IHS: Professionally monitored smart homes to exceed traditional security systems in 2023

Feb. 6, 2017
Penetration of smart home systems to reach 7 percent globally by 2025

There’s no denying the advent of smart home technology has forever changed the landscape of the residential security industry. Now, according to a new report from IHS Markit, it seems that smart home systems stand poised to supplant the traditional burglar and fire alarm panels of old.

In fact, the research firm projects that the penetration of smart home systems will reach three percent of global households by 2018 and seven percent by 2025. As soon as 2023, IHS predicts that professionally monitored smart homes will exceed non-connected, traditionally monitored security systems.

According to Blake Kozak, principal analyst for smart home and security technology at IHS Markit, for smart home technology to continue on its current growth track, service providers will need to adopt flexible billing methods, such as on-demand/no-contract models. However, the challenge with alternative billing models like these compared to the typical two- or five-year contract is churn and the cost of acquiring the customer. 

“Despite this challenge, consumers are beginning to expect alternatives to long-term contracts in the form of on-demand billing, professional installation with self-monitoring or DIY installation with professional monitoring. For security providers, these alternative models can be an additional source of RMR for dealers seeking quick installations with minimal effort required,” Kozak wrote in a research note.

In addition, Kozak said that continuing to remain innovative will be crucial for service providers as the future of the smart home will have less focus on safety and security devices and more attention paid to automation, user experience and ecosystems.

“It is no secret that the DIY market has taken revenue from professional channels because of the innovation and design flexibility of DIY versus the often vertically integrated and proprietary nature of professional offerings,” Kozak added. “As a result, service providers with vertically integrated ecosystems need to be quick to market with in-house innovation as well as necessary third-party integrations, such as voice control with Alexa Skills or Google Home. Moreover, integrations with automotive, well-being (independent living and digital/telehealth) and multi-room audio will ensure differentiation, future proofing and additional revenue streams."

Kozak also emphasized the role that user experience will play in expanding the adoption of smart home technology moving forward.

“Engaging the end user with problem-solving technology (hook products) at the start, and making it simple to add additional devices (a large ecosystem of potential devices) is important for long-term success. Whether the end-to-end ecosystem is built up in-house or outsourced with reliance on third-party integrations makes no difference for the long-term success of service providers in the smart home as long as the devices are thoroughly vetted with the platform,” wrote Kozak.