The Future of Home Integration: Recurring Revenue
Just as we were beginning to understand the realities of the industry shift from retailer to custom integrator, a new sea change looms on the horizon. Wireless, Internet-enabled home integration via smartphones is coming, and it will force us to stretch our minds, revisit our business models, and work much smarter.
The Bad News: Last year, Comcast (in Texas, under their Xfinity banner) and ADT (in Florida, as Pulse) test-marketed low-cost wireless home integration systems, offering various combinations of security (intrusion control plus IP surveillance cameras with cloud image storage), limited lighting control and energy monitoring —all networked for remote access by smartphone, laptop or tablet. Both systems reportedly use an OEM integration interface from iControl. Expect national roll-outs this year.
Recently, Verizon announced the test-marketing of their new "integrated home management system" in New Jersey, based on their proprietary Fios router. It will piggyback energy and security-monitoring services onto existing home networks and broadband connections. Other majors (phone companies, broadband providers, security specialists) are cueing up to join the fray.
Compared with the custom hard-wired systems which are the gold standard of custom integrators, the major service providers will install these wireless systems for dimes on the dollar—in exchange for lucrative Recurrent Monthly Revenue (RMR). Depending on the size and complexity of the system, install pricing could range from under several thousand dollars for a simple system installed by a major, to perhaps $10,000-$12,000 for a tricked-out system provided by an independent. Monthly fees for support and monitoring access are expected to fall in the $50-$80 per month range, depending on the scope of monitoring services provided.
As more national service companies enter this space, an increasing array of features will be offered and bundled. Competition will also drive down installed system pricing, and cost-shifting will become a dominant marketing tool (lower up-front cost, higher monthly fees). Although it's unclear at this point how far down-market (and up-market) the new paradigm will spread, it will certainly encroach upon the turf of customer retailers, and force us to change the way we do business.