The Security Market

Feb. 1, 2003
Lurking just outside the realm of the electrical wholesaler, cloaked in uncertainty, is the market for security products. These specialty products haven't

Lurking just outside the realm of the electrical wholesaler, cloaked in uncertainty, is the market for security products. These specialty products haven't sparked the interest of many traditional distributors, but a little knowledge could shine a light on an elusive business opportunity.

This a multi-billion-dollar market waiting to be tapped by electrical distributors. Security Distributing and Marketing magazine estimates the size of the security market at $16 billion. Alarms, sensors, cameras and monitoring systems all go together as a mix being sought after by builders. Right now, most of that market is held in the hands of the few distributors. Large distributors like ADI, Melville, N.Y., with 120 branches and 40,000 customers, are among the few that are able to maintain the product base for this market.

"It's like a distributor who's almost captive; it's the only game in town. People are banging their doors down because nobody else has an array of products to offer," said Byron Brewer, chairman of Northeast Marketing Group, Wallingford, Conn., an independent manufacturers representative.

Brewer emphasized that most other distributors are too foreign to this new market to be an effective force. "They don't know how to bundle the products to get the right product mix," said Brewer. "It's like the datacom end of it; A: they don't have the relationships with the manufacturers, B: (they don't) know what products to bundle together to make an array of products that would be appealing to the installer base."

Distributors already have the potential customers for security products. Electrical contractors have the capability to install these systems. According to Brewer, they already do 50 percent to 60 percent of the wiring for security installations.

"The electrical contractor is fast becoming a multifaceted contractor. A contractor today is doing everything: fire alarm, security, electrical, data ... the building owners want the electrical contractor to be an entire one-stop provider," said John Myers, chairman of Houston Wire and Cable, Houston, a wire specialist now selling security cabling.

Houston Wire and Cable sells a package of 25 common cables for distributors and contractors dealing in security products. These cables include security, fire alarm, voice/data and coaxial.

"We just saw this coming about six months ago. We put together this line, and it's been very successful for us," Myers said.

Although in the past, electrical contractors were mainly used for pulling wire in security installations, they have no reason not to get involved in the whole business of security systems. The complexity is well within their capabilities, and if the electrical distributor carries the products, then the one-stop shopping will save them time.

A key challenge for electrical distributors who want to get into the security market is convincing electrical contractors to cross their usual market boundaries and look into the security business - and to use electrical distributors as a source for these products, said Myers.

"It's a great opportunity for incremental business for an electrical distributor today, to be in that marketplace ... (but) sometimes they bypass the electrical distributor for the security distributor."

Brewer identified several steps a distributor can take toward entering the security market. "I think the way to do it would be to develop a training (program) and a resource amongst contractors who have dealt in the market. Tell (the contractor) `You're in the job site already pulling wire. What you have to do is complete the circuit and put the devices in.' You need training (and) product array."

Besides competition from specialty security contractors, electrical contractors are confronted with obvious competition from full-service security companies like ADT, Boca Raton, Fla. Full service security companies buy products from large distributors and do their own installation and monitoring, leaving little room for a local distributor or contractor. As a starting point for smaller distributors, Brewer of Northeast Marketing Group said that they still will need conduit and other electrical products.

Brewer said that contractors and distributors alike should realize that ADT is principally involved in the monitoring business. So, the more work they can contract out, the better.

"They recognized the market (for monitoring) ... really all they are is a bunch of installers who are trying to sell monitoring," he said.

For distributors to get a piece of the security market, they must get involved with security system installation in the early stages of a project.

"It's a growing area. The amount of security installations is growing every year," said Gary Keller, president of Windy City Wire, Chicago, a distributor of wire and cable. "More homes are being pre-wired with all types of things: fire, security, video and being networked for computers on the front end."

There are two sides to this market. A distributor can get involved in handling the motion sensors, alarm panels and other alarm components. The other side is the wiring that makes those components function and carries the messages to the monitoring company. Myers of Houston Wire and Cable said many electrical distributors are no strangers to these products.

Electrical wholesalers can take advantage of the evolving residential security market by stocking hybrid cables that package security cable with other types of wire, said Myers. Myers believes the future of the market is in integrated systems run and maintained through computers - potentially even over the Internet.

"There's a home automation cable today that has a variety of cables within it," Myers said. "There's fiber-optic cabling in it, then you put in computer cables ... and a couple of coaxials for the security system (and other types of video) ... So you can have your digital satellite, you can have your audio, you can have your cable television and you can have your fax and data and your Internet all in one cable today."

According to Myers, this is not just a luxury item. Builders are realizing the need for smart homes and are mandating that these capabilities be included in their homes.

Remote Control By consolidating wiring for several services, a home owner or business owner can monitor these systems remotely. Soon, they may be doing this using the Web or through broadband cable. This capability is one of the key selling points of today's security systems.

Keith Henson, a project manager for the consulting firm Lockwood Greene Technologies, Spartanburg, S.C., foresees a large market in the integration of security into a whole network of systems.

"The big savings will be in the fact that you can have one point of control, one point of observation or assessment of alarms that can control fire, security, access, and just about anything else you want - in one central location," said Henson.

The ability of these different services to share the same wire has led to the development of new technologies.

@ Security Broadband Corp., Austin, Texas, and Cox Communications, Atlanta, are testing a home security system operating on a broadband cable network. The company claims that this will provide fast, reliable transmission of alarm signals and video and audio feed via an existing network.

The ability to remotely monitor - or even remotely operate - a security system over the Internet is becoming a reality thanks to several different protocols of remote access.

The development of one large networking technology to perform remote operability is on its way.

"The ability is there now, to do all this, but a lot of companies have proprietary systems," Henson said. "It appears the market is headed toward a common protocol."

BACnet and LonWorks are two industry standards for remote operability. Products employing these standards will allow the user to not only monitor security systems from remote locations, but change their settings.

Some possible applications will be lighting that can be turned on, off or dimmed; cameras that can give various viewing angles; and even alarms that can be armed and disarmed from one monitoring point.

Henson envisions advantages and cost savings stemming from several areas for businesses. Staffing requirements will be reduced when the same person can monitor several systems. Also, not only can these systems share wire, they can share some of the same sensors.

"The same sensors that you use to sense the presence of a person can be used to determine if you need heat or light and could also double as your sensor for motion during off hours."

Whether or not distributors want to start carrying products for remote control of air conditioning systems may be uncertain, but products for other kinds of automation and control - with the ability to control lighting and security systems remotely - have been demonstrated.

Echelon Corp., Atlanta, a provider of hardware and software for networking, has an operating Internet demonstration of some of its remote access products. At, Echelon allows Internet users to try out its LonWorks enabled system of controls for lighting and even window shades. More capabilities are on the way.

The ability to control these systems on the Internet has the potential to provide an easy way for a company to control a variety of systems or products.

The problem inherent in any system that functions on the Internet, or even an intranet is that hackers could possibly get into the system.

"There have been places where some of our customers have desired to tie access control systems into their office network," Henson said. "It could be compromised. That's always a concern."

The security of a Web-based system may be another subject entirely - and it may be that Internet systems will require a whole other type of security system just to control access. Multiple users can mean multiple problems.

In the residential market, other problems could surface. Few home owners would have the time or technical know-how to monitor and adjust their own systems when they start to encompass more areas of home automation. Even if operating them could be simplified, the task of controlling one's security, fire, lighting and other system could appear quite daunting.

"There's the potential market for companies out there that would maintain this type of thing and would be the custodian of your system," Henson said.

Those kinds of companies may be the answer to yet another question that Henson raises: What entity will be responsible for maintaining and servicing these networks? When so many systems combine and share the same components and wire, whom do you call when the whole thing breaks down? Maintaining these all-encompassing networks could be a big business, indeed.

The future of these networks is contingent on the speed of technology. The products and components of these hybrid networked systems will all have to be compatible. As Henson said, several competing standards have roots in the security business.

"I'd kind of put it in the category of beta and VHS. Sooner or later, one of them is going to win out and become the standard," said Henson.

Before that even happens, it's likely there will be markets for each of these systems. And distributors will have the opportunity to cash in whenever a consumer or business decides to enter that market.

- Security cabling, including 12AWG-22AWG cables; PVC and plenum cables; multiconductor, multi-pair shielded and unshielded wire and cable; cabling for card-access systems, fire-alarm cables and coaxial cables.

- Control keypads

- Wireless transmitters and receivers

- Wireless user devices such as hand-held remote controls

- Powerline carrier devices

- Glassbreak detectors

- Magnetic contacts

- Closed-circuit television (CCTV) equipment and other video surveillance products

- Passive infrared motion (PIR) sensors

- Sounding devices

- Fire alarms, smoke detectors and other life-safety devices

- The security market was a $16 billion business last year - Security Distributing and Marketing magazine.

- From 1995 to 1998, consumers spent more than $33 billion on home security systems and the related monitoring costs - STAT Resources Inc., Boston, Mass.

- About one-half of the businesses installing alarm systems have annual revenues of less than $250,000 per year and employ four or fewer employees - STAT Resources Inc., Boston, Mass.

- Security dealers expect the high-end residential market to provide the most growth this year, followed by large commercial, small commercial, low-end residential and home systems - Security Distributing and Marketing magazine.