The past year has been an odd one for those in the security industry. Not only did they have to grapple with a global pandemic like every other business, but they were also directly impacted by civil unrest and the rapid development of multiple technologies.
Still, when you look at the numbers, it wasn’t a bad year for business. According to SDM’s 2021 Industry Forecast, only 19 percent of those in the intrusion alarm market considered the state of the market to be “poor” or “fair.” Forty-seven percent of those in the market considered the market to be “good,” and 34 percent consider the market to be either “very good” or “excellent.” In response to the 2020 Industry Forecast, 16 percent said the state of the intrusion alarm market was “poor” or “fair,” 41 percent said it was “good,” and 43 percent believed the market to be “very good” or “excellent.” While these numbers are down slightly over the previous year, they show that the industry held its own in the face of the pandemic. And some even improved over the previous year.
“Our company performed better in 2020 than in 2019,” says Aaron Whitaker, owner of Preventia Security, Columbia, Tenn., and featured on this month’s cover. “We were fortunate to adapt daily, even weekly. We saw some really big challenges obviously around access into people’s homes, so that was really the initial rocky road we had to go down — people being uncomfortable with having us in their home.”
Preventia did so well that as other security businesses went under, they were buying them up. The company completed four acquisitions in 2020.
One factor that helped make the year the best so far for some was the increased interest and adoption of security and alarm products.
“Overall, the adoption of security and alarm products grew in 2020 compared to 2019,” says Mitchell Klein, director of strategic partnerships at Silicon Labs and executive director of the Z-Wave Alliance, Beaverton, Ore. “As consumers spent more time working, learning and entertaining from home, they recognized the importance of adopting security devices to keep their homes safe and secure. With new products entering the market in 2020, consumers had more options for adoption, allowing them to choose between DIY or professionally monitored systems that fit their personal needs.”
Alice DeBiasio, vice president of global product management, security, Resideo, Austin, Texas, says that people spending more time at home, combined with social unrest, put security at the forefront for many that had hardly considered its importance before.
“Resideo and the entire alarm industry saw strong demand in 2020, particularly in the second half of 2020,” DeBiasio says. “The uncertainty of COVID-19 drove families and businesses to seek safety and protection in their homes. People are investing in their homes and remodels and upgrades as they have spent increasingly more time in their homes, and in addition have begun investing in security and safety solutions due to the increasing social unrest surrounding many cities and suburbs in 2020.”
But while business may have been good for some, to say the year was sunshine and daisies for anyone would be a stretch, and some of the trends continuing into this year and beyond will have an impact suggests Amanda Kung, a researcher at Parks Associates in Addison, Texas. “Security and, to a lesser degree, smart home devices, face a mixed bag environment from COVID-19. Some households unwilling to risk exposure to COVID-19 avoid installation and even repair technicians entering their home as much as possible. This cramps growth for traditional security systems, but heightens the willingness to acquire self-install security systems. Countering this downward pressure for traditional security systems are strong new home sales with a higher than average adoption of security. ADT, as an example, has entered into a partnership with DR Horton, the nation’s largest homebuilder. The security system and adjacencies such as IP cameras can go straight on the mortgage. In addition, sales of second homes in vacation areas have increased substantially as households, particularly those in large cities, seek escape to tranquility.
“Overall, slow and steady growth continues for adoption of home security systems and professional monitoring. In recent years, adoption of security systems has experienced growth even in the face of attrition, continuing at an average rate over 12 percent.”
Getting a Foot in the Door
In the first half of 2020, a profitable year seemed out of reach for many in the alarm industry, mostly because in many areas of the country, it was nearly impossible to get into a building to do work.
Parks Associates research shows that COVID-19 caused about one-third of security system owners and “intenders” to avoid professional installers due to their unease around having a stranger in the home.
On the contrasting side, pandemic-related concerns influenced more than half of the 40 percent of security system owners that told Parks Associates they were planning on upgrading their system in 2020.
“While there was substantial growth in 2020, there were also many industry setbacks as a result of the pandemic,” says Chris Carney, CEO of Abode, Palo Alto, Calif. “Demand boomed but doing business became more challenging than ever before. The industry experienced supply chain issues that made it increasingly difficult to fill the rising demand for product, and homeowners were more hesitant to allow installers into the home as they kept their contact bubbles tight.”
Whitaker says that already being established in an area helped Preventia get into homes and businesses during shut-downs, but they still weren’t spared from scheduling woes.
“I think we benefited strongly by already being a trusted advisor, but there was absolutely a significant percentage of people that would schedule an appointment, confirm the appointment, and as the technician was driving there the customer would change their mind and cancel,” Whitaker says. “Sometimes this was because of a potential exposure the night before, and it was a really big challenge scheduling and maintaining a high level of efficiency.”
Preventia was able to find success by quickly pivoting to a broader base. Since the initial challenges with getting into homes were mostly on the residential side of the business, projects were still in motion on the commercial side. Then once commercial jobsites started getting shut down, people were more comfortable with technicians coming into their homes.
“Predictably, lockdowns and restrictions due to the pandemic impacted end customer behavior in varying ways,” says Clint Choate, senior director, security market, SnapAV and Control4, Charlotte, N.C. “The residential segment saw enormous demand in all things security, surveillance, smart home, networking and adjacent technology services provided by the alarm industry such as audio, video, entertainment and lighting. The commercial, educational and industrial segments were much more negatively impacted as businesses worked to preserve cash and did not spend on capital projects.”
Anna Sliwon-Stewart, senior analyst at Omdia, London, says that many commercial projects have been postponed, with only the biggest projects managing to continue, though still with delays. “This negative development clashed with the emergent need to secure facilities that have suddenly become unoccupied, while in the past they have been used 24/7,” Sliwon-Stewart explains. “Smaller businesses, which had to shut down temporarily, became an easy target for opportunistic burglars. … Q2 meant for many [security] businesses almost no activity and very limited revenues. However, the pace of recovery at the end of Q3 and Q4 have helped even out companies’ financial books, and order intakes have been steadily higher going into Q1 2021.”
When the pandemic first hit, Omdia forecasted global intruder alarm equipment revenues would decline by 4.9 percent in 2020, but according to their latest analysis, the market only ended up declining by 3.3 percent.
The Evolution of Technologies
The pandemic wasn’t the only challenge in 2020. Those who wanted to succeed in the alarm industry also had to keep up with rapidly developing technologies, says Dave Sheffey, senior vice president of sales for the northern region at NAPCO Security Technologies, Amityville, N.Y.
“The marketplace is changing at a faster pace than it ever has,” Sheffey explains. “I’ve been in this business for over 40 years, and in the first 30 years, it changed very little — some of the marketing and bundling and how dealers and large integrators went to market changed, but product didn’t. In the last 10 years, products have changed a lot, customer expectations changed a lot, so that’s had an impact.”
One growing customer expectation is that of interactive services. According to Parks Associates research in Q2 2020, approximately two-thirds of security system owners, or 20 percent of U.S. broadband households, have an interactive security system. “Now more consumers expect their security systems to provide basic interactivity that enables a user to access and control the household security system as well as receive notifications as scheduled or requested,” Kung says.
“Today’s generation is looking for interactive services and more interaction with their home,” Sheffey says. “Today you have a lot of dealers that are a little older or companies that aren’t as progressive, and you have to be progressive in today’s market and adapt to the change. If consumers are looking for interactive services and you aren’t doing them, you need to.”
It’s natural that interactive services grew in popularity during the pandemic, as they help users operate their systems remotely.
“Interactive services continue to grow, especially with existing and installed security systems to upgrade to remote services,” says George Brody, president of Telguard, Atlanta.
And while the ability to remotely control security systems has been in demand in the residential space for years, commercial clients are increasingly requesting remote capabilities, says Tom Mechler, regional marketing manager, North America, intrusion and access control, Bosch, Fairport, N.Y.
“Customers expect the ability to control their system and check system status from anywhere, and they expect that to be simple,” Mechler says. “This has been a staple of residential systems but is now expected in commercial systems as well. Technologies that enable remote programming, diagnostics and servicing, and those that allow additional capabilities to be activated remotely through cloud connections became more important in 2020. While this has allowed integrators to continue to service customers throughout the pandemic, many have found reduced travel has helped to maximize the efficiency of employees and drive savings in labor costs. As a result, they will continue to be important in 2021 and beyond.”
The cloud has also helped advance artificial intelligence capabilities.
“We’re seeing some promise with video artificial intelligence,” says Jim McMullen, president of COPS Monitoring, Williamstown, N.J. “AI is creating the ability to filter out and trigger alarms based on a number of criterion [in a way] that wasn’t possible just a few years ago.”
With these new technologies, Kung says that building on existing core offerings by addressing security-adjacent use cases could be a big opportunity for security dealers.
“Parks Associates July 2020 research shows that security system owners and non-owning purchase intenders both prioritize, after personal space and home structure, protecting cars, electronics and pets,” Kung explains. “COVID-19 has also raised interest in a variety of security-adjacent use cases and products, such as monitoring vacation homes or rental properties, monitoring family members and pets and allowing for protected package, grocery and delivery service when no one is home. Professionally monitored security may experience a boost in interest among consumers anxious about how economic desperation might increase crime rates.”
Morgan Hertel, vice president of technology and innovation at Rapid Response Monitoring, Syracuse, N.Y., believes that the biggest opportunity in the residential space is the blending of traditional security with customer lifestyles: “This will become even more crucial. No longer will delivering great security service be about having the best looking keypad.”
The need for fully integrated solutions should also serve as an opportunity for the security industry. Honeywell Building Technologies, Atlanta is trying to make dealers’ lives easier by creating solutions that meet customers’ needs for fully integrated security systems.
“We expect to see customers continuing to invest in fully integrated solutions — ones that not only integrate with their existing systems but can expand to fit security systems and upgrades,” says General Manager of Security Americas Rick Koscinski. “The word unprecedented was used a lot in 2020, but what if we use it as inspiration? We’re going to continue with the mindset of moving quickly, innovating for our customers and helping them deliver business outcomes.”
Once the manufacturers deliver these interoperable products, it will be up to dealers to make them work for customers.
“Being able to integrate and ‘talk’ with others systems like access control and video surveillance is valuable,” says Patrick Kilbourn, director of strategic marketing and inside sales, Stone Security, Salt Lake City, Utah.
“As a systems integrator, our job is to help the client see this vision, if they are not already doing this.”
Preparing for the Rebound
While 2020 ended up being a good year after all for the industry, many believe that 2021 will be even better. Answering SDM’s 2021 Industry Forecast, 60 percent of security professionals said they expect revenues to increase in 2021, while 36 percent expect them to stay the same and only 4 percent expect revenues to decrease compared to 2020.
“We remain optimistic that 2021 will be a year of further expansion for the industry, with consumers adopting and experimenting with innovative and useful solutions,” Kung says. “COVID-19 has changed the way most Americans live, work, play and go to school, and the security industry, like many others, has been faced with a variety of opportunities and challenges. With consumers at home most of the time, many pay more attention than normal to the condition of homes, which may result in security system and product purchases.”
According to the CDC, half of U.S. adults, which equates to almost 130 million people, had received at least one COVID-19 vaccine shot at the time of publication. Kung says this suggests a return to normal is coming, and believes the pandemic will be followed by a period of strong growth as businesses reopen and Americans return to normal activities outside of the home — especially in the security industry, after the pandemic, recession and social unrest have resulted in a renewed interest in health, safety and security.
“Before the pandemic, consumers relied on security systems and devices to protect the home while they weren’t there, but as consumers spent more time at home, they realized the opposite was also true,” says Dennis Holzer, executive director of the PowerHouse Alliance, Pittsburgh. “Security devices can and should be used to add more layers of security to the home even while the homeowners are home. Security is now a focus 24/7 rather than just when the homeowner is at work for the day or on vacation.”
There is a great deal of business to be had in the commercial sector as well, Whitaker says.
“We really have seen a strong demand on the commercial side throughout the entirety of 2020 as well as into 2021,” Whitaker says. “Our biggest challenge comes back to finding good people. The labor pool is absolutely more limited than it has ever been for recruiting new crew members.”
After a short period where businesses were concerned about having enough work for all of their team members, many dealer and integrator companies are now hiring.
“Our expectations are optimistic,” says David English, vice president of sales at Southeastern Security Professionals (SSP), Norcross, Ga. “While we expect the market to demand increased service costs, we anticipate growing our revenue and adding additional technicians to our team to keep up with the competitive market.”
The supply chain is also a concern as the demand for security increases.
“In 2021, I expect the industry to continue the upward trajectory that we experienced in 2020,” Carney says. “Many of the same challenges remain in place, specifically, the supply chain ripple effect and how that will continue to impact product development and sales. The real estate market as a whole will also impact sales in 2021 as there is a high demand for new homes but the supply is low. In general, the demand for security devices will still be high but the success of the market in 2021 will fall on whether or not the supply chain can keep up with consumer demand.”
One thing is for sure though — for the companies that were able to turn the lemon of a year that was 2020 into lemonade, no obstacle is too great.
“2020 has proven that every business in every industry needs to adapt to change, embrace technology and push through adversity to ensure our essential workers across the globe are supported and celebrated,” DeBiasio says. “In doing so, it puts in perspective what our industry does: we protect people and property and during times of uncertainty and stress we never waiver on that commitment.”
Other dealers would be wise to follow suit, Parks Associate research suggests.
“There is a heightened desire for remote technical support that COVID-19 has accelerated,” Kung says. “Parks Associates Q2 2020 research shows that 30 percent of consumers prefer remote support for maintenance at this time, and nearly 30 percent are hesitant to have an installer in their home.”
And the trend of remote technical support will likely not recede post-pandemic, Kung adds. Instead, consumer interest will continue to grow due to the added convenience. “As consumers move towards online and digital services, security dealers must continue to develop more tools to help support customers remotely, such as YouTube video tutorials and do-it-with-me installation help via video, phone or chat.”
Understanding this challenge its professional partners were experiencing, Alula now offers pre-enrolled kit options.
“These kits allow the professional dealer to install the out-of-the-box-ready, pre-programmed systems in customers’ homes,” says Alula’s Brad LaRock. “The industry’s growth demonstrates consumers need experts now more than ever — especially when it comes to personal safety.”
Nick English, North American sales manager for Kwikset Residential Access Solutions, Lake Forest, Calif., says that while he expects people to become more receptive to having installers enter their homes as vaccines are more widely distributed, his team is working to provide solutions for those still hesitant.
“For those homeowners who are still reticent to allow in-home installations, we want to work at developing more options to allow them to perform the work themselves, while setting up additional support and technical help to guide them through the installation and help troubleshoot any issues,” English says. “As more people look for DIY locking solutions, the dealer channel that we work through runs the risk of decreasing revenues, which of course would translate to fewer locks sold. On the flip side, despite DIY, there are myriad studies showing that a large percentage of customers still seek out the service of a professional. And let’s face it — even products that are labeled as DIY are really not DIY unless the consumer is particularly handy.”
SnapAV’s Clint Choate says that Google’s recent partnership with ADT demonstrates how security professionals are needed to sell, market and deploy systems. Dealers need to prepare by becoming a trusted advisor with home and business owners, rather than starting a relationship and expecting RMR to continue flowing.
“Far too often, the traditional security installer has simply said, ‘Because of these competitive pressures, I don’t do residential anymore, I just do commercial,’ and I push back when I hear this,” Choate says. “First, RMR is the lifeblood of the security industry, so fight for every dollar of it — it’s worth far more than any profit or margin dollar is to your business. Companies that focused exclusively on commercial suffered in 2020, and frankly there aren’t enough businesses to go around while ceding the residential space to new entrants or the ‘big boys.’ These same competitive pressures have already moved to the SMB space and are quickly bleeding over to the upper commercial space as well.”
The solution, Choate suggests, is to be more creative in how you go to market and how you service your customer.
“Differentiate your offerings and your services,” he says. “Be a trusted advisor for your customer for technology. Offer creative programs that allow you to compete with $99 installs and capture RMR. Offer consumer finance programs. Provide remote and interactive services. There are a myriad of ways and resources for the industry to be successful in the spaces that the vast majority of our pros are competent in.”