Each operator in the central station of Devcon Security Services Corp., Hollywood, Fla., has two screens. One shows logs and the other shows video. The large screen in the top center on the wall monitors the alarm buffer.
But many are reporting that stress has not hit the intrusion market yet, at least not among the residential customers they serve, and the commercial intrusion market is doing well.
Brett Bean, president of F.E. Moran Inc. Alarm, Champaign, Ill., sees demand for alarm systems as very strong in his area. “We are seeing growth of about 20 to 25 percent over last year on both sales and revenue,” Bean reports.
“We are seeing a trend in the commercial market toward the customer wanting us to manage more of the administrative functions remotely of alarm systems, access control and CCTV,” he observes. “That seems to be up and coming.”
Gordon Hope, vice president of Honeywell Security’s AlarmNet, Melville, N.Y., says that from Honeywell’s perspective, 2007 was a year in which the intrusion industry continued to expand from the traditional alarm, glass-break and motion detector environment to one that incorporates cutting-edge security technology as a lifestyle-enhancing feature.
“For example, the industry continued to prepare for the approaching AMPS Sunset Clause by transitioning from analog alarm radios to technology such as GSM. This new digital technology, however, also brings features such as remote system control from Web-enabled devices, which offer dealers the opportunity to increase recurring monthly revenue. Homeowners can arm/disarm their security systems remotely and be automatically notified of non-critical events on their cell phones, Blackberries and other PDAs via e-mail or text message.
“Honeywell expects this trend will continue to materialize in 2008 as consumers seek to stay more connected to their homes and businesses,” Hope emphasizes.
New capabilities of home security systems are increasing ease of use and customer satisfaction.
“It continues to grow, it continues to be very resilient, even in the face of some trailing economics in certain parts of the country,” Rothstein maintains. He estimates sales of intrusion products to security dealers in 2007 were “well into double-digit growth” over 2006 sales.
Some security dealers’ experiences in the alarm market were very positive in 2007, while others had less-than-impressive results. For example, John Jennings, CEO of Safeguard Security, Scottsdale, Ariz., says intrusion sales were flat. “For alarm systems, installation and sales of standard alarms was about the same as 2006: $3 million,” he declares.
“The economy is shrinking in every market we’re in,” Kevin Stone, COO of Doyle Security Systems Inc., Rochester, N.Y., declares. “We’ve been able to overcome this challenge in our market — and systems sales are on the rise.”
Doyle Security has felt its greatest business decrease in new construction for residential homes. “We are expecting that to continue for 2008,” Stone reports.
Jennings expects 2008’s residential sales to be “not as robust as it’s been in the past, but just because of sales of homes, attrition has also slowed down.”
Residential intrusion systems and new construction also are declining for F.E. Moran, and Bean sees that as continuing during 2008.
“The builder market has slowed down a bit, and those dealers who were completely on that as a single source have felt it more than others,” concedes Mitch Clarke, vice president of marketing and market development for Monitronics International Inc., Dallas.
But Clarke sees other segments of the intrusion market as being better off. “2007 was a better-than-average year,” he reveals. “We saw a good number of accounts come on. We had a much better summer than we did a year ago — we’re predicting 2008 to be bigger.”
Progressive Technology Security Systems Inc., Escondido, Calif., has not felt a slow-up in the housing industry yet but is anticipating it, although Joshua Ladick, manager of administration, says housing prices in the San Diego area have been fairly stable and have experienced only a small downturn so far.
Judy Jones, vice president of marketing for NAPCO Security Group, Amityville, N.Y., concedes the manufacturer has felt the residential construction slowdown.
“Continued weakness in new U.S. home construction has somewhat impacted the residential intrusion alarm segment of our intrusion system business,” she reports. “However, commercial sector sales, across which all three divisions sell, have been strong and seeing growth.”
Ladick is not sure how the residential market will go if the economy sours. “No matter how much we tell them, if people put security in a category where it’s convenient to have it but it’s not up with food and paying your mortgage — the hard part is making people see it as a necessity rather than as a luxury,” Ladick concedes.
“In business that’s definitely different, because we can sit down and show them pragmatically how security can save them money and protect their assets and offer more stability, but in the residential market, that’s always difficult,” he admits.
William Buckwalter, lead installer for Progressive Technology Security Systems Inc., Escondido, Calif., works on a control panel for the security system of a small office.
NEW TECHNOLOGIES TO THE RESCUE
Security dealers, distributors and manufacturers are united in their enthusiasm for new technologies and services to offset the sag in new home construction. Clarke sees new technological innovations driving the burglar alarm market.“I think the biggest buzz now is in two areas — one is getting some remote access to the panel itself through the Web or a PDA device, where you can turn it on or off, or read information on your panel, so you know what’s happening in your house,” he notes.
“The other area we see growing more is more dealers are getting into some video monitoring,” Clarke declares. “As the cost of the hardware comes down, we’ll see more systems that will have video monitoring, and we’re looking into those types of solutions. We don’t currently support it, but definitely I see it on the horizon.”
Clarke also thinks customers can be encouraged to obtain more services from the equipment they already have installed. “In the next year, you’re going to see a reversal in the way products get introduced. Now it will be more of the Onstar model, where we give people a suite of services through software they get free for some period of time, and if it is of value to them, they sign up for a contract that adds $5 to their bill so they can have some added features that are good for them. Sometimes sampling is a good way to try a new product.”
Ladick agrees that technology is creating buzz in the burglar alarm market. “I think the technology is finally catching up to where people want it to be as well,” he says. That technology in surveillance video and access applications is making up for a drop in the number of burglary installations by his company.
“Occasionally when the technology improves, then we can go to customers and offer a technology as an upgrade,” Ladick relates. “I know that the demand has gone up for having a remote control to turn an alarm system off and on when somebody pulls out of their garage — that’s an add-on.”
Safeguard Security has added stand-alone life safety product offerings to monitor water, natural gas and more. “We started offering these life safety devices just last year as standalone — it’s another source of RMR,” Jennings notes.
Life safety devices, such as temperature and carbon monoxide sensors and sump pump monitors, are also being promoted by Doyle Security. “We’ve found it’s a great way to differentiate ourselves from other companies,” Stone notes.
The company also is selling alarm activity reports. “Customers can dial in and see alarm activity and their contact lists in real time through the Internet,” Stone explains. “With the Internet getting bigger and more people with PDAs, the fact that customers can see what’s going on with their alarm is hugely popular.”
Doyle Security is also offering GPS monitoring of trucks for electricians, plumbers and other fleets. “They have a real need for it,” Stone insists.
Tri-Ed Distribution Inc., Woodbury, N.Y., is reporting double-digit growth in sales of intrusion products to security dealers in 2007 over 2006.
MORE OPPORTUNITIES
Digital radios for alarm systems to replace older analog technology are being sold to approximately 65 percent of Doyle Security’s customers, Stone notes.Safeguard Security has been installing only digital GSM radios since March of 2007. “It is really secure, and we have had an increase in our conversion business because of our offering,” Jennings notes. “We increased our pricing nominally, but it has made us unique again.”
Rothstein agrees that technological improvements are helping the digital GSM radio market. “All the major manufacturers have been trying to trump each other in adding technology and features to their GSM products,” he observes.
He is pleased with the growth of short-range wireless devices in burglar alarm installations. “The wireless segment of the market continues to just gain strength, and I think wireless has gone through a really nice evolution,” Rothstein maintains. “I think today wireless is so good, and the prices have come down to such a great extent, that the application of wireless is much more universal.”
Rothstein suggests additional opportunities are available in home automation and structured cabling. “As a distributor, we really try to educate dealers on these opportunities, so that when they’re in a residential or for that matter commercial intrusion situation, they see the expanded opportunities for complementary technologies like audio/video, home automation, etc.,” he points out.
Clarke maintains customers are continuing to request a two-way voice alarm system. “We still do quite a bit of two-way voice,” he reveals. “It is not every dealer that pushes it, but those who have it in their portfolio do very well.”
He thinks the aging of the baby boomer generation could spell out opportunities in personal emergency response systems (PERS). “As we have more and more people over 65, I think that PERS is ripe for more acceptance,” Clarke believes. “The price of units from different vendors have come down.”
Medical alarm monitoring is Doyle Security’s fastest growth area. “We didn’t really have a business there two years ago, so when you don’t have a business there, you can explode right out of the gate,” Stone concedes, adding that he expects Doyle Security’s 52-percent growth in medical monitoring for 2007 to continue at 55 percent in 2008.
F.E. Moran praises maintenance programs as being a solid way to build business. “For those customers that do subscribe to maintenance plans, the attrition rate is almost non-existent, and it makes the relationship overall better,” Bean maintains.
“Growth areas in commercial come from just upgrades and repeat customers,” relates Ladick. They ask burglar alarm customers about whether they need surveillance video or access control. “We have that relationship with them, so they go with us for those add-ons. I would say new sales and add-ons are really big.”
John Trotter of Gold Protective Systems, New York, installs an alarm panel in a residence in Mahwah, N.J.
INNOVATION IN PRODUCTS AND SALES
Companies that are offering innovative products and services are experiencing growth in the burglar alarm market. At Bosch Security Systems Inc., Fairport, N.Y., sales of control panels that have IP integrated in them and the modules that allow other control panels to communicate over IP are growing. Additional business is being driven by the switch to digital GPRS radios.“For us, we’re seeing VoIP commercially,” observes Tom Mechler, Bosch’s product marketing manager – intrusion products. “We’re also seeing a trend toward IP communication, especially in the commercial space. VoIP is a subset of IP. IP communication is strictly data.” Overall, Bosch’s monitored intrusion equipment sales are up slightly, Mechler reports.
NAPCO is experiencing growth in its hybrid wired/wireless control panels, keypads and peripherals, and in its Internet reporting modules and wireless backup radios.
Honeywell Security reports higher than expected growth in commercial intrusion products and sensors, such as PIRs, glass-break detectors and wireless versions of all contacts and sensors.
Alarm.com Inc., McLean, Va., which offers customers control of their alarm systems through cell phones or personal digital assistants (PDAs), reports it has sold five times as many of its units in 2007 as in 2006.
“The sales reps for a lot of these companies can demonstrate it quickly at the customer’s site using a cell phone, Blackberry or PDA,” explains Alison Slavin, Alarm.com’s vice president of product management. “Once they’ve done a quick five-minute demo, it becomes 10 times easier to close the deal with the customers, because they’re no longer comparing it to the $99 system.”
Sending video clips over cell phones also is available from Alarm.com.
NAPCO also has high expectations for its system that sends video clips over Web-enabled cell phones or Internet browsers.
“This indicates a new incremental recurring revenue offering for dealers to capitalize upon while improving their accounts’ overall security and peace of mind,” says Jones.
Using video with alarm systems and viewing it over the Internet has been extending down from the high end of the market for Doyle Security. “In the last year to 18 months, we have seen the mid-market come into play,” Stone points out. “The cost of equipment has come done extensively.”
F.E. Moran has residential video monitoring as part of its business plan for 2008. “We are seeing an interest in some of our locations in the high-end residential customers,” Bean reports.
Customers can view a log of alarm events on their laptops with the newer systems on the market.
HAPPY NEW YEAR
“The new construction market has taken a very big hit to the south Florida market as well as other areas around the country,” Pollack reports “But our business has been and always will be recession-proof.”Rothstein also points out the recession-proof nature of the intrusion industry, but concedes, “I don’t know if that’s quite true, but I do know that at the end user level, the demand for security and peace of mind will continue to be strong, and that should have a positive impact on our business. The core of our industry is strong.”
Adds Pollack, “Personally, I’m surprised there is as much growth as there is with existing homes that don’t have a system. That continues to be a good growth market for us.
“We’re constantly busy,” Pollack emphasizes. “New construction is a little slower, but we are keeping busy with the changes of the AMPS system to the digital system. We’re doing what we can to get all our customers up on the radios. That gives us an opportunity to go back and touch that customer again, and make that personal response with them.”
Gordon Hope at Honeywell Security’s AlarmNet thinks intrusion products will always be needed. “The role of communications in our industry has changed rapidly in a short time,” he comments. “But the role of an intrusion system as a protector of life and property, and the critical role played by the professional central station, hasn’t changed at all.”
Economic caution is not affecting the market view of Jay Stuck, vice president of residential sales for Guardian Protection Services, Warrendale, Pa.
“My contrarian view is I think we have reasons to be optimistic,” Stuck asserts. “We’ve shown we have an industry that can really accept a lot of the economic knocks as they occur.
“I think first of all, everything is cyclic,” he believes. “I think in good times and in bad times, people are looking for peace of mind and protection. As an industry, we are pretty well-positioned to be resistant to any economic factors. I’m not doom and gloom, I’m boom and vroom when it comes to ‘08!”
Sidebar: Most Dealers Bullish on Alarm Sales
SDMasked dealers and integrators, “Considering the economic health of your business, how would you define the state of the market and the potential for burglar alarm sales in 2008?”2008 (compare with) 2007
Excellent16%* 24%†
Very good34% 38%
Good34% 30%
Fair13% 8%
Poor3% 0%
*percentage of respondents to SDM’s 2008 Industry Forecast Study, conducted November 2007 among SDM’s subscribers
†percentage of respondents to SDM’s 2007 Industry Forecast, conducted November 2006 among SDM’s subscribers
Note that in the2007 Industry Forecast Study, the question encompassed both burglar and fire alarm systems, while the 2008 study asked about burglar alarm systems only.
More than 8 in 10 dealers still view the state of the market as “good,” “very good,” or “excellent.” Note that changes between 2007 and 2008 figures may be attributed to a difference in the survey question (see note above).
Sidebar: Dealers Reel in their Reliance on New Construction
SDMasked dealers and integrators, “In which one residential market segment do you expect to see the highest rate of revenue growth for your company in 2008?”2008 (compare with) 2007
Middle-market homes (existing)37%* 31%†
High-end homes (existing)23% 21%
New construction (custom-built)17% 29%
Multi-unit dwellings9% 12%
New construction (tract homes)4% 6%
*percentage of respondents to SDM’s 2008 Industry Forecast Study, conducted November 2007 among SDM’s subscribers
†percentage of respondents to SDM’s 2007 Industry Forecast, conducted November 2006 among SDM’s subscribers
Dealers indicate they will be less reliant on the residential construction market in 2008 compared with 2007. Last year, 29 percent identified custom-built new construction as their hottest market; that figure dropped to 17 percent this year. More dealers say they will rely on the existing home market for alarm system sales.
Sidebar: SDM Chronicles Home Security Prices
SDMasked dealers and integrators: “What is the average price of the residential security systems your company has sold in the single-family home market in the last 12 months for a…”‘traditional’ system ‘mass-market’ system
2007 $1,726* 2007 $664*
2006 $1,683 2006 $820
2005 $1,645 2005 $1,169
2004 $1,391 2004 $616
2003 $1,471 2003 $911
2002 $1,425 2002 $416
*average price for each type of residential security system among respondents participating inSDM’s 2008 Industry Forecast Study, conducted November 2007 amongSDM’s subscribers. Prior-year figures are based on results of prior Industry Forecast Studies from each respective year shown.
