Tap water costs pennies per gallon, but premium bottled water marketed as a wellness product enjoys a 1,000 times markup. A sneaker is an inexpensive, mass-produced commodity — until you add a swoosh and make it an homage to athletic achievement. And coffee went from dollars per pound to dollars per cup when Starbucks elevated the perception of the entire market segment. In markets, categories are destiny. Where you place a product shapes how people value it. And nowhere is that truer than in the way Wall Street categorizes industries.

That’s why it matters — deeply — that the $100 billion physical security industry is still lumped under the “Industrials” sector in the Global Industry Classification Standard (GICS), the taxonomy financial analysts use to divide the stock market into sectors like Healthcare, Information Technology, and Consumer Discretionary.

Labeling security companies as “Industrials” might once have made sense, back when the industry was dominated by locks, gates, steel doors, and high fences — brute-force hardware from a pre-digital age. But that picture is decades out of date for many new entrants.

Today, security is undergoing a software-led transformation. Nearly every new company in the space is a SaaS startup. AI-powered analytics can detect anomalies and threats in real time. Mobile apps have replaced badges and keys. Cloud-native platforms integrate identity, access, video, and analytics with the kind of real-time control and insight that would have seemed like science fiction even a decade ago.

And yet — on the spreadsheets of market analysts — security platforms still travel with such industrial bedfellows as bulldozers, railcars, compressors, adhesives, and cable management clips.

This miscategorization is more than semantic. It has real financial consequences.

Sectors like Information Technology trade at far higher EV/Revenue multiples than Industrials: averaging ~2-6x for SaaS/Tech versus ~1-3x for Industrials. P/E multiples follow a similar pattern, with IT in the range of ~42x, compared to only ~28x for Industrials. As they say in real estate, it’s best to have the least expensive house on the street, illustrating the truth that comparison against your nearest neighbors significantly affects selling price. That means companies with similar revenue, growth rates, and profitability can be worth dramatically more or less depending on which neighborhood they live in. For founders, that affects access to capital. For employees with stock options, it affects long-term wealth. For investors, it largely determines liquidity and returns on investment.

Historically, category migration and expansion have had a significant impact on companies that transitioned into a category with a different alignment to their core business, as illustrated by two recent category shifts:

• In 2016, REITs were moved from the Financials sector to the newly created Real Estate sector. This shift led to increased holdings from Real Estate-specific ETFs and mutual funds, boosting visibility and demand for shares.

• In 2018, the Communications Service sector was established, welcoming mega-caps like Google and Meta, which had transitioned from IT. Analysts began comparing these new entrants to media, telecom, and entertainment companies rather than traditional tech peers, leading to a shift in valuation expectations and metrics.

This is not just about perception — though perception matters. It’s about ensuring the security industry is recognized for what it has become: a digital-first, cloud-powered engine of intelligence, automation, and risk management. And it will soon be a premier example of a domain where AI can transform complex real-time sensor inputs into immediate cost- and life-saving actions (like healthcare, I might add).

The economy is increasingly built on bits, not atoms. Market perceptions, unfortunately, tend to place security on the wrong side of that divide — not because of its business model, but because of a labeling error.

It’s time to fix that.

Security isn’t an industrial anymore. It’s specialized information technology. And it deserves to be valued accordingly.