Legal Watch: Industry Impact of Emerging Markets and Services

March 13, 2015
How everything from the connected world to the search for RMR is affecting security

This month’s magazine focuses on emerging markets and services. As a business lawyer, I provide clients business advice, not just legal advice. Here are my business-related thoughts about emerging markets and services from my place in the foxhole:

It’s the Internet, dummy. If you’re boomer like me, you remember life before the Internet. You have also witnessed the Internet’s ongoing series of massive disruptions in the marketplace and in society. The next disruption is a freight train barreling down the tracks called the Internet of Things (IoT) — the “interconnectedness” of everyone and everything. That includes the myriad of devices we have hanging on the Internet now and in the future.

At the same time, we are also at the advent of a massive data explosion driven by intelligent sensors measuring, storing and reporting all kinds of usable information. Research predicts 26-50 billion (yes billion) of these connected sensors by 2020. Our industry is uniquely positioned to exploit the IoT — we have systems that can provide data. Go get your fair share.

Big Data means big bucks. Internet-based storage means companies can collect and aggregate more and more information about people, places and things. Customers need real-time access to information transmitted from multiple devices. Executed well, big data will mean customers obtain ongoing value from a service over the entire customer lifecycle. Move your company from a one-time sale to an ongoing relationship with customers.

Think solutions, not services and certainly not products. Give ‘em what they need, not what you have to sell. That means a focus on solutions, not products, which some call “Outcomes as a Service” or OaaS. The days of selling HVAC equipment or services are on their way out. In the coming market, solutions providers will sell a service that keeps your building at 68 degrees year round — and manages the consumption of energy necessary to maintain the service. This means you need to think outside the box. It’s no longer just security or fire protection. Subscribers want solutions and they are going to expect them. If you cannot step up, someone else will.

Expect Increased Competition. Google bought Nest. Comcast and AT&T flood the airwaves with home security offerings. Apple just launched “HomeKit” — connecting thermostats, door contacts and cameras in the home. Many players are fighting to become the new standard in our space. We are smaller, but we have stuff they do not — including the trust of customers and access to homes and businesses. Exploit that. Customers need boots on the ground — knowledgeable, competent service aggregators, who can provide one-stop shopping for a wide variety of solutions with a single bill and a mobile app that ties it all together. We are well situated to fill that role on the residential and commercial sides. Develop a well-thought-out plan and be prepared for competition and innovation.

Recurring Revenue is the wave of the future. Once upon a time, smart operators in electronic security industry were among the first who were learned in the ways of recurring revenue. No more. Consumers are used to subscription fees for all kind of Internet-based services. Move your customers to a recurring fee for virtually everything. As someone who represents buyers and sellers, recurring revenue is worth its weight in gold. Good luck getting a decent purchase offer for your company without contracted recurring revenue. Remember: Annual billings of $1million in time- and material-based service business is worth far less than monthly billings of $80,000 of recurring service revenue!

New Liabilities on the Horizon? You bet there are, but a well-written contract can go a long way to protecting you while laying off part of the risk on insurance (buy it until it hurts and then buy more). And do not forget cyber-risk liability.

Eric Pritchard is a Philadelphia lawyer who spends his workday making the world safe for electronic security providers. Reach him at [email protected]. This column does not constitute legal advice; contact an attorney with questions. 

About the Author

Eric Pritchard | Eric Pritchard

Eric Pritchard is a partner in FisherBroyles, a law firm with office throughout the United States and in London. He spends his days trying to make the world safer for the security industry. You can reach Eric at [email protected].