You Can Go Home Again!

Don Dulchinos, president, Smart Home & Away LLC

Don Dulchinos, president, Smart Home & Away LLC

Market Shifts Put IoT Back on the Radar Screen

By Don Dulchinos

Was Thomas Wolfe wrong when he wrote “You can’t go home again?” Or in this case, could I still re-engage in the home automation/Internet of Things space after a two-year absence running a non-profit entertainment industry consortium?

To find out, I dusted off my Smart Home and Away business cards and attended the recent Connections conference from long-time home automation mavens Parks Associates (who, I must say, are finally reaping the benefits of being early to the market of what we used to call “Home Networking,” with a great array of conferences and research products).  The short answer: it is not too late at all.

The category continues to proliferate in size and scope, but there appears to be more organization of the ecosystem than existed just two years ago. And while the competitive landscape has shifted in interesting ways, no dominant player or service provider has emerged.  Following are some observations, part of a longer strategy report in preparation.

Home Security – A Safe Bet?

The first thing I noticed at the conference was that a number of companies are doubling down on security, whereas I had thought home security would serve as an anchor tenant and foundation for much broader home automation offerings.  Reading a little between the lines and talking to some executives at ADT, Nortek and, among others, they seem to be re-focused on their core business of security, one they know well and feel is strong in the USA.  Some representatives of these companies observe that customers resist paying a monthly fee for general home automation, but they still perceive value in a security service.  The main counter to this conservative strategy is the feeling that penetration of security services may have topped out at 25% of housing market.

Most interesting, and somewhat close to my heart as a former cable guy, is the progress in this area from Comcast.  Despite a broader vision articulated in a conference keynote by Sri Solur, Comcast still believes they have a superior security solution and can take market share from the incumbents.  Indeed, in May they achieved the milestone of 1 million home security and automation customers.  And you may have seen the recent marketing campaign combining the xFi and Xfinity Home value propositions – customer visibility and control of the Wi-Fi network capability reinforces the “peace of mind and security” branding of Xfinity Home.  I still believe Comcast is well positioned to leverage a broader swath of the Internet of Things, and it’s interesting to look at how the other big technology and ecosystem players have progressed in recent years.

Ecosystems Wars Continue

One Connections panel featured Elizabeth Mathes, director of smart home tech at Home Depot, who emphasized that her company does not offer an ecosystem. Rather, it sells retail devices with a focus on products that are approved for at least one of six major ecosystems: Alexa, Google Home, Wink, Apple’s HomeKit, Nest and Samsung’s SmartThings. As an old cable guy, I asked why not Comcast. This elicited two responses – one from a fellow panelist (unnamed) who was apoplectic that anyone would work with Comcast, ever!  Mathes more judiciously responded that Home Depot needs products that support a national footprint, and Comcast is “not in every home.”

Ecosystems and devices are definitely different business models and mindsets.  Speaker Derrick Decoi of Comcast noted that they don’t compete on the basis of devices offered; “Though we want a broad array, our advantage is support.”  Indeed, comparing the similarity in the lists of products from Works with Nest to Works with Xfinity Home seems to bear this out.

Nest, too, like other brands in the Alphabet/Google portfolio, appears to operate in support of the parent’s business model. My EIDR organization has direct experience of this mindset with regard to Google Play, which is an EIDR board member. Google and other member companies like Amazon and Microsoft do not consider themselves as being in the video business per se, but rather as pursuing a line of business to drive traffic for their main businesses.  As near as I can tell, the best description of what industry Google is in is “attention.”

Apple presents a somewhat different picture. It is primarily a device company, but in this space it still seems focused on driving affiliation of third-party devices with the HomeKit platform, some of which (but hardly all) it stocks in Apple stores. So maybe the product orientation is changing in subtle ways?

Amazon is a retail product company, and it is not surprising that Alexa works with third-party devices such as Wemo, Hue, Insteon, Ecobee and Nucleus. What is less intuitive is that it works with presumably competitive ecosystems like Nest and ecosystem/product combinations like Samsung. Just saying “frienemies” doesn’t seem to be a rich enough term anymore to describe all this positioning. (I’m working in my longer strategy report to better define and clarify similarities and differences.)

Having run through this ecosystem summary, I was surprised that representation at Connections was scarce among these big name ecosystem purveyors – one guy from Nest Labs, another guy from vendor company Fibaro touting its HomeKit enabled window, motion and flood sensors. Not sure why there were not more evangelists, other than there may be better venues for them. Or maybe just the device guys do their pilgrimages to Silicon Valley or Seattle, but it begs the question.

Finally, one of my favorite quotes about ecosystem compatibility came from a speaker from GE Lighting: “We need to be more open; we’re small compared to Silicon Valley players.” GE is now considered small.  We’re in a new world for sure.

Significant Trends of Last Two Years

Alexa sales this past Christmas were mentioned by many of the speakers as a big shot in the arm for the connected device industry, and Mathes’ opinion was “Q4 is going to be huge for voice control, huge for Smart home.”  Some of the chatter at the conference was that Alexa and Google Assistant are good products and doing well, but that earlier entrant Siri seems not to have evolved with the market, and that Apple was taken by surprise.  For the home automation market as a whole, as Parks analyst Tom Kerber put it, “voice control lowers adoption barriers.”

In another new trend, insurance companies were very well represented at the Connections conference. They included Roost, which provides a platform to insurers, and AmTrust, a provider of specialty risk and warranty solutions. Really my brain goes numb after that last phrase, but it is very clear that insurance benefits, both to consumers and insurers, are a significant chunk of the business model for many types of connected devices and services.

For example, some insurance companies now provide discounts for customers that have Nest Protect smoke alarms in their home. In some offerings, video can now be available during events that cause water or fire damage in the home. One speaker noted that 50% of users are willing to share data to get insurance discounts, although only half that number are willing to share camera data.

More broadly, insurance claims provide a huge data base of in-home events and device usage or failure. Sandra Maples of Verisk notes they curate a database of over 1 billion claims. As the Farmer’s commercial goes, “We know a thing or two, because we’ve seen a thing or two.”

Data and analytics, of course, is a broader trend that shows no sign of slowing. The firehose of device data and service usage is just the latest target for data science. In addition to insurance claims databases, connected devices themselves generate and transmit data either intermittently or continuously. Frequency and duration of usage of major appliances can inform repair cycles, consumer satisfaction, and replacement sales opportunities. Arrayent incorporates a data collection and monetization component in its service to appliance manufacturers.

And this works for service providers as well – frequency of use reduces churn. Security provider collects data across 2 million properties from 6,000 different dealers – “475 million data points per week from tens of millions of devices, and 1 billion central station events through over 800 central station partners.”

Finally, in terms of other big recent trends, some market segments have definitely filled in. There is now a substantial array of systems integration companies in the space, some of them the result of acquisition and roll-up activity over the last five years. Xively, Ayla Networks, and Arrayent have joined Amdocs, IBM, Cisco/Jasper and other usual suspects. Arrayent seems to have locked in a business as a “cloud platform for trusted brands.”  They provide compliance and integration services focused on appliances, lighting and access control (that’s door locks, for the uninitiated) for Whirlpool, Pentair, Chamberlain and others. One start up called MivaTek, which offers a mobile call platform that turns a phone into an IoT controller, calls its product “a System of Systems.” Wish I had thought of that.

Whatever Happened To…

Not a lot about connectivity at Connections, but it’s an ongoing challenge. I saw a low-profile group from Verizon scouting the conference, which makes a lot of sense. But there are still open questions about who has the upper hand as connectivity provider – Comcast touts Wi-Fi footprint; 5G continues to expand, etc. I did not hear much talk of LoRa and other low-power, purpose-built approaches that have some investment backing and are gaining experience. But I have noticed Zigbee and Z-wave advocates are still pushing their device communications protocols – I thought that debate was long past.

Only one panel on connected health care at Connections, possibly because of B2C focus, or maybe they were waiting for the health-specific Parks Conference. Surely fitness apps would fit in this category. But maybe this absence reflects a strategy yet to be explored, and it’s the story I try to tell under my “Smart Home and Away” brand: A whole-consumer approach in connected health care needs to integrate smart devices inside the home with a quantified human perspective, and thence to the consumer’s engagement with smart systems in cars and smart cities. There is also an underexplored relationship with the larger transportation and energy utility institutions whose top-down approach is beginning to be disrupted.

And I shouldn’t end this return home without mentioning that a number of my fellow cable travelers are now in the IoT business. I ran into Chris Williams, ex-Time Warner Cable exec, who is now a key mover at industry group the Internet of Things Consortium.  This is comforting as the two business are not so far apart, and growing closer in some surprising ways.  The Nest Cam app, designed for security purposes, now “makes it easy to create video clips and timelapses. Clips let you save things like your child’s first steps or the crazy things your pets do while everyone’s away.”

So, you can go home again, but it will look a little different, and will be more connected all the time.

About the Author

As president of Smart Home and Away LLC, Don Dulchinos provides consulting services for developers and providers of Internet of Things applications and services. Dulchinos, a former CableLabs executive, recently served as executive director of the EIDR (Entertainment Identifier Registry), a service created by Hollywood studios, cable companies and digital video providers, including Netflix and Google, to manage assignment and storage of IDs used to track movies and TV programming across all distribution outlets.