Kastle Systems has seen video, mobile technology transform its security business

December 8, 2013

Falls Church-based Kastle Systems has seen its 40-year-old business of securing office buildings and other commercial properties transformed in recent years as the proliferation of devices that connect to the Internet added new technologies to the firm’s arsenal.

Take video surveillance. It’s becoming less and less common to have security guards watch camera feeds on a cluster of tiny television screens, Chairman Mark Ein said. Instead, software monitors the video for illicit behavior in real time and alerts authorities via smartphone when necessary.

It’s not technology for technology’s sake.

“You really have to make sure the new technologies aren’t just interesting, but they’re totally reliable, totally dependable, and they’re available at a price point that the market wants them,” Ein said.

The rise of video, mobile devices and data analytics has forced companies such as Kastle Systems, which generated about $68 million in revenue last year, to invest in fresh products that incorporate the latest technologies in ways that enhance building security.

“Security businesses were a very high-cash-generating type of businesses” with little technical investment, said Daniel Holland, an equity analyst at Morningstar, an investment research firm. “It wasn’t a highly innovative place until you started seeing more Web-based types of applications.”

Some larger security companies are acquiring that innovation by purchasing start-ups that have created cutting-edge technology, Holland said. “The bias has generally been toward buying versus building because a lot of these technologies aren’t necessarily in-house things they already know” how to create, Holland said.

Kastle Systems, for example, purchased CheckVideo, a Reston-based video surveillance and analytics company, for an undisclosed sum in May, a move that turned one of Kastle’s vendors into a wholly owned subsidiary.

“The cost of the cameras has come down, and the cost of the bandwidth has come down, and video is becoming ubiquitous,” Ein said. “Pretty much every significant terrorist or security issue has been solved through the use of video cameras.”

But the company hasn’t looked elsewhere for all of its innovation. Ein said Kastle System counts 70 developers among its staff of 450.

As longtime technology executives, Ein and chief executive Piyush Sodha have made product development a focus since they bought the company in 2007, Ein said.

Holland, at Morningstar, said smartphones, tablets and other mobile devices are becoming an increasingly important part of security companies’ offerings as property owners and managers use apps for other business purposes.

“The firms that don’t have that will quickly find themselves in a difficult place when they try to get that new project,” Holland said. “Incumbency helps a lot, but if I’m putting in a new building, I’m more interested in the latest, greatest technologies, as opposed to what would have worked 20 years ago.”

Kastle Systems significantly expanded its footprint last month when it added 4,000 customers in New York, including financial institutions, high-end stores and jewelers, through the acquisition of Mutual Central Alarm Services and Stat-Land Security Systems from ADT Corp.

The deal, which makes New York the company’s second-largest market after Washington, includes a central station in Midtown Manhattan from which the firm can monitor its thousands of new customers.

Internet-enabled security technologies make it easier than ever before to offer sophisticated monitoring from afar. But that comes at a risk, Holland said, particularly as the technology may be vulnerable to hackers and other
cyberthreats.

“There’s a really delicate balance between the push to centralization versus making sure you’re providing a service that is dependable and safe, because that is the reason they were hired in the first place,” Holland said.

Steven Overly covers the business of technology, biotechnology and venture capital in the Washington region for The Washington Post and its weekly Capital Business publication. In that capacity, he has written about start-up struggles, investment trends and major drug discoveries.
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