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INSIGHTS

Security Services Providers Set to Embrace IP (Part 2)

Security Services Providers Set to Embrace IP (Part 2)
Over these past few years, the alarm-monitoring industry has undergone such a surge in acquisition activity, according to Allan McHale, Director of Memoori Business Intelligence. Tyco International purchased Broadview Security, followed by GTCR's purchase of Protection One. Monitronics was acquired by Ascent Media as well. Cash flow in the difficult trading conditions of the last two years' econom...

Over these past few years, the alarm-monitoring industry has undergone such a surge in acquisition activity, according to Allan McHale, Director of Memoori Business Intelligence. Tyco International purchased Broadview Security, followed by GTCR's purchase of Protection One. Monitronics was acquired by Ascent Media as well. Cash flow in the difficult trading conditions of the last two years' economic uncertainty could be one of the acquisition drivers. The need to scale up quickly is another driving force as a requirement for an intermediary with scale and the capacity to deliver these services permeates the market. The integration of different security devices delivered through surveillance as a service enables more comprehensive and cost-effective services to both residential and commercial customers. More acquisitions, thus, might surface in the alarm-monitoring/security services industry.

Customized solutions
IP allows for more integration opportunities. “Our goal is to provide more customized solutions to meet end-user requirements; this will decide who will survive in the future. We are also seeing great potential in customized bundles in China as each vertical segment has a vast base, making customizations easier and possible,” said Robert Lien, Assistant VP of R&D for Taiwan, Secom. “Local/national legislation is definitely one of the most important catalysts that mandates the use of surveillance cameras, resolution of the cameras, frame rate and storage. For instance, the Chinese government mandated surveillance solutions be used in the heavy machinery industry in 2012.”

The right mix of technology, service and customization does make a difference. For retailers, some security services providers (SSPs) offer integrated video and PoS services to tackle shrinkage issues. The retail-specific solution enables retailers to proactively utilize the system to perform process verification audits such as PoS anomalies, monitor goods deliveries, inventory procedures and employee access, and track high-value merchandise. Management — at the corporate, regional/district and store levels — is able to anticipate loss vulnerabilities before they become unmanageable.

For ATMs, there are solutions to detect card-cloning devices. “We have services that detect and deter illegal cameras or jammers,” Lien added.

Heated Competition = Good Market
While SSPs compete with one another with customized solutions in the commercial security market, the residential security market is of increasing interest as well. A clear sign is that DIY surveillance equipment providers and ISP/cable companies are entering the home market. “Increased competition makes marketing even more critical since not every SSP has the channel and/or human resources,” Lien said.

Such business potential has attracted companies like Comcast, Rogers Communications, Time Warner Cable and Verizon Communication, which are now offering services, be it remote monitoring or home automation, to their subscribers.

Based on IMS Research estimates, worldwide shipments of smart-home devices will rise rapidly, from less than six million today to 25 million in 2014. Years ago, configuring and monitoring a fully connected home — with video cameras and remote Web access — could cost thousands of dollars. Only about 20 percent of US households today pay for professional monthly monitoring, according to Strategy Analytics. Many factors such as the dropping cost of hardware have brought smart-home technology to consumers' doorsteps. Also, consumers with smartphones and tablets have grown increasingly accustomed to using apps to manage their lives.

To “traditional” SSPs or alarm-monitoring companies, providing smart-home services can not only “differentiate” a company's offerings and win new customers, but also increase average revenue per existing user. Sounds like a game changer, doesn't it?

Take another example. ADT has its own smart-home offering called Pulse, which represents one in three new systems sold by the company. Its premium package includes 24/7 burglary and theft monitoring, smoke detection, remote access, remote arming/disarming features and lightning and HVAC control. Competitors such as ISP/cable companies are offering similar home automation bundles, with average monthly subscription fees at around US$50 or less. It is yet to be seen whether consumers will entrust home automation capability to their cable/Internet providers or SSPs.

In an effort to acquire more customers and retain the royal ones, ADT also offers a personal emergency response system, allowing for 24/7 monitoring and ambulance dispatch capability. With an aging society and increasing demand on medical resources, Secom in Taiwan has teamed up with local hospitals, medical device manufacturers, information system platforms as well as software developers to offer monthly health checkups or reports via telemedicine.

This year might be the first year the security services and alarm-monitoring industry has the bitter taste of strong competition from the more well-financed telcos and cable companies. The industry is reinventing itself to capitalize on new technology as more users seek more attractively packaged and priced solutions.

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