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June 23-26, 2014


Top 5 Electronic Security Industry Predictions for 2014

George De Marco
I  January 08, 2014


Security Industry Predictions 2014

Another year is in the books. Crazy…we are 14 years into the new millennium, and still no flying cars or teleportation machines beaming us around the universe, although Elon Musk may have a solution to both soon.

In 2013, we experienced terrible human tragedies, from the horrific Boston Marathon bombing attack, and the devastating Oklahoma tornadoes, to the Typhoon that razed the Philippines. Other notable newsy events in 2013 were the meteoric rise of Bitcoin, Yahoo acquisition of Tumblr for more than $1 billion, and Amazon’s announcement of a proposed drone delivery service, and of course, courtesy of the Feds, a sequester, a shutdown, and an enormous amount of money spent on developing a website.

A few questions linger as the Feds begin tapering off of Quantitative Easing (QE), such as what will the real economy look like as we begin to taper? How will real estate values hold up? Will interest rates rise or fall? Will we enter a period of inflation or stagflation? And so on…

Maybe there are more important questions for the electronic security industry to ponder. Will ADT be purchased by a cable or telecom company or…? If Google makes a play in the space, what will it be? Are Apple and Microsoft ready to introduce innovative products and services directly to consumers? Will monitoring and interactive service fees increase or decrease for the end-user?

On a brighter note, the electronic security industry continued its upward trend in 2013, creating many opportunities for existing companies to grow and prosper. The attraction of a vibrant and hot sector is drawing gobs of money from private equity and venture capital firms wanting to capture a piece of the market. This is translating into ongoing mergers and acquisitions of integrators, monitoring facilities, distribution channels, and manufacturers.

Innovative technology, introduced through crowd-funding opportunities with names like Piper, Canary and Hive, is capturing the attention of investors and the imagination of consumers. In addition to their pioneering thermostat offering, Nest hatched an innovative smoke detector. And the innovative parade will continue into 2014 as consumers clamor for products and services that keep them connected to their homes, businesses, and people. Just wondering if the company names will migrate away from the birds and the bees?

As I stated in the past, the industry is moving past the traditional “detect and response” model to one that is highly interactive with the end-user. This continues to be the theme as the interactive services model gains stream, including the early emergence of on-demand monitoring. Refreshing “dumb” panels to robust “smart” security hubs is a huge opportunity for the existing security provider to offer their customer before a competitor steps in.

To kick off the top five predictions for the Electronic Security Industry in 2014, I reviewed my 2013 list from last year. Although last year’s predictions are relevant for 2014, here are my prognostications for 2014:

1. The Internet of Things - Interactive Services 2.0
Safety and security have always been important to people, but the need for reliability, convenience and savings continue to be strong factors in the consumer buying decision and customer experience. Although app fatigue may be creeping into the customer experience, consumers are looking for more efficient and effective ways to streamline their interactions with people, places and things. People want engaging interactive systems and services to keep them connected to what’s important to them. The challenge is to deploy well-designed intuitive technologies that will provide the consumer with a more elegant and intelligent solution while delivering predictive and practical lifestyle enhancements.

The next level of interactive services will come from the deployment of “Internet of Things” (IoT). Although we are in the beginning stages of the IoT revolution, many companies have already begun to tap into the IoT-connected business strategy.

Existing products are being transformed into connected devices that unlock complimentary revenue streams, but more importantly, create entirely new products and services in the process. With these Internet-enabled devices that have the ability to connect to other devices, companies are changing the relationship they have with consumers by moving from just selling products to selling predictive recurring services to end-users. Fulfilling customer needs and expectations will become easier to accomplish, delivering a more service-oriented relationship. Instead of guessing when somebody will need service, access to real-time data will help to eliminate reactive service relationships. Cloud-based services will continue to host these connected objects to the Internet and control them remotely 24/7 from virtually anywhere via mobile devices.

If we can control the Mars Land Rover from Earth, I’m thinking Earth-bound devices are a piece of cake. Forward thinking security integrators and monitoring companies are well-positioned to deliver next-gen technology and interactive services 2.0 to the consumer. However, non-traditional players will continue to impact the competitive landscape, offering predictive lifestyle solutions for managing people, places and things.

2.Monitoring Services of Everything 2.0
Traditional monitoring services will begin to shift from today’s standard flat rate model to a more activity-driven pricing model that manages a growing volume of connected devices. When the onslaught of the IoT devices hit the marketplace, there will be a greater need to change the pricing strategy for monitoring these connected devices. As software improves for monitoring IoT devices, monitoring and interactive services will be able to handle the experiential relationship between connected devices and what people expect to happen next in their homes or businesses.

On-demand monitoring will become more common place as alternative monitoring services and predictive analytics become more widely available. Innovative monitoring apps and IoT products and services will begin to disrupt the traditional monitoring model. As a result, the industry will experience a far greater market penetration than in previous years.

Recurring Monthly Revenue (RMR) Alert: Innovative technologies and robust competition from new players may begin to erode the pricing power for existing RMR models. Disruptive technology is lurking around the corner. Be prepared.

3. The Road More Traveled - mPERS
Aging in place seems to resonate with seniors who want to remain in their homes and communities. In this case, familiarity does not breed contempt. The growth for Personal Emergency Response Systems (PERS) will be tremendous as Boomers move toward retirement. However, Mobile Personal Emergency Response System (mPERS) can be very attractive for people of all ages on the go, helping to give peace of mind beyond the traditional security perimeter for homes and businesses.

Whether you are a college student walking home, a senior on vacation, or a child riding a bike to the park, personal emergencies can be more easily traced to a location and summon help from police or fire services for an emergency situation. mPERS apps will become more sophisticated, differentiating the level of response required for the situation. For example, “personal or community safety nets”, consisting of family and friends, can simultaneously be summoned for non-emergency situations that do not require police or fire response. As monitoring software becomes more sophisticated, mPERS will provide people with a greater sense of security and safety whether in their homes or businesses or on the road.

4. Data Bounty - Predictive Video Analytics
Video surveillance is more prevalent in commercial and residential security systems. In its most basic functionality, video systems are analyzed after a criminal event to assess the crime scene and gather images of potential suspects or witnesses to the crime. These images are used by the media as “breaking news” events to distribute images of persons of interest, assisting law enforcement in breaking the case. Although this solution is powerful, video contains mega amounts of data that can be harvested for many uses, including predictive video analytics.

Predictive video analytics is an important tool for surveillance, assessment, or analysis in safety, security, resource management and business activity applications. As video cameras become smarter connected devices, apps will be developed to harvest data to help organizations become more effective in predicting customer behavior, fighting fires, or preventing terrorist activities. In other words, valuable, empirical, analytical data from video cameras will produce actionable predictions in the near future.

However, the assessment of video data is only one facet of the equation. Law enforcement will need help in managing the huge amounts of video surveillance data gathered from smart phones, cameras and social media apps for predicting criminal activity and solving crime. The chain of custody, storage and management of digital assets has become an increasingly vital task for law enforcement agencies as they migrate from analog to digital processes.

5. Beyond Physical Security
The global impact of cybercrimes is well understated, mostly due to cybercrimes not always being reported. According to the 2013 Norton Report, the global cost of consumer cybercrime is $113 billion USD or $298 USD per victim, up from $197 USD. This represents a 50% increase over the previous year. For the USA, the cost of cybercrime is $38 billion.

A new criminal frontier for cybercriminals is targeting mobile and social networks. Criminal gangs are exploiting social networks for banking fraud and phishing campaigns. As cybercriminals continue their attack on mobile and social platform, they will continue to adapt and adopt new offensive criminal strategies. According to the European Network Information Security Agency (ENISA), “The proliferation of mobile devices will lead to an amplification of abuse based on knowledge/attack vectors targeting to social media.”

And then there is Crime as a Service – cloud-based approach to serial cybercrime activities. The black market is using terms like, “Attack as a Service,” “Fraud as a Service,” and “Malware as a Service,” helping cybercriminals to sell or rent their peers hacking services and malicious codes to conduct illegal activities.

Hence, the opportunity is enormous for the traditional physical security integrator to offer cybersecurity solutions for their customers via strategic partnerships. Physical security and logical security are not mutually exclusive anymore.

Bonus Prediction: Mergers and acquisitions will remain strong this year, thanks in part to private equity players and new entrants in the market. Does that mean multiples will go up, down or remain the same, as in 2013? No matter where RMR multiples settle for 2014, security integration companies that stand out operationally will continue to be rewarded at the top end of the range. Growth still matters, and the electronic security industry has tremendous room to grow.

Best wishes for a healthy, happy and prosperous 2014.

George De Marco is the ESX Chair and author of the InSecurity Blog.





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