As I see it, there are 10 leading factors propelling technology to new heights at a faster pace than ever before in the electronic security industry.
In generally chronological order, security trends 2019 include:
- The expansion in availability, adoption and throughput of IP-based transmission and broadband.
- The trend away from hardware/firmware-centric products toward software and software-upgradable devices.
- The advancement of wireless communications and ubiquity of smartphones and mobile access/control.
- Building connectivity into all manner of products, creating the Internet of Things (IoT).
- The move away from localized software programs and servers to cloud-based topologies.
- A corollary to Murphy’s Law in that the speed of technology breakthroughs innately accelerates (and among other things is reflected in the explosion of self-installed security alternatives).
- A response to the evolving nature of worldwide threats, including cyber crime, active shooter scenarios and terrorism.
- The unquenchable consumer thirst for better, faster, easier and more convenience.
- The similar business and economic demand for more operational effectiveness and efficiencies.
- Intensified security market competition that has brought not only telecom and cable/satellite companies and national retailers into the mix, but also scores of tech startups and global giants like Google, Amazon and Apple.
Security Trends in 2019: It’s Harder To Be Here
It’s those last few developments that served as the launching pad for an enlightening session I attended at the recent The Monitoring Association (TMA) Annual Meeting in West Palm Beach, Fla., “Valuations Evolve in the 2018 Market ― Understanding How Today’s New Technology Players Impact Your Place in Our Industry.”
The panel consisted of Imperial Capital’s John Mack, Barnes Associates’ Michael Barnes, The Edmonds Group’s Henry Edmonds and John Robuck of Capital One.
The group focused mainly on the residential security market, where they still see enormous opportunity but also great challenges, volatility and instability.
By comparison, the barriers to entry are much more pronounced on the commercial/industrial side, where panelists envision cloud-based security-as-a-service (SaaS) type offerings really taking hold.
“There is a lot to be said for the alarm industry being leaders in achieving success using recurring revenue models as compared to the home automation and IoT industries,” said Mack, who served as the moderator.
“SimpliSafe, Ring and others are one way to reach consumers but they do not make the traditional market obsolete.”
Barnes offered, “We have faced newcomers before and done just fine. They are just bigger and faster this time. But I see our industry responding and doing just fine.” Edmonds, concurred, saying, “Our job is to provide a more robust solution, and we have to make sure we add that value.”
Marketing Your Security Tech Company Better in 2019
As far as valuations, the consensus was although multiples have come down a bit for residential-oriented companies the overall demand remains high.
Much of that investor and buyer faith emanates from the Great Recession of a few years ago when security firms were among the least negatively affected businesses. Thus private equity continues to pursue security prospects, although many are wary of how the Googles, Amazons and new technologies of the world may rock the boat.
Yet security is not unique in that regard as many industries today are navigating tech challenges. As the above security trends for 2019 demonstrate, the industry is also not immune to capital market fluctuations.
Some of the keys suggested to maximize a company’s valuation included lowering costs of new customer acquisitions, reducing attrition, maintaining healthy gross margins and demonstrating the capacity for growth.
Panelists conveyed that lenders continue to be supportive of the industry so long as the company in question is not over-leveraged.
In a final plea of tough-love encouragement, Mack added:
“We need to provide a fundamentally better emergency service that incorporates verification in order to prevail vs. the advanced technology oncomers with lower prices. Let’s leverage and implement those same technologies to enhance what we do. We have to be better and keep up as we look to reach 40 to 50 percent market penetration.”
And from the “if you can’t beat ’em join ’em” camp, Edmonds suggested, “The big new players will move into data collection as a core focus and, in doing so, will want to partner with us.”
Click here to see more security trends for 2019