This is the first in an ongoing series of features by Memoori Business Intelligence, covering innovation and disruptive technologies in physical security and building management. 2012 would be remembered as the pivotal year for home security. A perfect storm of technology, investment and new entrants has now changed the market landscape forever. SaaS models, ubiquitous broadband and smartphones have finally colluded to make home video surveillance a cheap and viable solution.
This is the first in an ongoing series of features by Memoori Business Intelligence, covering innovation and disruptive technologies in physical security and building management.
2012 would be remembered as the pivotal year for home security. A perfect storm of technology, investment and new entrants has now changed the market landscape forever. SaaS models, ubiquitous broadband and smartphones have finally colluded to make home video surveillance a cheap and viable solution.
Vivint was sold to The Blackstone Group for more than US$2 billion, and ADT in North America was spun off from Tyco International to form the ADT Corporation. Of course, everyone now recognizes that the big play here is not just security but home automation; offering numerous services with little extra “cost per user” required, by virtue of SaaS and cloud computing.
This is the opportunity that has got markets and investors excited. ADT is currently trading on the New York Stock Exchange, 25 percent up on its October 1 debut (as of December 19, 2012). But for all the hyperbole and talk of doubling residential penetration, have the “big boys” really embraced the revolution? Or, have they left the door open for smaller and more innovative companies to gain a foothold?
Mark Richards of Hive Labs certainly thinks so; “our vision is that everyone should have home security and not at $30, $40 or $50 per month. The alarm business models are still exactly the same as they ever were, and it won't last forever. Long-term contracts, not being open and honest with pricing, and salespeople knocking on doors are from another era.”
Richards puts forward a persuasive argument; almost all the smaller companies entering the market have a background in software. They understand it. Web services, cloud, agile programming techniques and third-party APIs, for example, enable companies like Hive to offer video surveillance services for $5 per month with no contract. “It's services like Hive that have a shot at growing the US market to 40-percent penetration, not the incumbents,” said Richards.
It is perhaps worth taking a step back and considering the example of the current king of consumer electronics, Apple — beautiful industrial design combined with intuitive software; hardware and software together in one ecosystem; an ecosystem that offers a completely end-to-end experience for the user, but at the same time is tightly controlled for third-party developers. Have major players in home security followed the Apple example?
According to ADT's own figures, it has in the region of 6.7 million customers delivering $240 million per month of recurring revenue. So why chose to rebadge iControl for the ADT Pulse service? Why not invest in its own hardware and software ecosystem? The camera offered by Hive is straight out of the Apple and Nest playbook. A small sphere of brushed metal and white plastic, which sits comfortably in a magnetic housing, can be mounted anywhere in seconds, with a patented ultra-low power Wi-Fi chip which can provide more than 1,000 triggered events (7,000 seconds of video) from just 2 AA batteries.
In 2013, the home automation market is up for grabs. Winners will be the ones that can offer the same seamless experience that consumers have come to expect from the likes of Apple.