Future Direction
Generating ROI from alarm monitoring is primarily achieved through adding more accounts. “The infrastructure is a huge upfront cost for us,” Pyle said. “But because it is scalable and we are aggressively acquiring customers, it will bring down the overall cost of infrastructure as it spreads across more customer accounts. Our system is very flexible so we can add 150,000 to 200,000 customers a year.”
The profitability of monitoring companies depends on the volume of customers, as most costs are fixed. “Large companies have advantages of scale in operating monitoring centers and in national advertising and brand recognition,” said First Research in a 2011 report. “Small companies often compete by selling customer contracts to the large monitoring companies, or reselling the monitoring companies' services, which they buy wholesale.”
Vivint's biggest expense is staffing to maintain service levels, Pyle said. It manages all accounts in-house, rather than selling them to a central monitoring station.
Learning New Tricks
Marketing is a challenge for alarm monitoring, as end users may not understand the benefits of newer services. “We were formerly known as APX Alarm and then rebranded as Vivint in February 2011,” Herrick said. “As we evolved from a security company to a full home automation company we felt our name no longer represented all the products and services we had to offer our customer.”
Most consumers considered home automation a luxury and not an affordable service, making it difficult to promote. “It's a huge challenge for us to educate the marketplace on the benefits of a security system and branching into home automation, but once they become familiar, it's something they don't want to live without,” Pyle said.
Residential monitoring has evolved from home security to home automation. A continual challenge is minimizing false-alarm rates, which waste first-responder time and rack up fines for homeowners. It must also ensure that when something does happen, operators take an appropriate response in a timely fashion. Best practices are essential for home monitoring to be successful.