everyone’s awareness. You couldn’t escape it if you wanted to unless you didn’t have a smartphone.

It’s unfortunate, but it also, I believe, has given such awareness to our industry that you may not have without social media or the web and things like that.

Foglio: But, to your point, I think all the information…all the awareness…does make people more anxious and keeps crime and safety top of mind.

Gibson: Today, you hear more people talk about security and the need for it than I have ever had in my time in the business. (I am in my 51st year here at Mulhaupt’s) Social media has made a huge impact on people hearing about crime. I believe that it is one of the reasons so many changes and innovations have come about in our industry..

I believe the change will continue and that will cause us a need to be more on top of our business and the model that we use to go to market.

What’s your boldest prediction or hottest hot take when it comes to the physical security business in 2024?

Alfano: Definitely the connected home. I think, in my lifetime, everyone’s going to have some type of a smart device in their home connected to something: a smart camera, a smart video doorbell, an alarm system. I mean, you can almost say that now: Everyone has Alexa or other devices. So, I would say that the connected home will just continue to grow.

I also want to point to drones. The person who comes out with that — who really can make that cost effective and actually market that as another level of service — I think we’re going to see that at some point, also.

Foglio: I think the companies in 2024 that are going to be the most successful are the ones that truly put the customer first. Selling “noise makers” isn’t protection, and being able to deliver fast service is also what customers want.

People seem to have a lower tolerance after the pandemic, and they don’t want a two-hour response time from police – because what is the customer really paying for if our business model outsources the most critical piece of the protection we promise? How can we say we deliver “peace of mind” when the response is an uncontrollable variable?

I believe in 2024, [recurring monthly revenue] will be given to companies who can innovate, incorporate new technology, and deliver true value in a unique way within their market.

Yarger: I think we’re going to continue to see larger companies enter the space. I think what we’re seeing at the conference is that companies and other service providers will step in and provide services. And I think traditional integrators can still maintain their customer base by providing better service.

Gibson: Home automation will continue to grow and grow fast because of how fast technology is growing. I believe that larger companies will continue to buy up companies.

I believe that, as we move forward, our industry will need to look hard at partners with other companies because you can’t be everything to everyone.

Does the idea resonate with you that security installers and integrators should really be the client’s strategic, consultative advisor and their outcome guarantor, as opposed to being a mere reseller?

Alfano: Yes. We have to play that whole role. And when they call, they want to know that you know the system, or you had technicians who were at the home or business, and that you’re familiar with them. As a company, you should continue to play on that and build your client care around that. I mean, we always strive for that.

Foglio: Absolutely. We must be security advisors. The experts. The professionals. We need to train our teams so that they are able to answer the prospect’s questions, because everyone can get valuable information from Google before you show up to the appointment. The key is to sell a professional service that shows the value over DIY and knockoffs.

Gibson: I think, when you are speaking with a customer, you have to learn to be a great listener and find out exactly what they want to accomplish. That can take time and patience. After that, then you can begin to solve the problem of what equipment will be needed for.

Every system is a little different, and that is why we can supply a better solution than DIY. For the most part, they have one system to fit every situation, and that could not be further from the truth.

Do you have any closing thoughts or final comments?

Alfano: It’s just my opinion, but nothing beats a professionally installed system. I know DIY is always a big topic, and I’m not against it. There’s always going to be that person who can change their own oil and change their tires and everything else.

As Jesse said, you need to present yourself as a business that’s going to be there for them. You’re going to answer that call if there’s a problem. You’re not going to have to rely on calling somebody who could be in another country.

I just think there’s always going to be that value of having an actual professionally installed system, whether it be cameras, alarm, audio or video.

Gibson: I said it earlier: we sell our company and what we bring to the customer in our quality of products and quality and experience we bring. We tell them we are available 24 hours a day, 365 days a year and you talk to a real person when you call.

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