Dealers should consider automating for the future

Cheaper, better technologies give dealers edge in automation

While some say home automation is the next big thing, it hasn’t seen tremendous growth, thanks to its cost and complexity – not to mention a downturn in the U.S. housing market. Despite this, some security dealers are finding ways to bring on additional revenue by adopting home automation product lines, though understanding the market and new technologies are critical to success.

Clients looking for high-end systems are often best served by dealing with an expert in each field, from AV to automation to security, says Mike Jagger, founder and president of Provident Security. “We’re right up front with the fact that our expertise is on the security side, so we’ll suggest that [customers] deal with four or five or six different companies that can offer specific narrow expertise.”

On the low end, more products are available to users directly, such as the Sonos digital home audio system. “I see that as the future of the middle market of automation where you don’t need an installer to set that up,” he says.

On the high end, dealers act as a resource for clients instead of straying too far from their core expertise. “There are products coming out that proclaim to do everything, and we’ve traditionally stayed away from those products,” says Jagger. “We want to make sure if we use a particular camera or motion detector or glass break sensor that it’s the best individual device for that application.”

Having six light switches and a thermostat and a security keypad is contagious. “In my experience, for most people it’s an aesthetics decision, and that’s where some of the systems fall down because they’re not simple enough to use,” he says. “We end up talking people out of a lot of things.” It’s not about dumbing it down, he added, it’s just that people don’t care enough to want to learn about a million features, so many are left unused. If clients are only looking for music in every room, for example, there are much simpler options out there.

Other dealers are finding an opportunity in the mid-market. In the past, any time you talked about home automation, you were talking about a quarter of a million dollars plus. Orca Security, which provides a low-voltage turnkey system for homes, is targeting the lower end of the custom market, offering solutions from $40,000 to $250,000. What’s changing is that a lot of the manufacturers are starting to play nice together – building standards-based products rather than proprietary ones.

While the housing market in the U.S. is flailing, business is still booming in the Vancouver area. “The problem is there’s still a shortage of labour, so we have more work than we can do,” says Brian Pozzolo, general manager of Orca Security. “I don’t know if that will ever slow down.” While the dealer has had opportunities to take on work outside the Vancouver area, it’s had to turn those opportunities away from a service and support standpoint.

Some structured wiring companies are entering the market, as are alarm companies, but electricians, in general, are lacking the necessary integration skills, and there are no mandatory requirements to get into the business. Inevitably construction will slow down in Canada, but the bigger problem, he said, is the lack of trained technicians – even proper pre-wire techs.

But online access and integration of online user interfaces is what’s now driving the market. Snap-Link, for example, can pull up home controls from a mobile phone or PDA. “Innovations like this are making the integration side take off,” says Pozzolo.

With wireless mesh network protocols, such as Zig-Bee, dealers can go back to existing customers and retrofit lighting controls. Somewhere around 70 per cent of new homes are offering structured wiring, which is a significant change over the past two years, and this makes it a lot easier to bring in basic Internet, voice over IP and programmable thermostats, says Dave Pedigo, senior director of technology with CEDIA.

While it’s always a good idea for dealers to diversify, they really have to do their homework, he added. Before taking on an integrated project, it’s important to understand the product completely and, if possible, the theory behind it. “There are certainly tons of opportunities to up-sell products,” he says. “If you’re going to start with intercoms, a lot are CAT5-based just like security cameras, so no matter what you do, if you’re a security company, if you think you’re going to start diversifying, you need to start getting better educated, especially on IP.”

The problem is you could have a couple of systems that share the same protocol and are able to communicate back and forth, but then you have a lighting control system that uses a different protocol. “You really have to understand the global picture of everything that you’re integrating,” he said. “It takes a while to get ramped up to do that job properly.”

With the downturn in the U.S. housing market – and cracks in the Canadian market – the more diversified you are, the better. Eventually the market is going to come back, he said, but we’re never going to get away from technology. We’re also seeing a convergence of technology into single-source solutions. “We have reached the tipping point and we’re not moving back at this point.”

The home automation market is a strange space, dominated by high-end solutions where a client is spending tens of thousands of dollars to put in very sophisticated automation capabilities, right down to the low-end “hobbyist” market.

“My take is that the home automation market is not a real market,” says Paul Dawes, CEO of iControl. “There’s not a clear value proposition to the consumer in that space.” They’re either disappointed because it costs too much or because it doesn’t work that well. The technology is getting better, he said, but the go-to-market strategy hasn’t changed. So the opportunity for dealers is to sell a better home security solution, which incorporates more compelling functionality.

“The problem with home automation is a bunch of companies trying to do everything, and they can’t do anything well, or it costs $50,000,” he says. “We want to focus on the 80 per cent of things that people care about and only costs them a couple of hundred bucks.”

Home security is a $30-a-month service that offers very little value, says Dawes. The next phase of security is turning that into a value proposition, allowing users to stay connected. So, for example, if your three-year-old daughter walks out by the pool, the $300 touch screen in the kitchen starts beeping. “It’s something that can be added in a low-cost way to a traditional security system,” he says.

iControl is coming out with solutions primed for the mass market, a movement it’s referring to as Home Security 2.0. “It’s the next generation of security,” he said. “[Our system] works with traditional Honeywell and GE systems, but it augments those with all this new functionality – access from the Internet or a cell phone, tying in inexpensive IP cameras, basic lighting controls, basic thermostat controls.” He believes, for dealers, the learning curve will be negative. “This is going to be easier to install than a traditional security system.”

Today about 95 per cent of security systems are connected to the phone line, though 70 to 80 per cent of security households have broadband connectivity. “Five years from now, particularly with the trend toward VoIP and cellphones, the security market is going to look entirely different,” said Dawes, as we move toward interactive home security. While the housing market is going to affect those security dealers focused on new home construction, this type of technology allows dealers to go back to existing customers, whether their homes are new or old.

“The housing downturn has actually turned out to be a plus for us,” he says. “Our focus groups have shown there’s a large shoulder market of people who value security but don’t see enough value to sign up for it today.” From a niche market perspective, there are a bunch of dealers out there making money installing high-end automation systems, but they’re only doing about 20 a year. “So for the normal dealer out there really trying to generate more revenue, these new services will allow them to get new value,” he says.

The business commitment to this space will depend on the skills of the dealer’s current staff, but it’s a commitment they will likely need to make in order to adapt to the demands of the digital home, says Rob Guttentag, vice-president and general manager of DSC, which has partnered with Lifeware. “We’re already seeing a number of custom electronics companies installing security systems, where in the past they had that component outsourced.”

There is an initial investment required for new training, and the funds they may need to commit could include inventory for show rooms. Typically tiered service agreements (at different price points) can be set up with the homeowner for warranty and support. Anything from program upgrades or updates to extended hardware warranty, and even 24-by-seven technical support, are available within the agreements.

Lifeware software is based on the Microsoft Media Center platform and provides a gallery view into all of a user’s connected devices. “We use the television, which is the absolute comfort zone of entertainment,” said Bret Fitzgerald, vice-president of marketing with Lifeware. Users can arm their security system and check cameras while lying in bed watching television. If a “zone” in the home is breached, it will send off an e-mail or text message. Typically there’s been an extensive learning curve attached with home automation, he says, but with this system there are only six buttons to push.

“Ultimately we’d like to see middle America have home automation available to them,” he says. “We all know we’re in an economic downturn, but it’s a great differentiator, something they can offer that makes people take the plunge.” The percentage of people who are aware of home automation, let alone use it, is so small, the market is poised for growth. And new technologies will be incorporated, such as RFID. “I don’t know how long it will be, but that will significantly impact security systems,” he says.

Security dealers are a great fit, said Fitzgerald, since they’ve got a pulse on what homeowners actually want. So far, the company has about 500 dealers, including a couple in Canada.

One area of home automation that has really caught fire in the U.S. and now in Canada is the whole concept of “going green,” where dealers can sell builders on the theme of green (in California, any new home that’s built must have some type of lighting control).

“That is a very easy fix for a security guy – he can upgrade the sale of an intrusion product by adding lighting and thermostat controls,” says Ed Constantine, senior product manager for wire, structured cable and home solutions with ADI. “Sensors are becoming a big thing with lighting, and security guys are already putting in sensors.” New construction is a big part of the market, but as that business dwindles, people will retrofit – and going green is easy to do in older homes with plug-and-play technology.

But the security guys are always going to be security guys, for the most part, and they’ll simply pick up the home automation side as an added venture, he added.

It would make no sense for anyone who has a security company to ditch security altogether, says Pedigo. “That is still always an avenue. Does it mean some companies will move into integration first, security second?” he says. “At some point that could be a natural migration for some companies, but I wouldn’t see why they’d ditch it altogether because it’s always a need.”

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