The emergence of the Connected Home has become something akin to the 1990’s Bill Murray movie, ‘Ground Hog Day’. Each year at the annual Consumer Electronics Show, a litany of technology companies announce that it is the year in which the Connected Home has become a reality. In 2011, Verizon announced its intent to become a dominant player in the home monitoring and security market. In 2003, Philips announced that the Connected Home was the centerpiece of a strategy intended to turn around their consumer electronics business. Over a decade ago, in 2001, Sony revealed its Wireless AV/IT Gateway, which allowed users access to e-mail, TV broadcasts, the Internet, video content and digital still images from almost anywhere inside their homes. Despite these announcements, none of these products saw the kind of market traction that was initially hoped.
Despite this history, Waterstone feels that this is really the year that Connected Home will make the transition from a set of niche, techie or luxury solutions to the main stream. We see a confluence of macro trends suggesting that the “internet of things” and smart appliances are a closer reality. First among these trends, smart phones and home Wi-Fi networks, which are near ubiquitous in the US market, are serving as platforms for controlling home technologies. Second, more and more home devices (from IP cameras to pedometers to home thermostats) are sold with microprocessors and firmware that take advantage of this environment to provide connected solutions. Finally, standards for hardware communication and network architecture have matured, making it easy for consumers to ‘plug and play’ devices. In conjunction with these trends, OEMs, service providers, Cloud software companies and other Connected Home players used CES 2013 to showcase the ways in which they are looking to capitalize on this growing market.
Explosion of Offerings Reveals the Growth in an “Internet of Things”
A wide spectrum of hardware and software manufacturers have launched or planning to launch new IP-enabled point solutions for the Connected Home market this year. Point solutions use smart technology to provide a service or resolve discrete issues for a consumer, as opposed to an entire suite of connected home solutions. The Nest programmable thermostat, for example, provides a smart interface to the home HVAC system, which allows consumers to remotely control their home’s temperature and automate control via a mobile app that learns how to adjust temperature to the user’s actions over time. The Belkin WeMo is a “smart outlet” that customers can use to reduce phantom energy drain of home electronic products, remotely start and stop electronics, and perform analytics on home energy usage. Philips has also entered the connected home space with the Hue - a smart LED lighting system capable of customizing lighting design to your mood and energy consumption desires.
We also continue to see growth in the commercial availability of smart appliances in the connected home market, with vendors such as LG and Samsung expanding upon their smart home appliance offerings. LG expanded the functionality of the Smart Thinq appliances to include Near Field Communication capabilities and mobile voice command. Samsung is launching its upgraded T9000 Smart Refrigerator this spring, and GE has already launched its GeoSpring Hybrid Water Heater as the introductory smart appliance offering of the Brillion connected home and energy management solutions suite. Cloud services have also emerged as a key technology enabling the Connected Home. Start-up Arrayent, for example, provides a low cost, cloud-based technology platform to consumer OEMs that allows any device or appliance to be connected to the web and then controlled and accessed via a smart phone application.
This plethora of recently developed point solutions culminated in the launch of the “Internet of Things Consortium” at this year’s CES. The consortium’s goal is to provide a space for hardware, software, and service providers to collaborate on developing and improving the capabilities of connected home devices for consumers.
This dizzying array of new OEM offerings, cloud services and industry consortiums suggests far more strongly than in years past that the Connected Home market has reached an inflection point.
New market entrants in managed services and platform solutions
Another trend highlighted at CES is the emergence of new entrants in the Connected Home market. Over the past 18 months, telco and cable providers, such as Comcast and Verizon, have entered the connected home market with managed service offerings focused on home automation and security. At CES this year, AT&T announced the availability of its Digital Life managed service offering, which it is market testing in Dallas and Atlanta and plans to expand to six additional markets in March. Unlike other broadband providers, AT&T is not only selling its solution to AT&T end-users, but is also licensing its technology to other service providers to launch their own Connected Home offering.
Not to be outdone, retailers are launching their own platforms and managed services. Lowe’s had a big presence at CES in support of its Iris connected home service – a low cost Wi-Fi based hub which plugs and plays with compatible hardware available in Lowe’s retail stores. While the pricing trend for these managed service offerings among telco and cable providers is a tiered subscription model, Lowe’s is using a different method and, in doing so, accessing different market segments. Lowe’s offers its basic service for free, and then introduces a premium subscription that allows users to receive alerts and have greater control in managing all devices in their Connected Home.
Implications for Consumer Technology and Tech Services Provider
These trends have significant implications for the Consumer Technology and Tech Services Provider:
- An increasing portfolio of offerings to the end-user as players test and learn what will drive adoption in mass market consumer segments
- Standard platforms and protocols will unleash innovation from start-ups and established players alike to find compelling value propositions and use-cases for the home owner
- Push and pull marketing by large OEM brands and Channels will continue to generate mass market consumer awareness
- Managed Services will be increasingly available at different price points and functionality levels to help better meet the needs of different market segments
- The emergence of new cloud-based services to enhance the home-owner user experience or help OEMs and other service providers better deliver against their value proposition
Given these trends and the proliferation of players and offerings in the market, it is no longer possible for companies to sit on the sidelines to see where the market goes. It is time, rather, to start developing a Connected Home strategy and business plan. The true dawn of the ‘Internet of Things’ and the Connected Home is here.