Small-timers with big ideas can always make their way into the industry In recent years, home automation technology has given birth to the “Smart Home” in which internet-enabled and controlled devices are bringing a new level of comfort to the standard house. From locking doors to setting the temperature to opening the blinds for a view of the sunset, technology is transforming the home into something reminiscent of the now-quaint 1960s sci-fi cartoon, The Jetsons. Of course, we’re still waiting for our jet packs and flying cars, but the house itself is doing far more of the work than anyone thought possible just a few years ago. Future of the home automation sector? “We have seen a lot of consolidation over the last five to seven years, and a lot of it was because of the economy,” says Dave Pedigo, Senior Director of Learning & Emerging Technologies at the Custom Electronic Design and Installation Association. “As much as you see the potential for consolidation, I also see a lot of potential for startup companies that have the ability to make products and are innovative, serve a purpose and can change the industry.” In an era of 3D printing, rapid prototyping and small companies powered by social media and crowd funding, small-timers with big ideas can always make their way into the industry, he adds. “It’s put us into what I think is the next industrial revolution,” says Pedigo. “While a lot of this is going to very large companies, at the same time I wouldn’t discount small or startup companies that offer goods that are unique and useful.” 4K: Opportunities and challenges "It’s put us into what I think is the next industrial revolution. While a lot of this is going to very large companies, at the same time I wouldn’t discount small or startup companies that offer goods that are unique and useful", says Dave Pedigo of CEDIA “Right now it seems like 4K video distribution will be the next big trend,” says Brad Hintze, Director of Product Marketing for Control4. “4K is the next step in high-resolution video and in our opinion it will not be like 3D. 4K will have staying power. It is for this reason that we came to market with our own suite of 4K video distribution equipment for the Control4 Smart Home.” He believes content is the main driver, both in adoption and hardware design. Network providers like Comcast and Dish Network, all have their own roll-out plans for 4K channels and content, which will eventually bleed into consumer adoption. “But from a hardware and automation perspective, it presents challenges because the industry standards for image display and copy protection are evolving rapidly,” explains Hintze. “Control4 recently released our fully HDCP 2.2 compliant 4K A/V Matrix switch products, which eliminates the black screen produced by playing copy-protected content from studios on non-compliant equipment. Being able to adapt to this wave is what will keep us ahead of the curve!” Intelligent sensors for smart home Industry experts predict that sensors in the home will reach a level of sophistication never considered in early versions of Smart Home. These devices will know when the house is empty and be able to shut off heating and cooling systems. Smart phone with geolocation will then tell it when the owner is on her way back so it can start adjusting the temperature to a comfortable level. “There will be an app on a phone that shows that you’re going to be home in a few minutes,” says Rawlson O’Neil King, Communications Director of the Continental Automated Buildings Association. “Then the house unlocks when you are at the door. The garage opens after detecting you’re close to the house. You have lights that turn on and off at certain times by detecting your presence.” Industry experts predict that sensors in the home will reach a level of sophistication never considered in early versions of Smart Home. These sensors will also end once and for all the question of “did I lock the door?” or “did I turn off the stove?” And, it won’t just be lights that turn on and off. Sensors in washing machines will know that clothes have been put inside and will start the cycle at a time when costs are at a lower level, he adds. These sensors will also end once and for all the question of “did I lock the door?” or “did I turn off the stove?” Home automation – a double edged sword With the move towards home automation, the coming years will see a greater emphasis on security as more and more devices become accessible – and hackable – on the web. As a security expert at the Federal Aviation Administration prior to joining Vivint as Chief Security Officer, Joe Albaugh saw attacks against critical infrastructure and industry. “The underlying theme was they are computer connected, the data is online and accessible and many of the attacks and threats are exactly the same,” he notes.
Once home automation – controlling everything from HVAC to door locks to lights to security cameras – was solely the providence of the high-end home. Custom systems were pricey – some ranging upwards of $100,000 or more. That was before widespread access to broadband internet and before everyone started carrying a powerful internet-connected mini-computer – called a smart phone – in their pocket. Home Automation goes mainstream These days the Smart Home has gone mainstream. Home automation apps to control lights, locks and cameras can be purchased at The Home Depot or ordered from Amazon.com. Customers of Comcast’s Xfinity Home solution can call a technician to install its “smart” devices, but the service offerings are tiered: On the low end you do it yourself while you have to pay more for a high-end full-service offering that includes home security monitoring. DIY home security: a good fit? “Over the last few years you’ve seen a move toward I would say DIY and entry-level automation,” says Dave Pedigo, Senior Director of Learning & Emerging Technologies at the Custom Electronic Design and Installation Association. “There are DIY products, and entry-level solutions you can get from the big providers and they’re very affordable. So the biggest difference is in reliability.” "There are DIY products, and entry-level solutions you can get from the big providers and they’re very affordable. So the biggest difference is in reliability", says CEDIA’s Dave Pedigo For the handy “do-it-yourselfer,” home automation can be cheap and easy, if not always good – or safe for that matter. Instead of paying for monthly monitoring, homeowners can install a web cam, access from a smartphone or tablet and essentially do their own security monitoring. The downside of this approach is readily apparent. Without full-time monitoring, homeowners can easily miss the break-in or the aged parent who falls and can’t get up. Until they log on and take a look, there’s no central station to send medical aid or call the police. Connecting door locks and other devices to the Internet can also open a door to hackers, if the infrastructure isn’t properly protected. Challenges with mainstream home automation “Yes, home automation is becoming more mainstream, which is raising general awareness for the category as a whole,” says Sean Goldstein, vice president of marketing at Crestron. “The elements that are mass market are cookie cutter.” In the high-end space, when people want different interfaces, or to control systems in a more custom fashion, a more advanced home automation system is needed. “Off-the-shelf home automation systems won’t be able to accommodate the needs of every customer and their lifestyle,” he says. To separate themselves from the DIY crowd, these security companies are emphasising the whole home solution “Where I think Vivint differentiates itself is in offering a complete solution to our customers in an affordable way,” says Joe Albaugh, Vivint’s Chief Security Officer. “The key is offering everything from the home security platform to energy management to lighting to cameras and even a doorbell camera. It’s a package that we’ve offered that’s built to work together out of the box.”
What does it take to be a success in the rapidly expanding home automation sector? For large and small security companies, making the jump from providing traditional security services to enabling the new Smart Home means dealing with competition. Security firms v/s cable and telco giants The market is filled with providers of all kind who want a piece of the action. In addition to security companies, cable and telco giants have all rolled out a home automation platform – usually on top of an existing security service. By making it easy for customers to add on a service to the ubiquitous “triple play” of bundled services, these companies are winning converts. “We’re getting a lot of switchers from traditional security providers,” said Dan Herscovici, senior vice president and general manager of Comcast’s Xfinity Home business. Its home automation product has reportedly signed up more than 500,000 subscribers. Comcast expanded its home automation lineup by adding support for devices from a wide variety of connected home companies. The company’s platform will incorporate August smart locks, the Nest thermostat, Lutron lights, and the Rachio sprinkler, among others. Products from nine companies in all will now work with its home automation platform. Comcast installs the “smart” devices and provides a tablet to control them. Customers can buy various levels of service and products from the “do it mostly yourself” to full-service product that includes home security. “I think there’s are lots of money to be made in systems integration whether it’s the entry level or DIY all the way up to just above custom,” says Dave Pedigo of CEDIA “I think there’s are lots of money to be made in systems integration whether it’s the entry level or DIY all the way up to just above custom,” says Dave Pedigo, Senior Director of Learning & Emerging Technologies at the Custom Electronic Design and Installation Association (CEDIA). Security firms must also go head to head with electronics installers represented by CEDIA. These businesses, which design and install home theater and other electronics systems, have a leg up when it comes to the higher-end custom solutions. Target existing customers Most companies agree that the secret to winning customers is with the right products delivered in a customer-friendly manner Successful companies who want into home automation should begin with the customers they know. “You have the existing customer base in which you can promote these products. On top of that you can see a lot of these companies are really driven right now by smart home offerings,” says Rawlson O’Neil King, Communications Director of the Continental Automated Buildings Association. “Whether it’s the platform or the physical hardware, that’s an entry point.” Strategy execution The question for security companies – like other competitors in this space – is whether they can convert their market share in other areas into revenue streams within the connected home space. Just having a large customer base for a particular product doesn’t mean those buyers will transition to something else. Just a few years ago, Microsoft announced that its Xbox game console would become the hub of a connected home system. That never happened. “It’s really question of how they determine or decide to execute the strategy,” says King. Most companies agree that the secret to winning customers is with the right products delivered in a customer-friendly manner. “We provide the core package and then we have a lot of customers who like to add on services,” says Joe Albaugh, Vivint’s Chief Security Officer. “We even have a wireless internet service and a file sharing solution. As we see the needs of our customers expanding, we’re trying to meet those needs and provide them in a seamless way rather than having the customer figure out how to put all of this stuff together themselves. We’re building a cohesive package for them.”
Just how big is the home automation industry? One way to tell is by looking at the sheer number of companies – large and small—that have rushed to enter this fast-growing space. They include some of the world’s largest corporations – Apple and Google – along with the nation’s biggest cable and telecom companies – Comcast and AT&T. It includes big names in security like Honeywell and ADT. Then there are less known, but fast growing, contenders such as Control4, Vivint, and Interlogix. Expanding market Also trying to muscle their way into this space are the big cable and telecom companies who are attempting to build upon previous gains made through their alarm monitoring business. Comcast through its Xfinity Home business and AT&T’s Digital Life provide their already large customer base with the option of adding home automation services. “We saw a lot of opportunity for innovation and to bring more value to our customers,” says Dan Herscovici, senior vice president and general manager of Xfinity Home for Comcast. “A lot of the fundamental components of what it takes to deliver and launch a home security system we already had as part of our larger operations. It was a matter of bringing together the appropriate capabilities, delivering an innovative cloud-based security platform, and then delivering that holistic solution to our customer base.” Comcast expanded the appeal of its service by integrating devices from a host of partner companies and allowing customers to control them using a single remote. “Those guys are getting into the business and naturally the smart home is a way to further integrate their systems,” says Alper Cetingok, Managing Director, Head of Security, Defense & Government Services with Raymond James, a financial company. “They’re trying to do everything they can to sell as much as they can to one consumer. That drives unit economics for them significantly.” New players Joining these players are the technology companies including both startups offering new technology, as well as behemoths, like Google. While best known as the world’s premier search engine, the company spent $4 billion in 2014 acquiring smart home technology businesses including Nest (smart thermostats) DropCam (Wi-Fi camera) and Revolv (smart home platform). Electronics maker Samsung also shelled out $200 million to acquire connected home startup SmartThings. Comcast through its Xfinity Home business and AT&T’s Digital Life are also adding home automation services Developers were also thrilled to hear that Apple is diving further into the market with HomeKit, which will allow the iPhone and iPad to serve as a remote control for the entire house. Along with these companies are a growing number of pure-play automation businesses that are now expanding their offerings. Names such as Crestron, Savant Systems, Control4 and other long-time automation suppliers are also forces in the market. "Everything must be on a common platform including lighting, HVAC, security, AV, shades and more," says Sean Goldstein, vice president of Marketing at Creston. "We enable custom home automation systems to be designed, while empowering homeowners to take control of their home and be able to do fun things such as look at the trends report for their home – their energy consumption, device usage, device failure and more." Inflow of funds Private equity money has also started flowing in the industry as well. Blackstone Group acquired Vivint, a provider of security, home automation and technology services, in a deal worth more than $2 billion. Another good indication of how big the industry could become is the entrance of players far removed from the technology itself. There is even a one very large paper distribution company that has begun its own home automation solution. “Yes, there are lots of companies that are moving into it,” says Dave Pedigo, Senior Director of Learning & Emerging Technologies at the Custom Electronic Design and Installation Association. “There are some companies who are losing focus at what they do well to hop onto this home automation/ internet of things bandwagon. There are tons of different options available. The difference is in the reliability, the performance and the security. It’s not the same on all of these devices.”