There are a number of megatrends that are having just as much effect on residential intrusion and smart home as they are on any other market. In this second part of our State of the Market of Intrusion & Smart Home, industry experts weigh in on the present opportunities and challenges and the future of these segments amid tariffs and AI.

The Tech That’s Transforming the Market

Of course, AI is the top tech trend in the market. It’s not on the horizon, or in the future, but already here and greatly improving threat detection and ultimately safety and security for end users. “So what we sell has changed how we sell,” John Loud, president, LOUD Security System Inc., Kennesaw, Ga., says. “The residential video space loves the ADTs and SimpliSafes because they’re out there doing so much marketing. There are folks out there that don’t want to do it themselves or they don’t want to be with a massive conglomerate. They want to do it with someone local.”

When you look at that crystal ball and see 5-10 years down the road, what we’re doing for installations today is going to look so transformationally different and it’s going to be completely video-based.

That free marketing means more people who are exposed to the idea that predictive AI can be deployed in their home intrusion/smart home system. “My point of that is that even SimpliSafe is talking about proactive video monitoring at the home, which obviously is going to help us tremendously for false alarm reductions, our relationships with local police stations and alarm ordinances and those factors,” Loud says. “But when you see the residential space with video and AI investments and advancements, we’re all going to benefit and that’s clear. When you look at that crystal ball to see 5-10 years down the road, what we’re doing for installations today is going to look so transformationally different and it’s going to be completely video-based.”

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Anecdotally, Loud says, “Several years ago when all of a sudden the Ring doorbell came out, I thought, ‘Who in the world needs a [video]doorbell? Nobody is going to ring somebody’s doorbell.’ Well then guess what? Amazon. You talk about an amazing time. When I was a kid — I’m 58 years old — you could go knock on the neighbor’s door and ask if Johnny could come out and play. Whereas that wasn’t happening when Ring came around. People would call to ask if Johnny could come out.”

Judy Jones, vice president of marketing, NAPCO, Security Technologies, Amityville, N.Y. says, “AI is surely the most promising of technologies being incorporated in security today (and possibly everywhere). It is already used in NAPCO’s doorbells to differentiate humans from moving leaves to avoid unwarranted activation, as an example. AI is also frequently used in central stations and call centers to speed the help processes; it is used in predictive analysis and facial recognition to enhance safety measures; and AI-enabled forensic search capabilities can be used to help identify and investigate suspicious activity and/or detect the presence of gunfire. The areas in physical security where artificial intelligence can be incorporated — to help verify, enhance, and improve upon security technologies — are too numerous to list or even realize, as the technology continues to evolve and grow daily.”

AI is able to differentiate more than just motion and detect if the alarm was triggered by a person — or a known person — and it can detect if the alarm was triggered by a vehicle — or a known vehicle. “There are certain states where you can’t do this, but I think that you’re going to see facial recognition continue to grow on the residential side, to identify who can and can’t enter,” Jon Adams, vice president of sales, DMP, Springfield, Mo., says. “We’re always looking for a way to let in someone that needs to come work at our house without us having to give them a code. But we also don’t want to set the alarm off. So can I approve this person through the system seeing their face? I’ve seen some solutions we’ve looked at that allow me to say that a person is allowed to be there these hours of the day. I know that we’re seeing a lot of notifications built around AI that can recognize vehicles. The AI can recognize a postal truck or an Amazon Prime truck. I don't need a notification every time a human is detected right after an Amazon truck pulls up.

How can we merge security into their lifestyle without it being an inconvenience? That’s what I think AI is going to unlock.

Adams continues, “Or the exact opposite: I do want to know about it. I’m waiting on a package. I want to know when Amazon shows up. I personally get more excited about Amazon than I do the postal service, so maybe I would say ignore the mailman, but show me the Amazon guy. I shouldn’t be excited, it just means that money got spent. But more importantly, how can we merge security into their lifestyle without it being an inconvenience? That’s what I think AI is going to unlock.”

Chris Oram, service department manager, Eagle Sentry, Las Vegas., says Eagle Sentry has partnered with Alarm.com to incorporate AI into its security/smart home offerings. “For many years AV and protection systems were the most common connected devices in a home. In the last 5-10 years, we have seen the lighting and shades connectivity go through the roof. In the last year, we have begun our venture into AI. Alarm.com has many amazing AI-related commands. The AI commands help our clients remember to arm their systems and learn about their lifestyle patterns and schedule to help them engage with their technology.”

Avi Rosenthal, chairman of Z-Wave Alliance, and managing partner, BlueConnect Partners, Ashburn, Va., also sees AI and its predictive nature as a transformative force in the market. “The big change that we’re going to see in security and smart home really boils down to this idea of interpreting data — understanding data, and then giving actionable responses to the data. I hate to sound like everybody else, because AI is everywhere and it’s eating the world and yada, yada, yada. I don’t want to give you a false impression, but I do think that we’ve always been really good at collecting data. We’ve never been really good at interpreting that data or responding actionably based on that data.”

Rosenthal adds, “That’s the thing that’s going to change. We're going to be just as good at collecting the data as we ever have been, but now we’ll be able to do something about it. We’re going to go from reactive to proactive in the next couple of years. That’s the most exciting thing that we can talk about — this concept of moving to a home that is intelligent enough to understand what’s happening in it. That’s revolutionary. That’s what we’ve been promising for 30 years.

“We understand now that other elements of the home can also enhance sleep — the lighting, the sound, the temperature all play into somebody’s sleep,” Rosenthal continues. “We’re finally getting to the point where the smart home is intelligent enough to understand all of these things together and it’s able to be proactive. It learns and it starts to understand. It knows that if I come home every day at 6:00 P.M. and I like to listen to The Beatles, it’s going to proactively put that on for me. I know that’s a simple thing, but it gets much more complicated. It starts to get much more sophisticated when you start to think about who’s in the home and when they’re in the home.”

This bleeds into the security applications of a truly smart, interconnected system, Rosenthal concludes. “How many people are in the home? Did the kids arrive with friends or did the kids arrive from school alone? Are the kids sitting quietly in their rooms doing their homework like I told them to? Or are they running around in the basement in the gaming room? Understanding those insights and understanding the data that these systems are collecting will now enable us to make intuitive decisions instead of just being reactive as in, ‘There’s motion in this room, turn on a light.’ That almost sounds pedestrian to me now.”

Overcoming Headwinds

The residential intrusion and smart home markets are not without challenges. While DIY companies may be providing free marketing for the technology, they’re not providing free marketing for your company. “While the big-media spends of DIY companies were initially seen as a threat to traditional security dealers’ business; in fact, they actually helped grow the security business market/consumer adoption at large.” Jones says. “According to Parks Associates nearly 50 percent of the residential security market is now inclusive of some DIY or Ship-Self-Install product — a camera, doorbell, system or otherwise.”

Jones continues, “As an industry, we need to be prepared to meet today’s security consumers where they live. Millennials and Gen Z grew up with do-it-yourself technology, smartphone-controls and Wi-Fi. They don’t look for security companies in yellow pages (if they even exist anymore) nor wait for service calls and take time off for installation appointments when they can just do it themselves and add the professional monitoring thereafter. Likewise, the ship-self-install business model resonates with the next-gen younger security dealer pros, such as those taking over the business from their parents who founded the company during the latter part of the 20th century. It is also a methodology/model that became more widely adopted/acceptable during COVID, where home-visits were deemed risk-taking.”

Ryan Park, senior product director of safety and security, Resideo Scottsdale, Ariz., mentioned the same challenge, and the importance of promoting to the end user the benefits of working with security professionals. “Key opportunities we hear from our pro security customers remain demonstrating the benefits of a pro-installed and monitored security and life safety solution to compete with DIY-monitored and installed awareness systems,” Park says. “Dealers can address these opportunities by offering value-added services and adopting advanced solutions customers are asking for.

“To overcome the challenge of the DIY offerings, dealers can leverage new AI-powered cameras with added services like intelligent video detection, automation and life-safety monitoring,” Park continues. “To stay ahead, we will continue equipping our dealers with the best technology, support and programs that highlight the value of professional installation and long-term service relationships.”

Another challenge experienced by every corner of the security market is the talent shortage. “Certainly the number one for our industry is clearly workforce, whether it’s the technicians or the sales side that is getting folks to be interested in our industry,” Loud says.

Oram agrees: “I would say our biggest threat or weakness would be finding qualified technicians,” he says. “This would also be the biggest opportunity for Eagle Sentry. Training is an area of focus for making the next generation of high-quality technicians”

And of course, another challenge that is expected to stay with the market throughout 2025 is the economic uncertainty brought on by the American political climate. Loud says, “The big down one right now without a doubt is everything to deal with the word ‘tariff.’ Especially considering so many of our products come via Mexico or through China, we haven’t even seen the full impact yet. And it’s really about what we as companies are doing to invest and to prepare and to respond.”

To prepare, Loud said his company first needed revenue flow. “As a company, we’ve grown a lot of recurring revenue organically,” he says. “We need to have some cash flow to build or to be able to take new opportunities or for the day a pandemic hits or a bad economy hits. By having access to cash, we realize that whether there’s a 10, 25 or 35 percent increase due to tariffs or the ripple effects, that tariff will be higher to us. Even if that goes away two weeks or two months later, and they go from that 25 percent tariff quote and then it goes away to zero, I think it’s probably very likely that they’re not going to go back to zero on that tariff because they’ve had to absorb a lot of cost. So for us, we’ve started with many of our partners to purchase some inventory to be able to give us some sustainability in the long run.”

Loud says, “My take on that again is with employee retention as the number one focus. If all of a sudden my marketplace starts to have to go up on prices to keep up with tariffs, I’m still able to get jobs because I don’t have to raise my prices yet, which means my employees are still going to be employed. An investment back into the people, into your inventory, into the community is what keeps a company viable in the long run.”

On the manufacturing side, Jones says NAPCO sees the economy as a challenge for the market. “Uncertainty in the economy is a real concern right now, and tariffs are adding to the turbulence by causing price swings and raising real fears about higher equipment costs,” she says. “Another is the industry’s long-term labor shortage, historically representing a potentially large issue for many years now. Not to sound glib, but fortunately for NAPCO dealers, NAPCO’s self-contained product is designed to be an ideal solution to both issues, as its equipment and accessories are designed to be lower cost and are simple to install. The solution also demands less of the installer with built-in installation videos, sensor by sensor, plus step-by-step multilingual spoken voice prompts for setup, too.”

Rosenthal also expects the smart home market to feel the effects of tariffs. “With all the tariff talk and everything, people are not sure what to order, how much to order, or where to order it from,” he says. “We’re probably in for some short term pain until all of this sorts itself out. I don't think it’s going to be a surprise to anybody. Things are a little chaotic out there at the moment. We are dealing with a situation that’s completely beyond our control. That presents some challenges. When we’re presented with challenges, we have to rise to the occasion.”

Opportunities Ahead

Amid the chaos and concern, the intrusion market is predicted to hold steady as is the smart home market. Jones says that the economic uncertainty — as a few others have also attested to — can also lead folks to want to increase the feeling of safety and security. “While economic challenges can unfortunately lead to higher crime rates, they also tend to drive greater demand for security solutions for smarter tech to protect people and their property,” she says.

Loud says there’s an opportunity for installing — as AVS-01 has become a standard — more modern, compliant systems, “There’s an opportunity when the security dealer installation companies start to realize AVS-01 one is now a standard. It is being adopted by many of the major monitoring facilities — many of the major jurisdictional communities across the nation. They catch the wave and understand it better, and then they start to educate the consumer and their sales team. They can take a look and say, ‘Here’s what these validation scores can look like.”

Rosenthal goes back to the opportunities presented by predictive AI. “The biggest opportunity for dealers is to dig in and lean in to this idea that there are other services and other benefits that they can provide to their homeowners to create real stickiness with their contracts,” he says. “And they’re not taking advantage of them as often as they should be. The value to your homeowners is in that data. How much energy did I use? How many times does the door open? How many times did the kids go in and out? How many times did the garage door get left open? What was the temperature outside versus the temperature inside? What was the differential? We collect all that data.

Rosenthal continues, “Because we don’t provide it to the homeowner, we don’t remain in constant communication with the homeowner, and they forget why we’re so valuable, until an event happens like someone’s home gets broken into in the neighborhood to remind them. You need to remind them every month why you’re an important part of their family and why they trust you to protect their family.”