Security System Service Industry Focus

The security system service industry can be traced back to the days of Al Capone and the rise of crime in the country's metropolitan areas. Beginning with the simple installation of burglar alarms in banks, jewelry stores and warehouses, the industry has grown since then into a diverse, high-technology, $24 billion sector of the service economy.

Today, the industry offers everything from simple on-site alarms designed to deter intruders and attract the attention of nearby residents to multi-channel combination systems including burglar and fire alarms and video surveillance with web-based capability for viewing from any location.

There are more than 15,000 security system service firms in the U.S. Most concentrate on offering burglar alarms, and most provide only local service, although there are a few national chains. When burglar alarms were first implemented, nearly 90 years ago, most were monitored by the local police. However, when the police became overwhelmed by false alarms, central stations appeared to fill the void. Over the years, these stations gradually began monitoring not only burglar alarms, but fire alarms as well.

In the late 1980s and 1990s, the number of security services firms declined because of mergers and acquisitions. Smaller companies found it difficult to compete with larger firms that could monitor several states from one location. To reposition, many local alarm services began marketing their services to private home owners. At about the same time more and more homeowners began to be more concerned about crime in residential areas and wanted more security than the simple alarms they had installed themselves. Installation costs fell from approximately $3,300 in the 1970s to less than $1,300 in 1993.

Residential monitoring services started offering a wider array of services, including monitoring medical alert signals, possible utility problems and thermostat controls. The diversification and cost decreases made residential alarms the fastest-growing segment of the security service industry during the 1990s.

The industry's growth was prompted not only by an increasing crime rate, but also by the fact that many insurance firms required clients to have security services before a policy could be issued.

Starting with the Oklahoma City bombing in 1995 and the subsequent events surrounding terrorist attacks, the industry saw a steady increase in demand. Customers not only bought new systems, they upgraded what they had with the rapidly changing technology. Sales of video surveillance systems exploded. A strong housing market helped sales of residential systems. The government market, concerned about the security of government facilities, became a serious consumer of security systems services.

But as always, burglar alarms make up the bulk of the market with about 43 percent. Fire alarms comprise about 18 percent, and home systems other than burglar or fire make up 16 percent. Video surveillance covers about 16 percent of the market, and integrated security systems and other tools make up the remainder.

One of the challenges for company owners in this industry is finding qualified workers. It's best if employees are highly computer literate and have some electrical experience. And, because they deal so directly with home or business owners, they need to be personable and customer-focused.

Those who study the industry say that the peace of mind afforded to parents of children who arrive home alone and to homeowners whose residences include more and more expensive electronic equipment is that motivates customers to make the purchase. For instance, with some systems, a child can enter the home, key in a code in the keypad inside the door, and an email is automatically sent to the parents at work notifying them that the child and home are secure. The industry is seeing proactivity on the part of its clients. No longer are home and business owners waiting until after a burglary to install a system. And customers are interested in high levels of security and are willing to pay for it. Many builders are pre-wiring their new construction as a sales advantage.

According to a Temple University study, homes lacking alarm systems are 3.5 times more likely to be burglarized. Surprisingly, however, more than a third of the respondents to a 2002 survey of 900 Consumer Reports readers who experienced a burglary said that they had an alarm system; it just wasn't enabled at the time. Many who invest in the technology do not use it.

The National Burglar and Fire Alarm Association recommends getting an on-site assessment and written bids from three or four system installers. Ask if the company conducts pre-employment screening and if they are certified by the Association. Ask your neighbors, friends and coworkers for referrals. Check with your insurance agents about related discounts. You could make the cost of a security system back in just a few years from the savings on your insurance premiums.

But after spending all that money on an alarm system, customers may be chagrined to know that the BEST deterrent is the lowest tech item — a sign on the front lawn advertising an alarm system. Burglars figure it's easier to move onto the next house or the next block.

- Mary Paulsell, Director, MU's University Center for Innovation and Entrepreneurship 5/26/06