Security system installation is a natural for electrical contractors that already pre-wire residences for alarms. The challenge is selling the idea to builders and homeowners.
The booming home-security installation market is a hard market to get a handle on for CEE News readers. While the market offers excellent installation opportunities to electrical contractors, it offers even better opportunities to alarm-system contractors, alarm-system manufacturers and to homeowners themselves.
Burglar-alarm manufacturers, such as ADT Security Services Inc., and burglar-alarm contractors perform the lion's share of home security installations. But, increasingly, electrical contractors offer security systems to homeowners as part of an overall package of power and structured data-wiring installations. Some electrical contractors even design their own systems, customizing security for upscale clients' homes.
The residential security market grew more than 30% in both 1998 and 1999 - nearly double the growth rate of the small commercial security market - according to an ADM magazine survey. The survey also found that alarm-installation firms averaged 128 residential but only 85 nonresidential new customers in 1999. Analysts expected the home market to crack the $1 billion mark in 2000. Tech-savvy and security conscious homeowners are doling out big bucks for alarm systems, but they're cheapskates compared to industrial and commercial business owners, who spent an estimated $15 billion on security last year.
"It's a very small percentage of U.S. homes that are protected, but it's been growing very fast. All the members of the New Hampshire Alarm Association are very healthy work-wise," said association vice president Glen Smith to the Eagle-Tribune, Kingston, N.H. Smith has installed security systems in Massachusetts and New Hampshire as owner of International Signal Inc., a firm that has specialized in installing home-alarm systems for 33 years. "This has been the best two years," he said. "The growth of my company is almost to the point of ridiculous. It's unbelievable."
The same robust growth rate is expected for home security systems for most parts of the country for the 2001-2004 period, according to various market-intelligence reports. But there's a proviso. The residential security markets fate rides with the economy. It would be among the first consumer electronic markets to falter with an economic slowdown and a slack in new construction.
But so long as electronics prices continue to fall and the economy remains stable, demand for home security installation should keep rising - particularly in high-end residential housing developments, but also, increasingly, in middle-income and even lower-income housing developments.
GETTING A FOOT IN THE DOOR "We have two companies that perform residential installations," said Jack DeBoer, president of Turbo Electrical Contractors, Inc. and Turbo Communication Inc., Houston. "Our communications company does low-voltage wiring, alarms and such; the contracting company does all the other wiring."
DeBoer sees the security market growing for residential electrical contracting firms that can do all the power and data wiring that a homeowner wants.
"We try to offer it all and customers come to us since we can do it all. We don't have to talk or deal with two or more other contractors. And with all of the Code changes and new products coming out, homeowners and builders now depend on us to do more and more wiring."
The most profitable side of security installation is bound to be that which ties into a homeowner's PC as part of an overall structured wiring package in upscale homes. Here's where contractors have a clear advantage. First, structured wiring products need to be installed by electrical professionals. Secondly, contractors who know power and data wiring can sell security as part of a one-stop power and structured wiring package.
Knowing where to get a foot in the door is the key for contractors looking to do residential security work. In the long run, home-security manufacturers may win the home-automation race by getting electronics into many homes first. For 20 years, security companies such as ADT, have been wiring houses with a backbone of computerized motion sensors.
The wiring in essence becomes a platform to link a host of other technologies. In addition, many of these home-security system manufacturers are now updating their systems with wireless technology, which can more easily interconnect to home-automation systems and home computers.
"The smart home of the future is all about the interconnectivity of appliances," said Timothy McKinney, vice president for residential sales and marketing at ADT Security Services. "We already let you arm your house. We might as well let you check your voicemail."
Manufacturers such as ADT seem to be a natural for installing the communications wiring that connects to PC and other devices at the same time. Then again, installation of the systems is also a natural for electrical contractors, who've already laid the wiring that leads to the system in new home construction.
Also competing with electrical contractors are handy homeowners who install simple, inexpensive low-voltage security wiring systems themselves. Homeowners can buy the most popular security systems, made by X10, directly from the manufacturer.
POPULAR HOME-SECURITY PRODUCTS Most homeowners and contractors still buy home-security systems directly from the manufacturer. Distributors who specialize in home cabling, such as Great Northern Wire and Cable, GNWC (now CSC), supply only a few products.
The most popular DIY systems are manufactured by X10, Closter, N.J. The company has manufactured its home security networks, some of which cost as little as $25, for 20 years. X10's Web site - x10ideas.com - includes installation instructions to homeowners. X10 also manufactures Active Home, which integrates with personal computers allowing a homeowner to manage various security functions such as lighting and sensors through software.
Early last year, Lucent Technologies began marketing its HomeStar Wiring System, a residential high-speed wiring system, through ADT. According to ADT, this provides homebuilders with the nation's single largest buying source for residential structured cabling systems. Lucent said it will be responsible for product development and manufacturing and ADT will market, install and maintain the HomeStar through its nationwide authorized dealer network.
HomeStar allows homeowners to integrate the control and management of communication systems (phone, fax and e-mail), entertainment systems (whole-house stereo, VCR, cable, digital and satellite television), home office equipment (computers, printers and scanners) and video surveillance systems. In November 2000, Lucent took the technology one step forward when it introduced PowerHome, a software package that allows users to control home lighting and appliances as well as Home Theater's infrared devices. Lighting and appliances are controlled via X10 controllers through a CM11A or CM17A (firecracker) interface. Infrared control is achieved through the CIR (Computerized Infrared Remote) device. With this programmable interface, control is achieved via keyboard, mouse, Web, incoming X10 or voice recognition. By plugging various home devices into a built-in network like HomeStar, a resident might set a VCR with the same control used to manage the alarm system.
The best way for contractors to tap into the home-security market is knowing what their customers want - and then being able to provide it and install it.
Glen Smith told the New Hampshire Eagle-Tribune that the security-alarm trend is particularly strong in new developments.
"We're seeing a lot of electrical contractors automatically wiring a home for a security system so all that we (alarm system contractors) have to do is connect it. Houses are being prewired for alarm systems."
In the same article, Thomas Zahoruiko, a former developer-turned-construction lender, said back in the early 1990s, when the economy was struggling, it was actually a rare occasion when someone even asked him about a pre-wired alarm system.
Today, he said, security systems are practically a given in expensive, newly built homes.
"Most houses in our area are pretty expensive homes at this point, and at the bare minimum, virtually every house is wired for a security system," he said. "And even if it isn't installed, they're having it wired for an eventual security system."