The proliferation of Software as a Service (SaaS) is changing industry paradigms. Here’s how integrators can leverage SaaS to differentiate themselves and create more RMR.
Recurring Monthly Revenue, or RMR for short, has always been a lifeline for security traders, enabling them to grow their business and potentially make a huge amount when they are ready to sell as valuations are usually based on multiples of the RMR. However, the dynamics of the industry have changed dramatically in recent years.
The advent of do-it-yourself (DIY) alarm systems that enable home and business owners to monitor their properties without the help of a professional installer has proven to be significantly disrupting the market.
according to Report Published earlier this year by Parks Associates, Half of Security Systems Sales Last Year Were From Do-It-Yourself Deals. More concerning to security dealers, however, was the fact that if this current trend continues, the DIY installation base will soon surpass that of professionally installed and monitored systems.
“DIY providers offer many smart home devices to accompany their systems, including cameras, smart thermostats, and smart lighting options,” Jennifer Kent, vice president of research at Parks Associates, says in a statement. “Device manufacturers can also add a monitoring line to any product with an occupancy and connectivity sensor and a control platform, so competition will intensify within the DIY space, as well as between DIY and professional offerings in 2022.”
In the span of less than a decade, the industry has gone from being worried about how cable and telecom companies could get into the space that could take market share from well-established security companies to seeing cost-effectiveness. Do it yourself Neck-to-neck traction systems with professional solutions. Things aren’t much better for those who focus more on the commercial space either.
With the proliferation of IP devices and the Internet of Things (IoT), the market for many products, including the sale of security cameras, has become a “race to the bottom”, resulting in lower profit margins for merchants.
Given this confluence of factors, system integrators in both residential and commercial spaces are looking for ways to differentiate themselves while generating more RMR at the same time. The answer to this problem for many is found in Software as a Service (SaaS).
SaaS: an emerging RMR opportunity
The advent of SaaS offerings, in which customers pay a monthly or annual fee to install and manage a security system rather than investing large sums of capital upfront, has truly revolutionized the business model for today’s security merchants.
Instead of selling low-margin hardware and hoping customers will purchase a maintenance agreement to help cement the bottom line, SaaS enables merchants to provide video surveillance and access control as part of an ongoing service.
Not only does this provide peace of mind to end users knowing they won’t have to invest more dollars in maintaining their security system, but it can also help integrators avoid costly truck laps and time on customer sites by being able to diagnose and troubleshoot problems. Remotely since most SaaS solutions are provided via Zipper.
Converting to a commercial SaaS offering also allows companies to shift from security capital expenditure models — buying and maintaining expensive on-premises deployments on an ad-hoc basis — to more affordable operating expenses in which those concerns are addressed by the aforementioned fee integrator.
In fact, the demand for SaaS offerings continues to grow just across the security domain. according to Report Released in March by Research and Markets, the global Access Control as a Service (ACaaS) market, which was valued at just under $790 million in 2020, is expected to reach $2.9 billion by 2026, at a compound annual growth rate (CAGR). Compound annual growth (CAGR) of 24.2%.
The adoption of SaaS in the video surveillance systems market is becoming more evident. Research and markets projects The global video surveillance as a service (VSaaS) market, which is estimated to be worth $2.2 billion in 2020, will grow at a CAGR of 16% over the next several years, creating a market worth $4.7 billion by 2025.
As the stats show, SaaS is and will continue to be an important part of the security market going forward, and those merchants who are flexible enough to take advantage of the benefits it provides will be the club leaders once it becomes a true solution for many end users. And you don’t have to look far to find a parallel industry.
It wasn’t that long ago that home and building automation was seen as a niche market for the wealthy or companies that wanted to show how green they were. However, the proliferation of relatively low-cost IoT sensors has democratized this technology and created what we know today as smart homes and smart buildings, which is one of the fastest growing segments of the overall construction industry.
Covid-19 Spurs Market Adoption
Of course, the smart home and building market did not appear overnight and SaaS was not used in security applications. Industry confidence in SaaS solutions has grown exponentially over the past several years thanks to the necessities born of the shift to remote work at the start of the COVID-19 pandemic.
When companies around the world began closing their doors in 2020 and sending employees home to work to help mitigate the spread of the virus, offices around the world were left largely vacant.
This staffing shortage also means there are fewer people around to help deter people from potentially breaking in to steal valuable equipment or perhaps worse in the case of personal data and trade secrets. This is where SaaS and security monitoring services in particular prove their value to end users.
Security managers who have moved their systems to the cloud can now remotely enter corporate facilities to ensure unauthorized persons do not roam halls or try to access doors.
One of the biggest hurdles to adoption SaaS solutions faced in their early days was the reluctance of end users to trust these services would be available when they needed them in the event of a power outage or internet outage, but the pandemic has shown that they are more than up to the task.
Innovation enters the picture
In conjunction with the growing confidence in cloud architectures, video surveillance technology has been boosted by the development in machine learning software that has subsequently led to the development of advanced video analytics supported by a new generation of AI-powered software.
The days of simple virtual tripwires have now been replaced by object recognition and tracking as well as things like facial recognition that were once thought only possible in the realm of science fiction.
Contract control centers need to leverage the best possible solutions, which include AI capabilities, and add another layer that integrators can add to RMR stock. End users can pick and choose which analytics they want to leverage across their geo-footprint and integrators can incur additional fees as a result.
Proactive video surveillance: the best of both worlds
One of the most innovative solution offerings integrators can leverage today leverages AI and live central station operators in a completely revamped approach to video monitoring known as Proactive Video Monitoring, or PVM. It differs from traditional video surveillance: proactive video surveillance leverages AI analytics to warn operators of a potential threat before it becomes a security incident.
Make no mistake – proactive video surveillance is not a video verification, but a means by which businesses and homeowners can stay ahead of potential risks. Security personnel can only watch a continuous stream of video channels for a long time.
Security monitoring in the midst of this data fire cannot be done without technology. Likewise, technology is not always perfect in responding to potentially questionable events. The combination of those two together—finding anomalies in vast swaths of video data and providing the human element for actual decryption without threats—is what PVM does.
Monitoring will always be one of the pillars of RMR for security traders, but it certainly shouldn’t be the only recurring income stream. As long as there are intrusion detection systems installed in homes and businesses, professional monitoring services will be required to call in to ensure the protection of people and property, and reduce false alarms. However, nothing stays the same, and our approach to security doesn’t have to stay the same.
This current generation of SaaS offerings is helping to redefine how people think about and deploy security technology. Smart traders who are willing to leave their comfort zones and embrace new approaches to old challenges will come to the fore.
Woody Andrews is the President of NMC.
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