Projecting the technology path to the smart home

1. Summary

The past few years have seen a growing awareness of the smart home as a way to reshape how consumers interact with everything from their thermostats to their door locks to their lighting. Building on a do-it-yourself tradition of home automation services, we’ve seen some early point solution successes (Sonos, Nest, Dropcam) and headline-grabbing acquisition figures, but the technology path as we move to a more integrated connected home remains unclear.

Depending on what you’re counting, market projections vary, but all imply 15 percent to 20 percent growth rates into 2020, and billion-dollar segments. Gigaom Research’s conservative home automation forecast projects $11 billion in home service automation in 35 million homes by 2017, but we can also envision a scenario supporting five times that many homes. Projections that count entertainment services put the annual revenue between $50 billion and $60 billion by 2020.

Declining chipset pricing is driving the proliferation of the smart home – and more generally, the internet of things (IoT) – to the point where making any device connected, be it a light bulb or a blender, has decreasing marginal cost for manufacturers. The proliferation of these devices is real, with more than 20,000 new devices featured at CES 2014, a show that highlighted the smart home. Additionally, near ubiquitous broadband and smartphone penetration has created truly connected consumers, who show increasing interest in monitoring, measuring, and controlling their lives from their devices. Cloud infrastructure and analytics have also matured so that managing larger volumes of data in the cloud and producing positive outcomes for business and consumer in real-time is easily accomplished.

This report creates a five-year map of smart-home development and addresses technology principles that could guide smart-home evolution so that the most robust and consumer-serving market can materialize.

Key findings from this report include:

• The early hub market, which aimed to bring device fragmentation under one controlling application, has been a critical evolutionary step in moving to the platform from the point solution. The presence of the hub has also managed resilience where internet connectivity can’t always be guaranteed. Combining the ability to manage fragmentation and resilience aims to remove the complexities from the user to ensure the continuity of customer experience. As the market develops, successful platforms will have the flexibility to deploy the important functions the hub performs in a number of ways through distributed logic, where software can operate in the hub, on another gateway device, and in the cloud – and therefore continue to provide the flexibility and resilience consumers expect.
• Alongside this, abstraction of hardware descriptions and communications protocols to the software layer will further progress the potential for a true IoT physical graph, where open systems allow devices to utilize the data and hardware resources derived from other devices to connect humans in a beneficial and convenient way with their home and the “things” in their lives.
• Four major technology principles will ensure the individual success of businesses in the smart home (as well as the market as a whole): interoperability, communications simplicity, intelligent analytics, and open ecosystems.
• The potential value to businesses of making home devices smart are threefold:
  • The value data will play in product development and iteration
  • The importance of data for creating efficiency, business model innovation, and new services for the customer
  • Connectivity will be vital for any business wishing to participate in the larger inclusive smart home market
• Examining the potential value and guiding principles for the consumer in the smart home, we see several primary value propositions:
  • The ability to connect with the home for remote monitoring, convenience, and efficiency beyond pure return on investment (ROI)
  • Extensibility
  • Real home intelligence through data

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