The March issue of SSI includes my in-depth interview with Tyco Security Products (TSP) and Life Safety Products President Mike Ryan in which he breaks down the TSP business, the strength of its brands and channel, the technology and products roadmap, and why he is excited about the opportunities both within his own purview as well as those for the company’s integrator partners. There was a lot more to my talk with Ryan, and much of the additional content follows here.
What is the approach from a Tyco Security Products corporate standpoint to continue to support the portfolio’s many strong products and brands, that great legacy, while continuing to innovate, especially with how fast technology’s changing?
Mike Ryan: Our approach is when we think about all of our assets, including brand by the way — you think about assets of technology, channel, supply chain, and let me call it expertise; our approach is to share and leverage. We bought Visonic a little over two years ago. They have a great wireless technology called PowerG and we are in the process of adopting that PowerG wireless across our DSC and Bentel brands. Some other electronic product platforms in Tyco are also evaluating PowerG. I have mentioned the strength of our channels, especially on the relationship side. You might have a distributor in Chile that has historically sold DSC intrusion products. That distributor would also likely have a clientele that would be interested in our Kantech access control line, or our new our Illustra Flex IP cameras. To leverage our relationships we have in the channel is important.
I’ll give you another example. We actually have what I consider to be a pretty well developed supply chain capability around the world. When we bought Exacq last summer, one of the first things we did was looked at their component list, part-number list, materials they buy. We apply that list and part numbers against the global Tyco contracts, and there was a significant, pretty sizeable benefit. All we did was change it from their contracts to the Tyco contracts. I think that’s an example where we leverage our asset. We had one of our development teams on one of our access control platforms get stuck here a while ago with not being able to replicate a failure mode. Set up one of our developers from another access-control product line, and he found a bug in the compiler that he happened to see from a project he’d worked on, something completely different from some time ago. He was able to help him, and they were able to fix it. We really try and run the company as a global organization. We communicate, collaborate, share, leverage, and it’s an important part of our strategy.
Can you speak to the R&D side of that, how it impacts what’s being developed, from more the technology side?
Ryan: The approach there would be we approach that on centers of excellence, or maybe more easily explained as centers of expertise. For example, we have an R&D operation, Visonic, in Tel Aviv, Israel. They are the wireless experts within security products. They set the standard for all of the wireless development and technology we have. We have a group in Bangalore, India, and their expertise is on writing integrations for our access-control platforms. Those are just two examples. We have R&D facilities in Belfast, Ireland; here in Westford, Massachusetts; up in Toronto, Canada. The approach is centers of expertise, standards, shared technology, and leveraging the expertise we have around the company.
I imagine it must be a challenge. Not only that aspect of it, but also I’m thinking with being so large and having such great depth of expertise, to also at the same time be nimble, able to innovate quickly, and also to get things to market in an expedient way. How do you deal with some of those challenges?
Ryan: Probably our big unifier there is our strategy-development process. We spend a significant amount of time at different periods throughout the year where we bring all of our marketing, product management, and technology people together at different points around the world. And we update our market analysis, competitive analysis, and we develop our technology and product roadmaps for each of the segments and each of the brands. The brands are distinctly positioned in various parts around the world, but that doesn’t stop us from leveraging all the things I was talking about earlier, relative to technology, supply chain, and expertise. Yes, it is a challenge. It is something that requires a terrific amount of coordination and effort. But I really think it’s one of the things as a company that we do pretty well. There’s no question we’re getting benefit from the leverage of our various assets that we have.
Let’s talk cloud-based technology, are there vulnerability concerns or is it more looking at it as just another location to store information?
Ryan: If you asked us the latest hot topic, you really have to focus on data privacy and data security. Not just Target and Neiman Marcus, but Coca Cola had a pretty significant data breach involving thousands of their employees and contractors here not that long ago. When you think about aggregation of cloud and data, you really do have to think very hard about the data privacy and data security. I’m sure you’ll see continued legislation and other government agencies rules, and restrictions around this. Quite honestly it’s a new world. I think there are some risks and some issues that have to be dealt with including networks, bandwidths, and other investments. It’s easy to talk about the cloud. When you come to the actual implementation and other challenges, there’s a lot of work to be done. Again, we see the marriage of our capabilities, our technology, our scalability as being a natural fit with some of the cloud infrastructure and cloud capabilities. It’s on our agenda.
What are some specific ways Tyco Security Products is enabling dealers and integrators to generate more RMR opportunities?
Ryan: First of all what I’ll reference here is still in development and still ideas that we’re working on. But shorter term is within 18 months, some of the ideas that we’re working on would be bringing an interactive-service capability to the commercial market and to the small-business market in particular. I think there are some technology advancements on the IP camera side that would yield some efficiencies in processing video. I think that there are some improvements that we’re bringing to bear on the video analytics, so those last two pieces then potentially could give you more efficacy on video verification. I think the other piece is our continued investment and intention to bring some more value on integration, especially our video and our access-control platforms. Those would be some of the areas that potentially you could see an integrator and some of our channel partners building additional services that could lead to recurring revenue on it.
From a bigger industry perspective, how important from a corporate philosophy standpoint for Tyco Security Products to be enmeshed and involved in the trade associations and industry causes and groups?
Ryan: I think as a leader in the industry it’s important. Quite honestly, I consider it to be part of our responsibility through the industry. I think our channel partners expect it. And so for us to participate in the major organizations: Security Industry Association, Central Station Alarm Association, ESA, there are a number of Tyco and Tyco Security Products’ employees participating in these trade groups and industry associations all the time. It’s actually kind of longstanding for us, and I think it’s important that we continue to support those groups, and make sure our presence is known and our voices heard.
Along that same line, what is the philosophy as far as standards in the industry and open platforms, interoperability, and those kinds of things? What’s the mindset for the company and whether efforts are put forth in that area?
Ryan: I would say it’s difficult to make a blanket statement on open systems or open protocols versus closed systems or proprietary. I think when you go back to the conversations we’ve had more on the connected world, and when you also consider the installed base and investments that many of our customers have, I think that if you’re not embracing more of an open and standards protocol, I think you put yourself in a challenging position. A lot of it has to do with what specific application or specific product you’re talking about. But I’d say in general we support open standards and promoting connectivity as a broad high-level statement.
Speaking about connectivity, the move to mobility and mobile devices and that sort of thing, how is that affecting the technology and product roadmap for you?
Ryan: I think if it’s not a minimal market entry requirement now, it’s pretty close. Whether that be on residential security, whether that be on small business, even on access-control systems — you tell me, 2007, 2008, that’s what consumers have become accustomed to. They’re accustomed to smartphones. They’re accustomed to connectivity. They’re accustomed to apps, that just the expectation across a wide ecosystem. If you don’t have effective, simple, intuitive interfaces that enable mobility, you really put yourself at risk.
Let’s talk about the big picture. What do you see in terms of realistic growth for the market overall in North America for the next 12 months and maybe even looking beyond that for three to five years?
Ryan: A week ago I might have had a different answer for you. This week, some of the macro economic reports weren’t that great. The equity market has taken a bit of a beating here. This week interest rates shot up in Turkey and India and South Africa. There’s still concerns about China. The revenue growth rate of the S&P 500 is not that great. Once you put that aside for a second; when Tyco announced our earnings a week ago, we felt, we told the world, and we believe that 2014 will be a good year for Tyco and good year for the fire and security industry. We see it as incrementally better than 2013. We’ll put the usual caveats on macro uncertainty, risk, and all the things that I talked about a moment ago, but we feel pretty good. On a high-level basis, our planning horizon is three years. We see good growth over the next three years in the North American security industry. We have a plan to invest. We see certain technologies expanding the markets. I think the new entrants into residential security is going to expand the market. If you think about wireless capabilities and wireless locks, you’re going to see increased potential penetration for access-control systems at more doors, and more control points throughout buildings. If you think about price points of IP video systems and IP cameras coming down the cost curve, you’re going to have potential to expand that market. We feel good about the macroeconomic, and the growth possibilities in North America security industry and we’ll continue to invest to maximize our participation there.
Are there specific verticals you’re particularly thinking will really do well?
Ryan: When we look across our main verticals: retail, government, what we call core commercial security, education and schools. There isn’t any data that definitively suggests any one is going to expand faster than the others. Certainly as I mentioned the residential market has the potential to grow a bit faster based on the expanding market, but the trends that I talked about earlier: wireless, IP video costs, interactive and mobile, don’t necessarily point to one area growing faster than any other in particular.
What would you say are the top couple of threats or barriers to success right now? You may have talked about some already, but what else, if anything, comes to mind in terms of threats for both the manufacturer and what you see on the integrator side, to success?
Ryan: I would say that if you’re a security-products manufacturer, and you are stuck on your product as it is today and you’re focused on making your product incrementally better, and don’t really take into consideration all the things that we were talking about relative to the trends, I do think you put your business at risk. And it’s really an obsolescence or irrelevance risk. You can have the greatest product in the world, but if it’s not connected and not scalable, and not taking advantage of other advances in technology, continuing to focus on your product today I think is probably the biggest threat, as far as I’m concerned.
If you’re looking at one of your integrator partners, what would you say would be similar on their end?
Ryan: I think it’s pretty similar. In other words, for the integrator as they look down their channel to their customers, to be able to provide that more integrated, more comprehensive, more total solution — very reflective of the conversations we were having — making sure their capabilities keep up with changes in network, changes in video, analytics, and all of the technologies that are becoming part of the new offering — the integrators and channel partners have to make sure that their teams, employees, skill sets are changing and keeping up with the various technologies that are being offered.
I’d like to end with something closer to home for you. What do you find most fulfilling about your role? What really gets your juices going?
Ryan: I have a great team here. We have a very experienced group of people here. Leaders and employees that have been with the company a long time. Again, it’s across the board: Software House, American Dynamics, DSC, Visonic — each of these brands and products represent an employee base that’s been here a long time, that’s committed, that’s enthusiastic. Tyco Security Products is winning in the marketplace. We are growing our company. Our people know it. Our prominence in the industry is increasing. We run a global company with a lot of great assets. And quite honestly, I’m having a lot of fun. It’s really a lot of fun to work with here, and a lot of possibilities, and everybody likes to win. I’m no exception.