After years of low compound annual growth rates (CAGRs) and limited innovation, the home security market is finally evolving with new and affordable security control products, and systems are becoming widely available, according to a November 2013 blog from Amdocs Inc., a software and service provider in St. Louis.
Not so long ago, consumers could only arm or disarm their security system by touching a physical security panel. Now, they can perform the same functions remotely and receive notifications on their smartphones or tablets. With remote access, users can view in-home video in real time, adjust their lights and change thermostat settings. Security systems, in essence, are becoming just one part of a whole-home automation system. According to Greg Rhoades, director of marketing for Leviton Security and Automation, New Orleans, the biggest trend is tying together as many subsystems as possible, using the security sensors as the “eyes and ears” of the home.
Which products and systems, then, are included in a residential security control system in this evolving market? Kirk MacDowell is the vice president of sales, intrusion—Americas, at Interlogix, Bradenton, Fla., a unit of United Technologies Corp. According to him, the electrical contractor may either prewire a new home or addition or retrofit an existing residence to accommodate the intrusion or life safety sensors required to detect break-ins or smoke, heat, or carbon monoxide. Depending on the homeowner’s needs, a system may also include seismic, water detection or other specialized sensors.
“The electrical contractor often ties together the many pieces and parts that comprise a connected security system,” Rhoades said.
Video cameras are another product category that is becoming common in residential security system. These cameras may use traditional analog technology that is hardwired, or—as is happening more frequently—wireless IP cameras will be requested. In most cases, a DVR or server will be used to record the video from these digital cameras.
“Cloud recording, offered by some vendors, is also growing in popularity,” MacDowell said.
At the heart of any system is the control panel, of course.
“From an electrical contractor’s point of view, that panel could be a hardwired or hybrid system that combines hardwired and wireless technologies. The customer then chooses security or lifestyle devices to augment the system,” MacDowell said.
Today’s modern panels not only control all of the security components chosen by the homeowner but also can be used to provide lifestyle information such as news, weather and traffic.
Even while in the midst of this current evolution, a new development has been gaining traction, MacDowell said.
“Informational security or situational awareness are the terms being used to describe the requirement more, and more homeowners have to know more about what’s happening in their home while they’re at work, on vacation or traveling on business,” MacDowell said.
One of the factors driving the market is the entry of nontraditional providers, such as telecommunications or cable companies. According to Reuters, Comcast, the largest U.S. cable operator, entered the home security market in 2010. The company has not revealed subscriber numbers, although it has 22 million video subscribers to whom to market its services. Time Warner Cable, which services 12 million video customers, has 30,000 subscribers for its security business (At press time, Comcast announced a potential merger with Time Warner.) Meanwhile, AT&T rolled out its Digital Life security and automation service in 2011 and planned to offer services in more than 50 markets by the end of 2013. While Verizon also has a security product, it does not connect consumers to the police or other authorities in an emergency.
“These offerings help drive the notion among consumers that security is no longer an afterthought but an expected part of a home, and it is a good time for electrical contractors to take action by offering their services to homeowners directly or by partnering with a local system provider,” MacDowell said.
This market also has its challenges.
“Security system regulations can significantly vary from jurisdiction to jurisdiction, and that can be a challenge to many security providers,” MacDowell said, adding that this issue is lessened for electrical contractors, who are used to being highly regulated and to complying with licensing requirements and installation or other standards.
The opporunities don’t stop with the installation. Monitoring companies rely on a monthly service fee, while most often, ECs install a system and then leave with no further revenue. However, ECs could share in the recurring monthly revenue.
“Electrical contractors can join in this opportunity by setting up their own boutique central monitoring stations, or, in return for a percentage of the monitoring station’s RMR, electrical contractors can offer to recommend the monitoring company to customers,” MacDowell said.