What used to be a fairly straightforward (but regulated) industry is now increasingly convoluted. Since multi-system operators (MSOs) began offering security solutions in 2010, the residential security industry has been flooded with new products, solutions, protocols, marketing messages and new partnerships. Although these are all ingredients for a potential paradigm shift, the dust hasn’t yet settled. The initial hype is beginning to wane and, as a result, equipment suppliers and service providers will soon face many difficult questions in the areas of merger-and-acquisition (M&A) activity, new product development, the route to market and end-user awareness.
For M&A activity, there are currently dozens of crowdfunded brands. Some have great ideas with incredible potential, while others are a flash in the pan. For those with potential, the primary challenge is their route to market. Established brands have established partnerships, distributors and installers – all of which take many years to forge. Many of the crowd-funded products do not have the time needed to make these connections. As a result, some of these crowd-funded brands will be acquired.
For new product development, many existing brands of security equipment are not technology innovation companies. Most of these companies are instead focused on creating products that are reliable and that meet or beat standards. Products that have strict standards requirements and are “life safety” oriented (as opposed to “life-style” oriented) are not often fun or exciting for end-users. These brands must now innovate to maintain market share. While this form of innovation may conflict with original roadmaps and strategy, suppliers operating in the residential security market that do not offer point devices, at a minimum, may find themselves in a difficult position within the next several years.
Furthermore the radio frequency (RF) type chosen by the supplier could be as equally important — or even outweigh the product design itself. The radio-frequency type that will become the standard remains unclear. Nearly all components are agnostic (e.g., they can be configured with any RF type and most hubs today are similar). For example, Lowes Iris can work with Z-Wave, ZigBee or Wi-Fi; iSmart Alarm can work with Z-Wave, IFTTT, Thread and HomeKit; D-Link routers work with Wi-Fi or Z-Wave; Comcast and Time Warner are ZigBee, while ADT and AT&T use Z-Wave. The type of RF that will win out in the end is unknown. It could be that the smart home market will be divided between Apple and Android users; however, the winner could be the brand that can accumulate the largest number of devices. Nevertheless, the winning device RF type that will win will be tied to a router, rather than a hub . Devices will work independently and as part of an ecosystem untethered from a single hub and cloud brand.
Equipment suppliers will need to find the most efficient route to market – though it might not be a traditional route. Suppliers that traditionally use installers have found sluggish uptake for Internet of things (IoT) devices, while the retail side has in some cases seen stronger gains. One reason for this situation is that traditional installers are sometimes reluctant to upsell technology and are not as comfortable with newer technologies. Some retail outlets are only interested in putting products on shelves, while others have a more vested interest in making sure the customer is educated about the product and understands how to pair various products to create an ecosystem. As a result, end-user awareness is not only based on educating the end-user about the technology, but also on suppliers and service providers becoming more aware of how to solve end-user problems and provide ecosystems that have real-world value.
With the initial hype of smart homes waning, the industry can now focus on sustainable expansion that may be achieved by the following means:
- Understanding end-user needs
- Introduction of ecosystems by Apple and Google
- Prioritizing one to three RF types
Blake Kozak
Principal Analyst – Security & Building Technologies.
IHS Technology
15 Inverness Way East
Englewood CO
USA
Phone: +1 512 582 2023
Blake.kozak.ihs.com
www.ihs.com
