The Many Reasons to Pay Attention to RMR
Various forms of RMR are valued differently.
I’ve just returned from the ESX tradeshow in Nashville, Tenn., and for those of you who don’t know about this event, it’s an RMR or Recurring Monthly Revenue event. Don’t drop out here saying “I don’t do monitoring” because you’d be missing the point of my column. The point is RMR. Sure, there is plenty of information on monitoring homes, commercial, industrial and even the government sector, but RMR is developed in many ways, and not just as a monitoring tool.
Various forms of RMR are valued differently. “Monitoring RMR” is valued at anywhere from 20 to perhaps 40 times your monthly recurring revenue, if you have iron clad, signed, long-term contracts. Integration companies are valued more so from three to five times your earnings before interest, tax, depreciation, amortisation, and non-cash equity-related charges, unless you have long term, signed service contracts. These are round numbers and not gospel, as there are other issues that are measured when a company’s value is determined, such as your business system, records, receivables, and on it goes.
RMR grows when service or monitoring results are driven and improved upon though automated processes, and ESX is where you will meet some of the companies that automate systems. The software developers who write automation software drive companies’ RMR. They write software that can manage any digital, electronic, or data signal and the software manages data, data flow, systems, processes, right down to the applications or apps that go along with these services. It’s a field that is not well known or understood, as there is little discussion or focus on what’s happening here. We do know that the software that is out there today is vast, and rapidly growing. Software opens the door to the next dimension. Software is marrying technology together to provide intricate, innovative and complex solutions that are empowering the capabilities of our industry.
I went to the Rise and Shine Breakfast event to hear the executives from Nest, Time Warner Cable and Alarm.com speak about what they are doing, how, and why. Yes, these companies are targeting the consumer market today but the technology they’re using is not limited to this market. It’s consumers today and the world tomorrow. I scanned the audience to see who’d decided to go to event, finding manufacturers who were looking at how to compete and some alarm company owners.
The speakers quoted Henry Ford saying, “If I had asked people what they wanted, they would have said ‘faster horses.’” Nest has sensor technology that reads the behavior of the individuals in a household and copies it, making the system do what they would usually do. You go to bed at eleven, it knows this and shuts off the lights, heat etc. Time Warner Cable provides you with an intelligent home solution, which you can control from your digital phone, computer, devices or basically an app. It even allows you to record TV programs and watch them from anywhere. Alarm.com is not a monitoring solution but an app that allows you to control your home system similar to what Time Warner offers, but without any monitoring services. You have to select one of their monitoring centers to use this app. One center installs the products for the consumer, and the other allows the consumer to install their own system. Now even Apple is talking about consumers being able to ask Siri, their voice recognition system, to control your heat, air-conditioning, lights, etc.
Data is managed by signals and data is being pushed from video, access control, HVAC systems, garage doors openers — any signaling device, including refrigeration, networks, email servers, GPS systems and satellites. And the next evolution comes from the management of data and the RMR and revenue derived from managing data and services. If you don’t want to manage information and don’t perceive your role as a data service provider, there are plenty of companies who will gladly do this for your customers. Our industry is providing the devices, the tools, but more so the software that provides the ability to manage data and services. It’s yours to control or to give away.