Security Systems News

DEC 2017

Security Systems News is a monthly business newspaper that reaches 25,100 security installers, product distributors, central stations, engineers & architects, and security consultants. Our editorial coverage focuses on breaking news in all major se

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Page 26 of 36 December 2017 S ec U r ITY SYST em S N e WS Monitoring 22 Continued from page 21 Cetingok highlighted EBITDA as a metric that is being more actively discussed lately. He brought up examples of sales within the security industry—such as My Alarm Center's sale to Oaktree and Electric Guard Dog's acquisition by Snow Phipps, among others—and their core valuation metrics. The most common metrics among the listed sales was EBITDA and steady-state net operating cash flow. Rory Vaden, author and co-founder of Southwestern Consulting, gave a featured presentation to end the second day of educa- tional sessions, Titled "Executive Leadership Skills—Investing Your Time Wisely to Get the Results You Want." One of Vaden's focuses is on procrastina- tion and how that affects a person's time. According to Vaden, there are three types of procrastination: classic procrastination, creative avoidance and priority dilution. Classic procrastination is when a person delays a task that they know should be done, and this isn't the most dangerous type of procrastination, he said. Creative avoidance is the act of doing trivial tasks for the sake of being busy. Priority dilution, which was the focus of Vaden's presentation, is either consciously or unconsciously focusing on less important tasks. Vaden outlined prioritization in terms of dimensions. One dimension would be looking solely at efficiency, and completing more items on a to-do list. Two-dimensional thinking is categorizing tasks in terms of their importance and their urgency. Urgency is how soon something matters, he said, and importance is how much something matters. Vaden suggested thinking about tasks in a three-dimensional model that layers a third factor on to importance and urgency: significance, or, how long will a certain task matter? How people decide to prioritize tasks is not only logical, said Vaden, it's also emo- tional. He gave a hypothetical scenario of a business leader assuming a task can't be delegated. Vaden pointed out that training someone to do a task may take time upfront, but save time over the long term. Keeping that decision in mind, not delegating certain tasks is then an emotional decision that another employee won't be able to do it as well. This can also change over time, as the trainee gets better at the task. The idea of "If you do what you've always done, you'll get what you've always gotten" does not hold true anymore, according to Vaden. If you do what you've always done, then you might be out of business tomor- row, he said. Tom Kerber, director of IoT at Parks Assocates, a research firm that focuses on the smart home, presented research on trends in the home security space. He started the session by addressing a couple of the key obstacles in the smart home and security space. The first, according to Kerber, is that consumers aren't familiar enough with the smart products, such as smart door locks and video doorbells. The second, he said, is that these products can be cost prohibitive. Kerber also said that, between access control, security, safety, energy monitoring, energy management, there are no use cases that particularly stand out to consumers. There is a lot of disruption, Kerber said, with companies trying to meet consumer needs at a lower price point. Parks examined a variety of offerings that would lead a consumer to acquire a security system with professional moni- toring, including no contract, paying for only specific days of monitoring, or hav- ing a system that controls lighting. Kerber highlighted that not having a contract was more attractive to consumers than picking days for monitoring. Kerber looked at how professional secu- rity monitoring companies compare to other home service providers. In terms of net promoter score, security providers scored higher than others, such as broadband Internet and TV providers. There is also competition in terms of financing. Vivint's Flex program offers cus- tomer the ability to pay no up-front costs and that is a notable advantage, according to Kerber. Justin Smith, director of security at KORE Wireless, a global IoT solutions provider that connects devices across carrier networks. There are about 7 million SIMs connected through KORE globally and the company's security team collects an average of 25 mil- lion events a day. KORE's security team is not focused on operations, he noted, but it monitors, advises and assists with security issues. Smith presented the session "Staying Ahead of the Race for Connectivity: Smart Business Strategies to Empower your Monitoring Business in the World of IoT." Here, he approached the topic of IoT device security and key considerations for attend- ees. He mentioned that the principles of the session are applicable even if attendees were not KORE customers. Smith discussed how security and busi- ness operations need to work in a balance; if a company is very focused on security, its agility in business might be low and vice versa, a highly secure business might not be as flexible. With security and IoT, Smith noted that physical access to a certain device is criti- cally important, as well as encryption and secure management. When it comes to a device's lifecycle, he asked about how it would be deployed, managed, updated or eventually replaced. In his presentation, Smith stressed secu- rity awareness training, and embracing security. The educational events of this year's TMA Annual Meeting closed with a conversation on the legal implications of cybersecurity. The panel included Timothy J. Pastore, part- ner with Duvall and Stachenfeld LLP, Nathan Wilcox, Vivint's chief compliance officer, and Jamie Barnett, partner with Venable LLP, with Sascha Kylau, vice president of sales at OneTel Security, acting as the moderator. Kylau opened the session with a question on how frequently an end user contract should be updated. Wilcox answered first, saying that any contract should be looked at on an annual basis, at least. There are a lot of items that can come up in contracts, he noted, such as limitations of liability. Pastor agreed, "Annual reviews are appropriate, perhaps even more so in the cybersecurity context." Pastore added that cybersecurity laws are evolving and yearly reviews may even be too infrequent. Later in the session, Kylau asked for the panel's opinions on the procedure to follow after a breach; at what point do companies need to alert their customers and involve authorities? Wilcox first suggested reaching out to the company's counselor to ensure that the company is doing what it needs to. Barnett advised that companies should not volunteer more information than they have to. The panel discussed the process of putting together a plan, having mock drills, and run- ning through what the company will do in the event of a cybersecurity breach. Wilcox stressed the importance of going through this process and practicing a response. He also advised companies should bring in outside professionals to help. The 2018 Annual Meeting will be held in Palm Beach, Fla., Oct. 13-17, 2018. SSN innovated their space, such as Lyft- and Uber's effect on taxis, the iPhone's impact on smartphones and Netflix's take on movie renting. Uldrich recommended the idea of a "reverse mentor," a younger person who can provide a different perspective, in order to see new trends in a different light. Uldrich commended the shift from the name CSAA, the Central Station Alarm Association, to TMA, The Monitoring Association, pointing out that "Monitoring is a really, really big umbrella." In terms of action, the last part of his "Aha," Uldrich urged attendees to regularly take time out of their schedules to think about the future, whether that's an hour every week or an entire week every year. Alper Cetingok is the managing director, investment banking for Raymond James, a financial firm that looks at various indus- tries, including security. Specifically within security, the company views the industry as a collection of 18 different market segments. At the annual meeting, Cetingok presented a session on "Valuation Trends and Drivers in the Current Market Environment." He looked at reasons investors like this space. Cetingok pointed out that market penetration rates for security are around 20 percent and there the penetration for home automation is less than 5 percent. To cover the overall state of the moni- toring industry, Cetingok commented on various factors, such as the current com- petitive landscape, private equity, strategic buyers, and capital markets. The monitoring industry currently has a lot of potential for disruption, he said. This comes from higher penetration rates in smart home, automa- tion, DIY and IoT. Private equity has recently been looking less at the residential market and more at the commercial space, which is very active right now, he observed. Among valuation methodologies, TMA

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