2020 Security Industry Forecast: Prepare Yourself for AI, DIY, More M&A

Two dozen security industry observers explain why the future is bright for those embracing technology, service, business and competitive variables.

2020 Security Industry Forecast: Prepare Yourself for AI, DIY, More M&A

2020: Security Industry

Celia Besore, E.D., The Monitoring Association (TMA)

A lot of the traditional players in 2020 will be challenged to react to both a reduction of financial options, such as tighter access to expansion funding, and the 3G sunset, which will lead some companies to decide whether they want to continue doing business or exit the industry. A positive is that the insurance industry has taken a stronger interest with the security industry, both through partnerships and acquisitions.

Also, the need for standards will grow as the products and services offered become more diverse and issues of data privacy are considered over convenience to assist in the monitoring process.

Charles Durant, Managing Director, Sandra Jones and Co.

Barring a significant economic downturn, 2020 should see continued robust M&A activity in the physical security industry. While valuations are arguably at all-time highs, buy-side demand remains very strong, especially from private equity. PE-funded acquisitions have soared to the highest level since the lead-up to the global financial crisis.

And there’s no end in sight as companies chase investment opportunities for a record amount of unspent cash that totals almost $2.5 trillion. These financial buyers are providing strong competition to established strategic buyers for deals. One prominent example is Convergint Technologies.

Clint Choate, Director – Security Market, SnapAV

The democratization of traditional security is expected to accelerate. Disruptive direct-to-consumer solutions will force dealers to rethink their offerings and business models. Many are looking to leverage the smart home to prop up service revenues through value-added services, as well as increase customer retention over the long term.

Instead of “bracing” for DIY we should “embrace” it in order to drive continued growth for our industry. Add more incremental value for the RMR.

Chuck Wilson, E.D., National Systems Contractors Association (NSCA)

Certainly M&A activity will remain very active. The low interest rates have made it very compelling to use debt to fund strategic acquisitions. If our industry maintains the high return on asset ratios, strong earnings and impressive growth trends, we will remain a target for debt-based consolidation.

Another big issue we must watch is regulations and licensure changes. We find ourselves competing for business with adjacent industries more than ever as our end points become a network device. Several industry sectors want to compete for control of that network and the attached devices.

2020: Overall Expectations

Carey Boethel, President, Allied Universal Technology Services

For security dealers, I see an underperforming trend with flat to negative growth. DIY will continue to take hold, and there will be softened M&A with relatively few new players due to depressed valuation multiples. Attrition will continue to be most critical KPI. For systems integrators, on the other hand, I foresee 5%-7% organic growth, with an increasing focus on Cloud-enabled RMR. There will also be continued consolidation in small to medium-sized providers.

For monitored services providers, I anticipate an outperforming trend. There will be 15%-20% growth in nonalarm monitoring applications such as hosted/managed access control and video surveillance, and GSOCaaS [global security operations center as a service]. However, there will be little to no growth in conventional alarm monitoring. Meanwhile, manufacturers and distributors will realize 5%-7% growth.

Peter Giacalone, Principal, Giacalone Associates

Regarding security dealers and integrators, those who pay attention and focus on the right markets will see great growth. This may mean departing from some traditional behaviors and habits. Those with their head in the sand who don’t stay technologically relevant may have a rude awakening. They must become true pros in every aspect of technologies including cybersecurity, as threat levels continue to increase with every IoT device installed.

For monitored services providers, the larger players are really separating themselves with technology and account base size as smaller players struggle to compete. Some of these players are left competing on price only to find themselves unable to support that to which they have committed. On the other hand, some of the mega centers are not only providing better service but able to do so at a more competitive price. We’ll likely see contraction here the next few years.

For product suppliers, competing gets tougher as the technology gets more sophisticated. Dealers need to work smart to separate the innovators from imitators, especially when evaluating imported goods. They may all look great but, unfortunately, looks can be deceiving. Distributors need to continue to step up their value-added benefits, as competing on price alone is a killer.

Kirk MacDowell, Principal, MacGuard Security Advisors

Security dealers will continue to face pricing pressures from large DIY companies, but I am counseling my clients to offer more, charge more and create clients for life. We do this by offering the Technology Exchange Program (TEP). The client purchases once, the dealer or integrator charges a set amount each month in addition to the RMR to upgrade technology, like a panel or touchscreen, once it is no longer cutting edge. This keeps the clients loyal to the dealers and prevents the panel from being taken over. Additionally we’ll see more residential systems financed with more devices added.

For monitored services providers, we’ll see more services provided such as entire home “integrity” monitoring that will encompass intrusion, cyberattacks, etc. Monitoring on demand will be offered, but at the end of the day dealers will be able to hold onto to traditional monitoring if the clients see the validity. On the suppliers side, dealers and integrators will need to watch them carefully and only choose those that will be a true partner. They must be leery of manufacturers tempted to enter the installation area to compete with them. Distribution will continue to consolidate and I expect Amazon to become a valid vendor with complete boutique packaging for the security industry.

About the Author


Scott Goldfine is Editor-in-Chief and Associate Publisher of Security Sales & Integration. Well-versed in the technical and business aspects of electronic security (video surveillance, access control, systems integration, intrusion detection, fire/life safety), Goldfine is nationally recognized as an industry expert and speaker. Goldfine is involved in several security events and organizations, including the Electronic Security Association (ESA), Security Industry Association (SIA), Security Industry Alarm Coalition (SIAC), False Alarm Reduction Association (FARA), ASIS Int'l and more. Goldfine also serves on several boards, including the SIA Marketing Committee, CSAA Marketing and Communications Committee, PSA Cybersecurity Advisory Council and Robolliance. He is a certified alarm technician, former cable-TV tech, audio company entrepreneur, and lifelong electronics and computers enthusiast. Goldfine joined Security Sales & Integration in 1998.

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