For decades, home security has been synonymous with professional monitoring services enabled by control panels and hubs, motion sensors, and a public-private partnership between security companies and first responders. This traditional model, built on expensive hardware installations and long-term service contracts, has shaped the industry’s economics.
As consumer expectations shift and technology advances, this approach is becoming increasingly ineffective. The high upfront costs, fleet installations, and maintenance demands of legacy security systems are challenged by new software-driven solutions that offer greater flexibility, scalability, and cost-effectiveness. The industry is undergoing a fundamental transformation – one where security is less about physical devices and more about intelligent, adaptive solutions that expand beyond the doors and to the perimeter, as well as integrate with other ecosystems in the home.
One indicator of this shift is the movement of functionality from the security panel to software or embedding functionality within existing infrastructure – routers, smart plugs, and cloud-based platforms – shifting hardware dependencies and moving communications to a central hub.
This shift presents both challenges and opportunities, and outdated hardware models risk obsolescence.
Home Security: The Traditional Model
The traditional model of home security revolves around physical hardware like security panels and hubs to arm/disarm a system and control communications, sensors that detect intrusion, and expensive hardware installations. However, equipment costs, fleet installations, and long-term maintenance result in high upfront costs for consumers and substantial OPEX costs for security providers.
At the same time, a slow housing market, depressed consumer spending, and more affordable alternatives like standalone smart video devices are having an impact on security system sales. Ownership of pro-install, pro-monitored systems is essentially flat over the past two years and down from pandemic highs. Parks Associates research reveals less than 10% of security system owners reported purchasing their system in the 12 months prior to the survey, reflecting a nine-year low in sales in 2024.
Leading residential security integrators are growing their businesses by acquiring accounts, increasing service prices, and attaching smart home devices to increase the system sale. While better monetizing the existing subscriber base remains a strong strategy, attracting and onboarding new customers is equally essential for sustained growth and long-term market success.
Equally as important is re-evaluating the cost of hardware and the value the equipment is providing relative to its cost. Providers must be able to deliver a security experience that attracts and retains customers at a cost that is competitive with alternatives on the market but with an approach that ensures margins are strong enough to sustain the business.
The Disruptive Shift: From Hardware to Outcomes
With more choice than ever in security solutions, consumers expect smarter, more efficient, and less expensive solutions. Systems with extensive installations drive up costs for both consumers and integrators. This includes wiring and truck rolls as well as more invasive and expensive costs associated with retrofits. This puts the onus on security providers to delight their customers and meet growing expectations around technology experiences.
The need for lower costs and more efficient security solutions is triggering a re-evaluation of where the most value lies in security systems, particularly as software-based solutions enhance scalability and reduce costs for both providers and customers.
The value of security devices and systems is in the benefit they provide rather than the hardware itself. Functions that can be virtualized into software (e.g., knowing that someone is home, knowing who that someone is) or combined into multi-functional hubs (e.g., detecting environmental inputs like light, temperature, humidity), are most likely to shed their hardware casing.
Security Panels Transform
The wired wall-panel is a staple of the home security industry, but more and more players are offering wireless hub alternatives. This shift to a hub (standalone or embedded in another connected device) instead of a traditional panel creates industry-wide effects, with both challenges and opportunities.
A standalone hub can be self-installed, or result in less time spent on-site by professional installers, and the controlling software can be embedded in other/existing hardware in the home, removing the need for a hardware hub/panel entirely. This enables providers to better compete on price.
Standalone hubs offer a cost advantage over panels; however, they have yet to provide “new outcomes.” They lower barriers to competition in an increasingly crowded marketplace, and Some consumers may prefer to have a traditional wall panel experience. Operational modernization is also difficult, especially for local integrators.
Reevaluating Legacy Security Technology
Security providers must re-evaluate their portfolios to scrutinize the value provided by panels, sensors, and other equipment – and whether a better job could be done more efficiently by software – and at greater scale.
Devices that generate outcomes that cannot be replicated via software alone – such as producing light, physically opening or securing a door, or generating images and video – are the least likely to be virtualized. Minimizing the use of hardware for knowing things (sensors, keypad input, etc.) means consumers can spend on hardware with the functional benefits listed.
These devices – door locks, video cameras, thermostats, lights – are also the most popular to attach to security systems. Even so, thinking broadly, much of what cameras are used for today – detecting presence, confirming identity, providing context – can increasingly be provided by alternative intelligence solutions, more affordably, and at scale.
A forward-looking security strategy considers what cameras are necessary for and whether software-defined context could provide the same valuable information about what’s happening in/around the home without the hardware costs, opening deep contextual value even for security packages without cameras.
This is an excerpt from a Parks Associates whitepaper, Home Security Reimagined: Intelligence over Hardware, produced in partnership with Ubiety Technologies, available at www.parksassociates.com.
