EDITORS CHOICE 02.11.15

A Bright Future for Integrators and Installers in the Connected Home

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The connected home is about to take off in a big way – and offers a huge opportunity for integrators and installers, not just equipment makers and communications providers. As more devices in our homes become connected to the Internet, they will need to be managed, maintained, and replaced in new ways.

The major growth opportunity for integrators and installers lies in remote and on-site technical support, and in the demand from consumers to ‘do it for me’ (DIFM) rather than DIY. Not everyone will be confident in installing their own connected home devices, despite increasing simplicity and ‘plug and play’, while some countries will mandate professional installation of certain technologies. DIFM is becoming increasingly common in the Western world, as people turn away from spending in DIY stores in favour of other pursuits.

In the connected home, this is about much more than a one-off purchase. Both installers and integrators will be able to build deeper relationships with their customers, transforming warranty and assistance contracts – and so increasing loyalty and therefore profitability. One key advantage of the technology is prognostic monitoring of devices. This will enable new business models, optimise costs, enhance the customer experience, and the development of new propositions that extend and strengthen the customer’s lifetime value.

For instance, monitoring a device’s status remotely can greatly reduce the cost of servicing customers by determining if the requirements for replacement are met for an insurance claim and exactly what needs to be to be repaired or replaced before a site visit. Offering technical support for both installation and ongoing use, either directly or through partnerships, can also enable DIFM providers to up-sell other services, such as installing security cameras.

Geek Squad style. One approach for installers and integrators is to offer a portfolio of on-site home technical services that is integrated with connected home technology, as an extension of the ‘Geek Squad’ service that is offered by Best Buy in the US and also in the UK and the Netherlands. From our analysis, one of the critical success factors in the connected home market will be building on home visits by helping customers during and after the installation process. This could also include selling incremental products and services, and ongoing support, perhaps tied to an extended warranty agreement. On-site support is important when one considers that connected home propositions can be perceived as too complex for many consumers, so access to a trusted remote and on-site engineer can bring considerable advantage.

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Warranty value. In the UK, take-up rates for extended warranties range from 18 to 67 per cent, depending on the category. According to Assurant Solutions, a provider of device protection and extended service contracts, up to 47 per cent of consumers buy an extended warranty, further reinforcing the value of prognostics. Extended warranties and emergency assistance are sold by a number of firms – by the manufacturer, utility, insurer, home service provider or retailer, depending on what is being covered and how and when it was purchased. Over the coming years, with replacement cycles expected to shorten in many product categories, warranty services are predicted to become increasingly valuable, especially as many European markets remain immature and penetration is still low. With that in mind, the extended warranty model represents another highly attractive route to drive the growth of the connected home. We believe that the opportunity to link remote diagnostics with an extended warranty represents a persuasive means to improve the customer experience, enhance loyalty, optimise costs, manage the replacement/recycling process, and move towards service-based subscriptions.

Digital plumbing and open platforms. There is a related opportunity for more entrepreneurial companies to provide customised installation services, sometimes referred to as ‘digital plumbing’, enabling home owners to further personalise their homes using connected technology – an extension to what members of the Custom Electronic Design and Installation Association (CEDIA) do today in high-end homes. Using developers to create bespoke features in a consumer friendly way offers further differentiation and value, but a new type of thinking may be required. The connected home industry needs to abandon proprietary and closed approaches or ‘gated communities’ and open up collaboration. By ‘open’, we mean offering APIs (application program interfaces) and software developer toolkits (SDKs) to allow easy interoperability with other products within the ecosystem.

We are working with open source framework Eclipse SmartHome which is maintained by the Eclipse Foundation. As a member of the foundation, we have integrated Eclipse SmartHome into our platform, so that developers can use Eclipse SmartHome bindings or develop their own bindings based on ESH technologies. We entered the smart home open platform business almost three years ago and have partnered with more than 30 companies, including Belkin, Philips and Miele. We firmly believe that an open platform architecture is the only sustainable approach to this market. We also think that there will only be a handful of scalable, winning platforms in the coming years and that the market will continue to experience significant consolidation.

In summary. Connected home devices have great potential for installers and integrators with emergency assistance and extended warranty expected to be increasingly important revenue streams. Providers can significantly improve the profit margin of maintenance services by optimising the effectiveness of engineers through prognostic monitoring and response, first time fix and more. These value added services will improve the customer experience, which in turn will also help an installer’s utility, retail and device manufacturer partners to maintain customer loyalty for their core commodity services.

Jon Carter leads UK Business Development for Deutsche Telekom’s white label and open connected home platform. His focus is on establishing partnerships with telcos, utilities, insurers and retailers, as well as third-party platform providers and OEMs to enable the realization of innovative new models and revenue generating services.
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