How to Earn Recurring Revenue with Security, Remote Management
How to make $58 per month, per customer, on security and other home systems.
Consumers will spend, spend, spend every month on their cable TV, telephone, security monitoring, Internet, movie downloads and other technological niceties. But they never seem to want to spend $10 or $20 per month for remote home management. At least, that has been the trend for the past decade.
2011 will be the year integrators can finally make recurring revenue by enabling consumers to remotely monitor and control their lights, security, thermostats and other home systems.
The reason? Some very large companies are spending big bucks to promote the concept. Most notably, ADT already is plastering the Internet with ad campaigns for its new Pulse home management system. A full-blown TV ad campaign begins in 2011.
Learn More About Recurring Revenue at EHX
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We’ve seen mainstream home automation advertising before, but ADT brings something new to the market: thousands of salespeople and installers getting into the home and having conversations with customers about security cameras, lighting controls, energy management and other home technologies. They are doing the difficult, expensive work, and independent integrators will benefit.
There’s better news still for CE pros. ADT is charging a lot for its professional- and self-monitored automation services. The security giant charges $48 per month for little more than a professionally monitored security system with a GSM module that enables text and email alerts and remote arm/disarm capabilities.
Add $10 to that for video, security, lights, thermostats and various Z-Wave wireless devices. Assuming the ADT Pulse model is successful – and we believe it is – then these prices are a nice “going rate” for solutions that CE pros have offered for years.
Are you making that much money per month for security and remote access?
ADT is just one of the biggies getting into this business. Comcast (Xfinity), Motorola, Verizon and AT&T also are getting into the game via recent mergers and acquisitions. It’s doubtful that their services will cost as much as ADT’s (Comcast Home Security is about $20 less), but it also is doubtful they will have near the reach as ADT. In any case, the activity by these large companies means free marketing for CE pros … if they can capitalize.
“We shall see if ADT can consistently provide a quality (or at least adequate) customer experience on multiple levels/skillsets,” says Bill Maxey of Media Design Inc., an integration firm based in Houston, where both Comcast and ADT launched their home management services. “I don’t often work on small homes, but this model is intriguing [and] offers residual revenue ….”
Why Recurring Revenue Will Explode
ADT has established the “going rate” for security and remote home management at about $58 per month. You’re already doing it. Now ADT and others are giving you permission to charge for it.
Services such as Alarm.com and Honeywell are available to independent dealers, but most good home control systems can accomplish the same feats with their built-in web servers. There’s no reason integrators can’t charge a monthly fee for that.
Research firm Parks Associates reports that recurring revenue for security has kept steady, even while the rest of the economy crumbles. Average monthly rates increased from $28.60 to $32 between 2008 and 2010. Remote home management should be a simple - and fun - upsell.
“Baby boomers” in the home systems business need to be thinking about their exit strategies. Most integration businesses are worth nothing without a history of repeat business - the likes of which can be accomplished with monthly fees for security and remote home management.
In the Field
Las Vegas-based Eagle Sentry goes head-to-head with ADT using a service called Alarm.com, which integrates professional security monitoring with video surveillance and Z-Wave-enabled home control. Alarm.com only added the automation functionality this year, and it has done wonders for Eagle’s business, says general manager Greg Simmons.
“We can add $15 to $23 per month on top of the other services,” he says. “We’ve added locks and lighting. We’re looking at going back to existing [Alarm.com] customers. Now we’re advertising in community newsletters in all communities where we do alarms.”
Alarm.com, which communicates over the cellular network (except for cameras, which are IP-based), currently works with select security systems from GE Security and 2Gig Technologies. From its servers, Alarm.com relays all security-related data to the monitoring station of the dealer’s choice.
Webco Security, based in Anoka, Minn., also uses Alarm.com. Webco principal Chris Thompson says, “The service is slightly higher than our standard central station monitoring; however, the savings of omitting the land line are substantial.”
In competing with “the big dogs,” the former ADT dealer focuses on selling “Webco and the impeccable customer service we offer.”
Like Alarm.com, Honeywell offers a GSM-based monitoring and remote management solution called Total Connect. Currently the system supports alarm panels, video cameras, and X10 devices. A Z-Wave interface will be introduced in 2011, according to Gordon Hope, general manager of Honeywell’s AlarmNet, the cellular network used by Total Connect products.
Hope tells CE Pro that dealers typically charge a premium for the service of about $10 to $15 per month.
Atronic Alarms in Lenexa, Kan., which installs about two dozen Total Connect systems per month, reports that business jumped when the iPad was introduced in 2010.
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Note: Recurring Revenue from Remote Home Management is one of CE Pro’s Top 5 Home Technology Opportunities for 2011. Check out the complete list below.
Julie Jacobson, recipient of the 2014 CEA TechHome Leadership Award, is co-founder of EH Publishing, producer of CE Pro, Electronic House, Commercial Integrator, Security Sales and other leading technology publications. She currently spends most of her time writing for CE Pro in the areas of home automation, security, networked A/V and the business of home systems integration. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, earned an MBA from the University of Texas at Austin, and has never taken a journalism class in her life. She's a washed-up Ultimate Frisbee player currently residing in Carlsbad, Calif. Email Julie at [email protected]
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