2019 Security Industry Forecast: Offering Cloud, IoT Services to Be Imperative

More than a dozen experts weigh in for SSI’s annual forecast, expounding the importance of providing offerings in wireless, smart home, video analytics, managed services and so much more.

2019 Security Industry Forecast: Offering Cloud, IoT Services to Be Imperative

Surging advances in technology, customer expectations and competition are spinning the security industry like a centrifuge. Those forces are separating the agile and able from the rank and file, with the former set to seize supersized opportunities.

2019: Security Industry

Mitch Reitman, Principal, Reitman Consulting Group

New players will enter the market. For example, we performed due diligence for AAA’s recent purchase of SAFE. Firms from outside the security space will enter the market and bring disruptive processes and products.

Old school “traditional” security company owners will sell and there will be some consolidation. Independents and regional players will be able to prosper if they can change with the dynamics of the market.

There will be customers who won’t be happy with their low end security, camera and doorbell systems, which will present opportunities for independent companies that add value. DIY systems will continue to reverse the downward trend of false alarms.

So it will be more important than ever for traditional security companies to forge relationships with local law enforcement and help them differentiate false alarms from the DIY system vs. from those of traditional systems.

Morgan Hertel, Vice President of Technology and Innovation, Rapid Response Monitoring Systems

DIY will continue to create new opportunities. It’s going to further technology requirements as the new entrants continue to demonstrate that their solution is better than others. There will also be an increase in consolidation as some companies decide not to compete in the new marketplace.

It will also be a big transition year as 3G radios migrate to 4G/LTE radios. Dealers did not think this transition was going to occur as fast as it did and most are ill prepared to handle it in time. This will result in a real mess in the industry.

Solving the false alarm problems will also be on the front burners. They won’t get solved in 2019, but I believe a couple of paths will appear to help everyone move closer.

Steve Surfaro, Vice Chair, ASIS Int’l Security Applied Sciences Council

There are numerous opinions on the increasing reliance of facial recognition in public spaces and by law enforcement. For public-use cases, once it has been determined that the high expectations for the protection of privacy, civil rights and civil liberties are met, facial recognition’s benefits far outweigh alternative biometric methods in speed and ease in processing.

It is currently deployed with increasing success in preventing terrorism, workplace violence, shoplifting and helping to find victims of human trafficking.

I also want to say that competition is healthy and Chinese cameras are not our enemy. From the focus of video surveillance system reviewers and solution providers, it seems if a product is made in mainland China technology centers that it is an active cyber intrusion threat.

Apple, Amazon, Microsoft and many others build products in mainland China without issue. Chinese manufacturers are making honest deals and solid, consistent products for hundreds of companies.

Should even one Chinese manufacturer drop off the top five IP camera market leaders, we can expect even more profit taking; there are at least two solution providers that consistently enjoy at least 50% gross margin from factory FOB price to MSRP. This means higher prices and fewer products to protect an end user’s facility.

Don Erickson, CEO, Security Industry Association (SIA)

The challenge to find talent in the technology sector and particularly physical security has accelerated and is inhibiting overall expansion.

The industry must educate more students at a younger age that the security industry is high tech and exciting to draw more people to the field.

A lot of security equipment now has the “wow” factor more often associated with consumer electronics, while at the same time providing important benefits to society. We need to do a better job conveying that to young people considering STEM careers and elevating the profile of the industry to prospective employees.

With a movement to connected systems, cities, processes and people come new concerns over data privacy. Finding balance between security and convenience and determining what people are willing to give up to be able to have seamless integrated solutions is a dilemma the industry must address in the digital world.

If consumers are not confident their personal data is secure, the adoption of IoT and other advanced security-related technologies will be slowed.

The industry needs to step up and proactively influence policies being developed by government agencies about how personally identifiable information is being used and managed by security solution providers.

There is considerable momentum for Congress to adopt legislation akin to Europe’s General Data Protection Regulation, and more states are beginning to consider adopting new privacy laws that could impact the use of security products following the enactment of landmark privacy legislation in California.

2019: Overall Expectations

Pierre Racz, President & CEO, Genetec

With the incredibly fast-paced evolution of our IoT world, there will continue to be tremendous opportunities for systems integrators in 2019. But the days of selling a video surveillance or access control system on their own merits are gone.

The challenge facing the industry is how to adapt. Customers no longer want independent, siloed systems. Savvy SIs are figuring out how to use their expertise to do more for the customer than ‘install, deploy, maintain.’

The future is bright for those that can guide customers to make sense out of all the sensor data they have coming in, and use or act on it more efficiently and intelligently.

While consolidation will continue, even smaller shops will be able to build longer lasting, more meaningful relationships with clients if they can get in the door earlier, ask different questions and are able to articulate solutions to problems the customer may not understand.

Streamlining the purchase journey to ensure the customer is better able to face the challenges that lie ahead — uncertain economic outcomes, cyber threats and meeting the lifestyle needs of their employees — will be paramount to success.

Jeff Kessler, Managing Director, Imperial Capital

We are bullish on the security industry, because of the “maturation” of bleeding-edge technologies into force multipliers that now actually work the way they were supposed to.

We are bullish because more standards are allowing companies to expand their API exposure, which in turn allow many more technologists with skills to provide third-party products and services.

We are bullish because we are seeing financial institutions willing to participate in programs that lower customer creation costs.

The two bad elephants in the room have not changed in half a decade: The move to put more security, or any piece of equipment, on a network immediately puts it at cyber risk — the most fearsome threat we have to face in this industry. The second risk is, again, simply not enough good STEM-educated people to hire.

In 2019, if the economy begins to slow so will security installations, although to a lesser extent. It is possible the K-12, university and other institutional upgrades and new installations will offset any slow-down and keep industry growth in the mid to upper single digits.

If the economy continues at its current rate, 2019 will grow to the extent of best-of-breed integrators, VSaaS and ACaaS move into the SMB market, and to the extent smart video, smart access control and electronic locks continue to be readily accepted as needed upgrades in the commercial/industrial world.

Richard Ginsburg, President & CEO, Alert 360

I expect 2019 to be a successful and robust year for security dealer and integrator companies able to integrate and service IoT. It will be a challenging year for companies not able or willing to do the same.

From a monitored services perspective, the industry should finally be able to break that same 20% penetration rate it has been stuck in for more than a decade due to the emergence of new products and services.

Pressure will be put on monitoring providers to tackle false alarms and police response fatigue via installing better, reinforcing two-step and video verification, and focusing on quality service.

Jorge Hevia, Senior Vice President, Sales & Marketing, Napco

The spotlight on security worldwide is a huge market expansion opportunity for a professional residential and commercial security technology innovator and pioneer, like Napco. There are two challenges.

First is keeping up with the ideas we have and want to implement and develop for this ever-evolving marketplace. The other is training and supporting the traditional security professional community with whom we’ve partnered and built our business.

We must help them transition into marketing, selling and rebranding themselves into the vital, new connected home and as business service providers trusted in their communities, versus “just” alarm dealers faced with a lot of new DIY and multinational competition.

John Distelzweig, General Manager and Vice President of Security, FLIR Systems

Healthy systems integrators should benefit greatly in 2019, either through growth of their business, or via acquisition by larger players that are paying generous multiples in many cases for strategic acquisitions.

As more manufacturers move to Cloud offerings, monitored services providers often become a primary delivery channel, bundling these offerings with other services to create robust packages that save end users money and increase their overall security and situational awareness of their properties.

This is helping many central stations replace RMR from more traditional services, like basic alarm monitoring, that has been challenging to grow profitable in recent years.

Security manufacturers have the benefit of increased access to highly advanced chipsets across several key areas, for example imagers, SoCs, GPUs and analytics acceleration chips.

This allows for the development of advanced products and reduced R&D timelines and budgets. This means an unprecedented opportunity for product development optimization.

Tracey Boucher, Vice President of Merchandising, ScanSource Networking & Security

Compared to other markets, the overall security industry is saturated in terms of the number of manufacturers. Thus, a handful of mergers and acquisitions are likely on the horizon, and 2019 may be the year where we see increased consolidation.

There is also a possibility for the upcoming year to be marked by an uptick in DIY and consumer solutions. Though less established in nature, these solutions have the potential to be seriously disruptive.

As well, issues regarding state-to-state licensing for physical security installations are likely to remain unresolved, making it difficult for end users to purchase full solutions all from one place.

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About the Author

Contact:

Scott Goldfine is the marketing director for Elite Interactive Solutions. He is the former editor-in-chief and associate publisher of Security Sales & Integration. He can be reached at [email protected].

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