The SDM Industry Forecast Panel: 2025

The Panel Talks RMR

SDM: How did your company’s 2024 recurring monthly revenue (RMR) change compared with 2023? And how do you expect 2025 RMR will change compared with 2024?

Chuck Petrusha: We are focusing not only on our RMR but looking inside of our RMR or attrition at exactly why folks are cancelling. So there’s no real new trend that I can report on cancellations, but I can say from our company’s point of view, residentially, the new business has slowed from what it was even three years ago. We don’t feel that it’s pressure from the DIY companies near as much as we just see a slowdown in housing and new housing starts. But multi-family housing is no problem. We’re very, very busy and our RMR trends there are growing at a rapid pace. Commercially the same thing, growing rapidly.

Overall, from 2023 to 2024 we’re going to show single digit growth on our RMR, which we feel satisfied with, even though we’d like to get in that 10 percent plus growth for RMR. In 2023 it was about 7 or 8 percent. We are right in there and we see the same thing panning out for 2024 and are optimistic for 2025 to be about the same. But one thing that has offered the alarm dealer an opportunity is the threat of of AT&T sunsetting their phone lines in California, maybe nationally. So we have a new effort to contact our existing customers and most of those that we’ve contacted are switching from our lowest form of monitoring rate, which is out of a telephone line, to either a cell or Wi-Fi or a redundant Wi-Fi cell combination. So there has been some growth from inside of our existing customer base.

Kathleen Ford: We set a goal in 2024 to grow and it looks like we’re going to end with about 10 percent of our revenue coming from RMR for 2024 and we have a rather ambitious goal of bringing that up to 15 percent in 2025, if possible. Our RMR does perhaps look a little different than Chuck’s, but, what we’re finding is a trend in the public sector, particularly the Department of Veteran’s Affairs, where they are seeking five-year contracts for embedded technicians or full-time service and maintenance contracts to manage their systems. It’s great for me, of course, but it’s great for the customer as well because they get everything they need on their system rather than an install-and-forget-it kind of thing until they’re ready to replace it when the technology is obsolete. So that’s encouraging and I’m hoping to land a few more of those recurring contracts for 2025 and hit that 15 percent.

While this potentially looks a little different than what the industry usually considers managed services, a lot of that is because in the public sector, they’re largely on-prem systems, so they are not cloud-based. That’s what is so exciting for me to see these contracts out there, because for some years we’ve been stuck in this “go to managed services” push in the industry with a customer base that’s very reluctant to do so. So now they’re finding a way to do it. We’re actually on-premise doing work, but they’re prepaying for that, so we are finding that to be a successful arrangement for us, and I think truly the customers are highly satisfied with the results they get.

Greg Parker: We grew services or RMR roughly 8 percent in 2024 and orders are up 10 percent in that effort. We have a high degree of focus on recurring revenue. The first thing I thought of when you asked this question was actually related to what Kathleen just said but in a slightly different way: managed services. Yes, we see opportunities potentially with embedded technicians depending on the vertical market that we serve. However, I think that our bigger opportunities are with a bit of a hybrid managed services where, if you take, for example, our Open Blue connected security offering, it is a service managed by a centralized team of engineers out of one of our facilities in Alabama.

So, what happens there is it becomes a subscription of a managed service. And then the notion of subscriptions beyond that — which could be software-only subscriptions or part of a managed service that goes across life safety and security — become opportunities for growth. Then certainly as you begin to blend some of those technologies across a building that has multiple inputs from life safety, from security, even from HVAC, becomes even more powerful, and that is also a recurring revenue growth opportunity for us — but only if we are hitting the unmet needs of our customers, and we’re helping them solve problems.

The Panel Talks Sales for 2025

SDM: What is one factor you feel will most significantly affect sales of security systems by your company this year?

Greg Parker: For us, our service teams and technicians are what make the difference. It’s really the backbone of everything. So when you consider we’ve got over 400 service branches, and about 8,000 technicians just in North America, we’re at least nearby where our customers need us. And whether we’re designing a new system or retrofitting an old one, we need to be there every step of the way for our customers and their journeys to optimize performance, cut costs, and simplify operations.

And those insights from our customers are shaping how we invest within our company. So AI technologies, our service offerings, be it a managed service, other as-a-service, or subscription services, are helping our customers address some of these challenges. And some of these are challenges we hear about directly from customers like staffing shortages, evolving security needs, “How do I keep my firmware up to date or secure at the edge?” I think that if we can stay focused on listening to those customers, that becomes a significant opportunity that will affect sales.

Chuck Petrusha: It’s a little different approach I see for us and our ability to sell security and life safety systems for 2025. And that’s if there is a thriving economy, which tends to drive construction in our industry and our region. Every new building that we touch, we love to offer our complete suite of products. And like Greg said, having a team of qualified security technicians and security staff in our office allows us to be ready for that. And I think we have been.

The security industry has weathered many, many storms. Whether it was the California wildfires or COVID-19, or the housing bubble, a lot of different things have come at the security industry. But we’ve been very resilient. And so being a local provider of services where you see our technicians at the grocery store and our office people down on the ballfields with their kids, that makes us part of the communities we serve. And so being ready for the economy to pick up a bit I think is our strongest opportunity for growth into 2025.

Kathleen Ford: For us, we are pursuing some new contract vehicles that I think will have a big impact on our growth in 2025. That’s on the federal side. We’re also doing some marketing in our local region to keep some steady work with our enduring customers in and around the Southern states of Georgia, Florida, North Carolina and South Carolina. Service and maintenance I think are a high growth area we see. There are some up-and-coming things in weapons detection. We’re still seeing quite a few customers interested in that, particularly in healthcare and education.

But I think across the board what I’m seeing is we have an opportunity to meet the customer’s needs for integrated solutions. I think that there have been historically some stove-piped solutions and I think when Greg talked about what JCI’s portfolio of offerings are, I think he’s got it spot on. I think our customers now are demanding those integrated solutions. And that’s a growth opportunity for all of us to be there with the right solutions and help them get all their systems talking to one another so that they can have a seamless solution to their security requirements.

The Panel Talks Emerging Technologies & Opportunities for 2025

SDM: What are the products and services driving customers to purchase or upgrade their systems in 2025?

Chuck Petrusha: What’s going to be driving most of it will be compliance, right? So in building a new building, what is going to keep us compliant? What is going to lower our risk?

We’ve tried to evolve from fire alarms to term them life safety systems. Throughout the building these are going be required in most cases. And then what’s going lower our risk? Well, of course, to buy insurance in this world you need all the tools in place to lower your rates, such as the security system; and to lower the liability, a surveillance system.

Greg Parker: I think in the coming year — of course this will vary by vertical market and even market segments — in general, we’ll see a lot of movement around access control; video, for different reasons, but in particular around how video is being leveraged as a sensor and the platforms that that video is being run on; then when I look across the life safety side, and to Chuck’s point, compliance in particular on that side and regulatory issues, those things that are changing as we speak.

For example, NFPA 915 at least opens the door to a degree of remote inspections. And as that’s colored in over the next few years, I think that changes the landscape a bit as to how we have thought about fire detection, historically. Of course, there’s a lot that remains to be seen and a lot that we have to at least be in in the river of information and flow so that we can react quickly enough. And lastly, I do still believe that there’s even more big opportunities around the hybrid managed services model to leverage not only AI into our methods of how we monitor and how we proactively identify insights for customers, but how we respond to that with actual human beings in the middle.

Kathleen Ford: I agree with what I’ve heard about compliance, and I think that’s a driver in our industry for sure. So in the access control space, there’s a drive towards FICAM compliance for those agencies that don’t already have compliance systems now. I think that there’s opportunity there and we’ll continue to roll out FICAM compliance solutions for some of those customers that require them. In the Department of Veteran’s Affairs in particular, in the video space, they have compliance documents that many facilities aren’t compliant with, so they’re driving specs and solicitations to fill those gaps.

But I think there’s another piece here at play that is an opportunity for all of us, which is that we’re selling some pretty cool technology that just keeps getting cooler and people want the shiny object. When they hear what is possible, they want it. So I see less pressure in the commercial and public sector as far as spending the dollars somewhere else. I find that we’re really in a sweet spot of cool, innovative technologies. The AI-driven opportunity here is to really provide something that they want and then you cloak that in life safety and security, which is the perfect dressing for something to have people commit dollars to. So I think that there are compliance-driven things and there are new shiny object things that just make their life easier, which is a win-win. I’m not suggesting that we’re providing something they don’t need. I think we have the opportunity to provide something they very much do need, but it sells itself in that it’s just very attractive. So I think that there’s huge opportunity there for that.

The Panel Talks Competition

SDM: What do you view as your company’s greatest competition in 2025?
Kathleen Ford: For us as a small business that does work across the United States, I think the challenge is competing against large nationals. That’s a challenge because we don’t have the budget on the marketing side or the name recognition. We do self-perform most of our own work, so we really consider ourselves an all-in-one agile solution with competitive pricing; but sometimes when you’re bumping against those well-known industry names, that in many cases can be a challenge for us. We consider ourselves small and mighty, but I would say without naming any particular names, that’s our greatest competition.

Greg Parker: First of all, I’d like to say we do admire many of our competitors including Advanced Security and ScDataCom. I think that there’s a lot of value in being highly focused and agile. So as we look across some of the competitors, that creates a dynamic for us to say how can a large company like JCI become more agile? We know who the big players are and we understand that roughly 80 percent of the market is probably a regional integrator. However, when we think about the customers, our biggest challenge is how do we better equip our customers and create value for those customers with tools and information that they need, particularly with connected security?

Connected security could be an opportunity not only for JCI but perhaps even for the dynamics of the market itself. Part of that is how do we demonstrate the value of that offering? We have some customers that are a bit more on the frontier and also some that aren’t quite ready for that. And I think as you look across those folks like us that are in the market, we have probably all experienced that at different degrees, right? How do you develop an offering that may go after a certain vertical market? Who am I going to compete with in that vertical market? And taking yet another look at it and saying, well it’s not just the vertical market but the market segment, which sometimes pulls in geography, but also is it light commercial or is it mid-market or up-market? Obviously with a focus on buildings, we really don’t play so much in the residential space, which is perhaps a little different than some of our competition as well.

Chuck Petrusha: I’m going to take a little different twist on this one because I’m going say that my biggest — or the security industry’s biggest — competitor in 2025 is going to be tertiary competitors, meaning that there are only so many dollars around today. And when you’re building this home with the current rate of inflation and what’s happened to the dollar value the last few years, we’re competing against the upgraded dishwasher. We’re competing against the landscaping. We’re competing against the carpet versus the tile. And so rather than pinpoint a specific competitor — and we all know who those are — I think truly my biggest competitor in 2025 will be that of a tertiary competitor, meaning there’s only so many dollars that the homeowner has to spend and where are they going to use those dollars or spend that dollars as they build the building?

And, by the way, a two-by-four in a business is the same as a new two-by-four in a home. I think in the business sector, you’re going to face the exact same thing. There are only so many dollars and with the inflation that we faced across the United States and really around the world the last few years, everything is more expensive.

The Panel Talks New Administration Expectations, AI & More

SDM spoke with our panelists about their expectations for the new Trump administration, tariffs, AI and what keeps them up at night as well as what excites them about the security industry. Listen to what they had to say here.