Why SBN Cloud makes monitoring your own affordable

In January 2015 UL awarded its first-ever Central Station Host Services certification to Innovative Business Software (IBS) for SBN Cloud, its cloud-based monitoring product. According to IBS, it is now cost-effective to set up a UL certified central station with as little as 600 accounts and even fewer with an existing 24/7 operations center. We explore how this can be true and look at some of the implications that this may have on the monitoring industry as a whole.

The infrastructure cost barrier has been removed

Traditionally, the most capital intensive part of starting a monitoring business has been building a central station capable of being UL certified. This requires redundant telephone lines, power supplies, receivers, servers, and central station automation, all housed in physically secure fire protected buildings.

This was perfectly illustrated by SDM magazine when they provided insight into how a respected monitoring company in Chicago created a new state-of-the-art UL listed facility. To meet power requirements, the company used dedicated in-house engineers to retrofit an existing office building. They had to isolate the main switchgear, wire to accommodate two 275-KW power supplies, trench the main parking lot to connect twin 275 KW generators, and build a power utility room next to the operator room. This created an N+1 redundant system for all components necessary to power the central station. Similar effort was carried out with the telephone connectivity, receivers, HVAC, fire suppression and automation. Although SDM did not reveal the overall investment in the new facility, it must have been significant.

So how can a cloud-based solution be more cost effective? The trick is that most of the facility and equipment requirements are met by hosting receivers, central station automation, and connectivity within large redundant data centers. These are then provided pay-as-you-go, with central stations only paying for the services they use. The remaining central station infrastructure requirements relate to a sufficiently secured operator room. A basic room needs to contain standby lighting, two fire extinguishers, two routers connected to the internet with backup cellular data, enough PCs to support the number of operators, and battery packs for supporting 24 hour power. The room can be housed in typical office space, slightly modified to accommodate the physical protection requirements, within a typical office building.

Of course, UL will still require inspection of staffing, training, records keeping, and disaster recovery processes for a central station. However, the investment necessary to setup the central station has been reduced significantly.

Separating technology from operator creates new opportunities

Interestingly, a cloud-based monitoring product creates additional opportunities other than reduced infrastructure costs. Trends include:

  • Expanded options for disaster recovery – Since the cloud is available and accessible from anywhere, creating two geographically dispersed monitoring centers now only requires replicating the operator room.
  • Removing the infrastructure as a limitation of growth – The pay-as-you-go model means that a central station simply needs to add additional operators to respond to the increased number of signals that comes with growth in accounts.
  • Creating a new generation of services – In Europe, IBS has had a cloud based monitoring product available for the last 2 years and has created a market place for monitoring accounts on that platform. Within this market, smaller central stations can now choose to only monitor during the day and have another larger central station provide backup services at night.

These arrangements are possible because the provider of technology has been separated from the provider of the central station services.

Change will come, but not overnight

With a growing number of organizations now having the option to consider operating a UL listed central station, there will be some disruption to the existing monitoring market.

In the United States, 2,500 companies categorize themselves as providing some form of alarm system monitoring. Of these, 15% are UL listed. The remaining 85% now have the opportunity to take on the challenge of operating a UL listed central station. With 1,000 chain retailers operating from more than 100 locations we can likewise expect the number of proprietary central stations to increase significantly, following the lead from Walmart, Target, Walgreens and the 35 other CSAA Proprietary Members.

Yet, change is not likely to come overnight. The alarm dispatch response is only a part of the service that UL listed central stations can provide. Many residential security providers build their business through dealers and fund dealer growth by purchasing dealer accounts upfront. Security integrators provide full preventative maintenance and service plans which are still required to keep the installed systems up to standard. Contract monitoring companies often provide a turnkey service and include billing for end customers through sophisticated billing tools that are not easy to replicate. Companies considering setting up their own central station will need to factor the loss of these services into their decision making.

The cost of dispatch response is also likely to deter some from starting their own central station. Licensing is still required to dispatch agencies in some states and can be expensive to obtain. Managing permits and ensuring that false alarm charges are not incurred requires constant training. With the most expensive recurring cost being the operator, economies of scale are likely to count against the very small central stations. In short, there will always be a need for contracted monitoring.

Whatever the future, it will certainly be interesting.