It has been an eventful few months for Arecont Vision, which has gone through Chapter 11 bankruptcy and, ultimately, was acquired by Costar Technologies Inc. What emerged is a new company, Arecont Vision Costar, poised for future growth unfettered by previous debt. For insights into what’s next for the newly minted company, we posed several questions to Jim Pritchett, CEO, Costar Technologies Inc., and Raul Calderon, President, Arecont Vision Costar.


Q. Please relate how Costar came to acquire Arecont Vision. Why did you see it as an attractive acquisition target?

Pritchett: We were excited when we learned that Arecont Vision was for sale. We have a long history with the management team and know the potential of the brand as a leader in omnidirectional megapixel cameras. It also solidifies the breadth of Costar’s offerings for our three major market segments – commercial security, traffic, and critical infrastructure.


Q. What benefits and/or synergies do you see of adding Arecont Vision to the Costar “family?”

This acquisition transitions us from 50% of revenue related to design and manufacturing to 75%Pritchett: The security market continues to face significant competition and pricing pressures. The more scale we gain, the better we can compete. Size also allows us to invest more in the business, producing differentiated products. To that end, this acquisition transitions us from 50% of revenue related to design and manufacturing to 75%. Not only is that another step towards unlocking value for our shareholders, it better allows us to control our own destiny.


Q. What new insights have you gained during these first few weeks since the acquisition? What has surprised you the most?

Calderon: Since I have known the Costar management team for over two decades, there have been no real surprises. We have already had cross-company strategy meetings and are making decisions that will improve different facets of the organisation, starting with adding much-needed headcount on both the domestic and international sales teams.


Q. What is the path ahead for Arecont Vision Costar? How is that path different than what we discussed previously about your expectations if Turnspire Capital Partners had acquired the company (as previously proposed)?

There are opportunities to leverage products and benefit customers between companiesCalderon: Arecont Vision set a plan in motion last year for turning around the organisation. There will be no significant deviation under Arecont Vision Costar of the main components of that turnaround. They are still in motion. The main difference is that Costar and its group of companies are in the same business as we are. So, there is already a fundamental understanding of our requirements, and of our competitive pressures, and of how the industry works. This will help greatly as we mold our strategy to fit within the new organisation. Additionally, there are opportunities to leverage products and benefit customers between companies that would not have existed under different ownership.


Q. How actively involved will Costar be in managing Arecont Vision going forward? Any other changes in how the company is managed?

Pritchett: Costar will be very actively involved in supporting the Arecont Vision business plan. Having said that, our mantra is that our people make the difference. Our job on the executive team is to remove obstacles from the paths of our employees, enabling them to execute the strategy. We have a long history and a lot of confidence in the Arecont Vision Costar leadership team.

Arecont Vision set a plan in motion last year for turning around the organisation
Costar will be very actively involved in supporting the Arecont Vision business plan

Q. What misconceptions have you encountered in the market about the bankruptcy process, the new owner, and/or other aspects of the transition?

Calderon: Bankruptcy (Chapter 11) typically has a negative connotation because it is many times associated with shuttering a company. For Arecont Vision, this was a tactical vehicle that enabled us to improve the company’s balance sheet and secure our financial future by selling its assets to Costar. This has made us a much stronger company than we otherwise would have been. There has been very little mis-step in onboarding all our employees. We are already in process of or have completed paying the pre-petition liabilities to our vendors. All-in-all, the transition is going smoothly, and our customers will soon begin to notice the improvements that we are making.


Q. Do you expect any personnel downsizing or other efficiencies as the companies combine (i.e., eliminating any redundancies in the two operations)?

We are looking for areas where we can expand the workforce, not reduce itPritchett: We are looking for areas where we can expand the workforce, not reduce it. Specifically, sales, engineering, and customer support are all critical to our customers’ experiences. With the industry’s obsession with decreasing prices over the last number of years, it seems there is a real opportunity for a company that is laser-focused on the customer, and that is what the Costar Technologies companies will deliver.


Q. What is your hope and/or expectations for Arecont Vision Costar in the next year?

Pritchett: It is a little over a month after the transaction closed. During that time, we onboarded all the employees, had in-depth strategy meetings with the executive management team, and identified the areas where we are going to make immediate investments. We are also in the process of scoping our NetSuite (business software) implementation plan for Arecont Vision Costar, transitioning them from QuickBooks and Fishbowl. The various initiatives and investments will not only pay off in the long run but will also make this acquisition accretive in 2019.


Q. Will we see you at the upcoming GSX show in Las Vegas?

ISC West 2019 will be the first show where you will see a fully combined presence for the Costar group of companiesCalderon: Arecont Vision decided long ago not to participate in GSX this year for a variety of reasons. We will have a meeting room not far from the exhibits, and we will be presenting to our key customers during scheduled meetings. We’ll also be making several pre-planned product announcements around additions to the Arecont Vision Total Video Solution that we first unveiled at ISC West 2018. ISC West 2019 next April will be the first show where you will see a fully combined presence for the Costar group of companies, including Arecont Vision.


Q. What is your overarching message to the security marketplace about the “new” Arecont Vision Costar?

Calderon: The new Arecont Vision Costar is stronger than ever with a renewed commitment to its customers and partners to provide improved product solutions and customer experience. We will continue to build upon our legacy of industry leadership in megapixel camera firsts, in advanced designs that our competitors frequently attempt to copy, and now in leadership of both stand-alone and web-enabled surveillance systems with our Contera families.

Download PDF version

Author profile

Larry Anderson Editor, SecurityInformed.com & SourceSecurity.com

An experienced journalist and long-time presence in the US security industry, Larry is SourceSecurity.com's eyes and ears in the fast-changing security marketplace, attending industry and corporate events, interviewing security leaders and contributing original editorial content to the site. He leads SourceSecurity.com's team of dedicated editorial and content professionals, guiding the "editorial roadmap" to ensure the site provides the most relevant content for security professionals.

In case you missed it

Enhance traditional security systems within your smart home
Enhance traditional security systems within your smart home

Market dynamics are changing the U.S. residential security market, creating new business models that better appeal to the approximately 70% of households without a security system. Smart home adjacencies have helped revitalise the traditional security industry, and alternative approaches to systems and monitoring for the security industry are emerging, including a new batch of DIY systems. Growth in the residential security market and its position as the channel for smart home solutions have attracted numerous new entrants. Telecoms, cable operators, and CE (consumer electronics) manufacturers are joining traditional security players as they compete to fulfill consumer demand for safety and security. Connected products also provide a layer of competition as consumers must decide whether having category devices such as doorbell video cameras, networked cameras, and other products suffice for their security. Increasingly competitive landscape Smart home services can provide additional revenue streams for the security industry For instance, IP cameras are a highly popular smart home device rooted in security, and Parks Associates estimates 7.7 million standalone and all-in-one networked/IP cameras will be sold in the U.S. in 2018, with $889M in revenues. Product owners may feel their security needs are fulfilled with this single purchase, as such dealers and service providers are under increasing pressure to communicate their value proposition to consumers. Categorically, each type of player is facing competition uniquely—national, regional, and local dealers all have a different strategy for overcoming the increasingly competitive landscape. Smart home services can provide additional revenue streams for the security industry. In Parks Associates’ 2017 survey of U.S. security dealers, 58% report that smart home service capabilities enable extra monthly revenue. Almost half of dealers also note they have to offer smart home devices and services in order to keep up with their competition. While white-label devices are acceptable in some instances, dealers need to integrate with hero products whenever possible when those exist for a category. For dealers who have added smart home devices and services are all potential benefits and good for business Improved customer engagement That 2017 survey also revealed 36% of security dealers that offer interactive services report security system sales with a networked camera and 16% report sales with a smart thermostat. For dealers who have added smart home devices and services, enhanced system utility, increased daily value, and improved customer engagement with the system are all potential benefits and good for business. Security has served as the most productive channel for smart home solutions, mainly because the products create natural extensions of a security system’s functions and benefits, but as smart home devices, subsystems, and controllers expand their functionality, availability, and DIY capabilities, many standalone devices constitute competition to classical security. Particularly viable substitute devices include IP cameras, smart door locks, smart garage doors, or a combination of these devices. Products that are self-installed offer both convenience and cost savings, and these drivers are significant among DIY consumers—among the 6% of broadband households that installed a security system themselves, 39% did it to save money. Enhance traditional security Self-installable smart home devices may resonate with a segment of the market who want security While many security dealers believe substitute offerings are a threat, some dealers do not find such devices an existential threat but instead view them as another path to consumer awareness. They argue that the difference between smart product substitutes and traditional security is that of a solution that provides knowledge versus a system that gives one the ability to act on that knowledge. A common theme among professional monitoring providers is that a homeowner who is aware of events happening in the home does not necessarily have a secure and protected household. For example, a Nest camera, a DIY product, notifies a consumer via smartphone about events in the home when it detects motion, but only when the notification is opened and identified will a consumer be able to act on the related event. Self-installable smart home devices may resonate with a segment of the market who want security but are unwilling to adopt professional monitoring; however, providers can leverage these devices to enhance traditional security features and communicate the value of professional monitoring. Smart home devices and features, while posing a threat to some security companies, are a potential way forward to increased market growth Increased market growth A key counterstrategy for security dealers and companies is to leverage their current, powerful role as the prime channel for smart home devices. Many security dealers now include smart home devices with their security systems to complement their offerings and increase system engagement. For example, as of Q4 2017, nearly 70% of U.S. broadband households that were very likely to purchase a security system in the next 12 months reported that they want a camera to be included as part of their security system purchase. In response, many security system providers now offer IP cameras as optional enhancements for their systems. Smart home devices and features, while posing a threat to some security companies, are a potential way forward to increased market growth. Security dealers have an opportunity to become more than a security provider but a smart home solutions provider rooted in safety. Provide status updates Comcast has entered both the professionally monitored security market and the market for smart home services The alternative is to position as a provider of basic security with low price as the key differentiator. Comcast has entered both the professionally monitored security market and the market for smart home services independent of security. It has discovered that monetising smart home value propositions through recurring revenue becomes increasingly challenging as the value extends further away from life safety. Since the security industry remains the main channel for smart home services, security dealers are in a unique position to leverage that strength. Value propositions must shift from the traditional arming and disarming of a system to peace-of-mind experiences that builds off the benefits of smart devices in the home to provide status updates (e.g., if the kids arrived home safely) and monitoring at will (e.g., checking home status at any time to see a pet or monitor a package delivery). These types of clear value propositions and compelling use cases, which resonate with consumer and motivate them to expand beyond standalone products, will help expand the home security market.

What is the value of "free" video management systems?
What is the value of "free" video management systems?

They say that every choice has a cost. It's a basic principle that, economically speaking, nothing is free. If it doesn't cost actual money, it may be expensive in terms of time, attention and/or effort. These are interesting observations to keep in mind as one peruses the various "free" video management system (VMS) offerings available on the market. Some are provided by camera companies to unify their products into a "system", even if it's a small one. Other free VMS offerings are entry-level versions offered by software companies with the intent of the customer upgrading later to a paid version. For more insights, we asked this week's Expert Panel Roundtable: What is the value of “free” video management systems (VMSs) and how can a customer decide whether “free” is the right price for them?

The ongoing challenge of IT and data risk management
The ongoing challenge of IT and data risk management

Managing IT and data risk is a challenging job. When we outsource our IT, applications and data processing to third-parties more and more every day, managing that risk becomes almost impossible. No longer are our data and systems contained within an infrastructure that we have full control over. We now give vendors our data, and allow them to conduct operations on our behalf.  The problem is, we don’t control their infrastructure, and we can never fully look under the hood to understand and vet their ability to protect our data and operations. We have to fully understand how important this issue is, and ensure we have the right governance, processes and teams to identify and mitigate any risks found in our vendors. No longer are our data and systems contained within an infrastructure that we have full control over Today, everything is connected. Our own networks have Internet of Things (IoT) devices.  We have VPN connections coming in, and we aren’t always sure who is on the other end of that connection. It is a full-time job just to get a handle on our own risk. How much harder, and how much larger should our teams and budgets be, to truly know and trust that our vendors can secure those devices and external connections?  For every device and application we have internally, it is very difficult to even keep an accurate inventory. Do all of our vendors have some special sauce that allows them to overcome the traditional challenges of securing internal and vendor-connected networks? They are doing the same thing we are – doing our best with the limited human and financial resources allocated by our organisation. Risk stratification and control objectives  The benefits of outsourcing operations or using a vendor web application are clear. So how can we properly vet those vendors from an IT risk perspective?  The very first thing we need to put in place is Risk Stratification. Risk Stratification presents a few targeted questions in the purchasing process. These questions include – what type of data will be shared? How much of this data? Will the data be hosted by a vendor? Will this hosting be in the US or offshored? Has the vendor ever had a data breach? These questions allow you to quickly discern if a risk assessment is needed and if so, what depth and breadth.  Risk stratification allows you to make decisions that not only improve your team’s efficiency, but also ensure that you are not being a roadblock to the business Risk stratification allows you to make decisions that not only improve your team’s efficiency, but also ensure that you are not being a roadblock to the business. With risk stratification, you can justify the extra time needed to properly assess a vendor’s security.  And in the assessment of a vendor’s security, we have to consider what control objectives we will use. Control objectives are access controls, policies, encryption, etc. In healthcare, we often use the HITRUST set of control objectives. In assessing against those control objectives, we usually use a spreadsheet.  Today, there are many vendors who will sell us more automated ways to get that risk assessment completed, without passing spreadsheets back and forth. These solutions are great if you can get the additional budget approved.  Multi-factor authentication  Even if we are using old-fashioned spreadsheets, we can ensure that the questions asked of the vendor include a data flow and network/security architecture document.  We want to see the SOC2 report if they are hosting their solution in Amazon, etc. If they are hosting it within their own datacentre, we absolutely want to see a SOC2 Type II report. If they haven’t done that due diligence, should that be a risk for you?  Today, we really need to be requiring our vendors to have multi-factor authentication on both their Internet-facing access, as well as their privileged internal access to our sensitive data. I rate those vendors who do not have this control in place as a high risk. We’ve recently seen breaches that were able to happen because the company did not require administrators or DBAs to use a 2-factor authentication into sensitive customer data sources.  In the assessment of a vendor’s security, one has to consider what control objectives to use This situation brings up the issue of risk acceptance. Who in your organisation can accept a high risk? Are you simply doing qualitative risk assessment – high, medium and low risks? Or are you doing true quantitative risk analysis? The latter involves actually quantifying those risks in terms of likelihood and impact of a risk manifesting, and the dollar amount that could impact your organisation.   So is it a million dollars of risk? Who can accept that level of risk? Just the CEO? These are questions we need to entertain in our risk management programs, and socialised within your organisation.  This issue is so important – once we institute risk acceptance, our organisation suddenly starts caring about the vendors and applications we’re looking to engage.  If they are asked to accept a risk without some sort of mitigation, they suddenly care and think about that when they are vetting future outsourced solutions. Quantitative risk analysis involves quantifying risks in terms of likelihood and impact of a risk manifesting Risk management process  In this discussion, it is important to understand how we think of, and present, the gaps we identify in our risk management processes. A gap is not a risk. If I leave my front door unlocked, is that a control gap or a risk? It is a gap – an unlocked door. What is the risk?  The risk is the loss of property due to a burglary or the loss of life due to a violent criminal who got in because the door was unlocked. When we present risks, we can’t say the vendor doesn’t encrypt data. The risk of the lack of encryption is fines, loss of reputation, etc. due to the breach of data. A gap is not a risk.  Once we’ve conducted our risk analysis, we must then ensure that our contracts protect our organisation? If we’re in healthcare, we must determine if the vendor is, in fact, a true HIPAA Business Associate, and if so we get a Business Associate Agreement (BAA) in place. I also require my organisation to attach an IT Security Amendment to these contracts. The IT Security Amendment spells out those control objectives, and requires each vendor to sign off on those critical controls. We are responsible for protecting our organisation’s IT and data infrastructure – today that often means assessing a 3rd-party’s security controls One final note on risk assessments – we need to tier our vendors. We tier them in different ways – in healthcare a Tier 1 vendor is a vendor who will have our patient information on the Internet. Tiering allows us to subject our vendors to re-assessment. A tier 1 vendor should be re-assessed annually, and may require an actual onsite assessment vs. a desk audit. A tier 2 vendor is re-assessed every 2 years, etc. We are responsible for protecting our organisation’s IT and data infrastructure – today that often means assessing a 3rd-party’s security controls. We must be able to fully assess our vendors while not getting in the way of the business, which needs to ensure proper operations, financial productivity and customer satisfaction. If we truly understand our challenge of vendor risk management, we can tailor our operations to assess at the level needed, identify and report on risks, and follow-up on any risks that needed mitigated.