In the past the hardware component of any security system sale was key, and accounted for a significant proportion of the overall cost of the solution. The emphasis and differentiation today is often more focused toward the software and services. Could we therefore reach the point, as has happened in the consumer mobile phone market, at which customers might not directly purchase their hardware at all?
Security specialists might build revenue streams through licensing, or perhaps with other moneys, such as savings, levies or penalties, raised through the use of their security system. What would the pros and cons be of such models, for security systems integrators and suppliers?
Business models come and go, and history repeats itself. Years ago, catalogue companies thrived, taking consumer orders by mail and phone, delivering by courier and even allowing weekly payment terms. Later, large out-of-town retail complexes became popular. Today, we’ve come full circle, with online retailers like Amazon selling through virtual catalogues and delivering to their customers by courier.
Meanwhile, the vast majority of mobile phones are today acquired through monthly payment contracts. The core customer needs and demands have remained constant, but the technology and delivery model has evolved.
The corporate security sector has had a similar “deja vu” experience. The sector relied heavily on lease services in the 1990s, which were popular for the cashflow, accessibility and tax efficiency advantages they offered. Many companies leased their security systems, as they did their cars and photocopiers. Today, as products and services become ever more digitised and the cost of physical hardware reduces or disappears completely, the proportion of whole solution costs accounted for by hardware is dropping in many industries. This rebalancing now makes “as a Service” (aaS) models a potential consideration.
The consumer market is a good early barometer of this, with companies such as Netflix creating a space for home digital media streaming without the need for the costly boxes used by traditional satellite and cable companies.
‘As a Service’ Benefits
Enabling reduced entry costs for security sector customers, aaS models with monthly, quarterly or annual payment models will enhance customer uptake and widen the potential market, especially where the need for substantial capital investment can be a significant barrier to purchase. They arguably encourage customer loyalty, boost demand and drive secure, sustainable revenue streams and stronger sales volumes for integrators and suppliers.
In the past, differentiation between security solutions was largely a matter of hardware capabilities. Today it typically arises from software features and the integrator’s services, such as remote monitoring, maintenance and support, as well as additional benefits gained within the customer’s business through smart innovation, integration and analytics. At Reliance High-Tech we call this “value beyond security”.
With more system intelligence implemented in software and less in hardware, aaS facilitates the adaptation of security services as business needs change, creating flexibility and reducing the need for costly hardware replacement. When configured correctly aaS can seriously enhance disaster recovery and rigour within the system. End users enjoy enhanced overall solutions while integrators benefit from more secure and regular revenue streams.
Handling the Costs
Naturally, these benefits are attractive to customers and suppliers. However, the need to cover or amortise up-front installation costs can be problematic, and for integrators in certain circumstances, trading the one-off profit associated with a traditional sale for the lower but longer-term monthly income delivered by the aaS model may not always be favourable.
From the end user’s point of view, the key issue is that of opportunity cost. Significant savings and overall business efficiency can be achieved by effectively leveraging technologies such as AI, data analytics and video forensics to reduce manual workloads, operational expenses and the cost of human error. Taking such savings into account, aaS solutions offer excellent affordability and could even prove to be self-funding when compared with systems procured through traditional capital purchases.
The long and the short of it is that we probably aren’t quite at the point of free hardware just yet, but we’re moving that way. Every customer and every installation is different, with a unique set of constraints and objectives. It is therefore crucial that security systems integrators ensure they have a profound understanding of each customer and every project, so as to be able to propose a business model which suits all parties.
At Reliance High-Tech we continually invest significant effort into innovation, assessing technological and market opportunities so that we can offer every customer the best solution for their current and future needs, for every project. To learn more, call us on 0845 121 0802 or email us at email@example.com.