Keys to Entering the Smart Home Economy
The connected home is about to take off in a big way and offers a huge opportunity for integrators and installers, not just manufacturers, telcos, retailers and insurers. As more devices in our homes become connected to the Internet, they will need to be installed, configured, managed, maintained, updated and replaced.
Market projections vary, but according to most analysts, the market will be worth billions of euros. Strategy Analytics claims that the home market in the EU could be worth over €15.46 billion annually by 2019, with 50 million Western European homes having installed Internet of Things (IoT) technology.
Smart thermostats, along with connected motion sensors and smart cameras are two domains that are often described as the 'lowest hanging fruits’ of this fast evolving market. Consumers appreciate the benefit of improved comfort, reduced energy costs, enhanced peace of mind, and the ability to stay connected with the people and place that is most important to them.
Analysts forecast that such connected devices will be followed by new, enhanced smart controls and sensors across a broad range of use cases, from heating and cooling to energy use, security, safety, comfort and convenience. Further, all of these devices will connect with each other, enabling homeowners to automate various mundane tasks, and can in turn connect to service providers, such as utilities or insurers, to offer new connected services.
Gartner claims that it expects to see a wide range of domestic equipment becoming connected and ‘smart’—in terms of gaining some level of sensing and intelligence combined with the ability to communicate—with the result that “… a typical family home, in a mature market, could contain several hundred smart objects by 2022.” The range of devices that we expect to become connected is numerous, from motion sensors and lights, to music systems, kitchen appliances, vacuum cleaners, radiators, blinds, door and window locks, door bells, and much more.
All of this presents a major growth opportunity for integrators and installers due to the fact that the mass consumer market do not have the time or inclination to install such systems, or to configure and set the rules that will make the connected home a reality and simplify their lives. In fact, we believe that the consumer trend for ‘do it for me’ (DIFM), overtaking the latter 20th-century trend for DIY, will be realised most clearly in the connected home, as consumers increasingly look for expert help to enable them to bring about their own personalised and unique connected home. Not everyone will be confident in installing connected home devices, despite increasing simplicity and ‘plug-and-play’ functionality, whilst some countries will mandate professional installation of certain devices, such as smart thermostats. A recent report by PlumChoice, ‘Consumers struggle to use common connected things’, reaffirms this. Nearly two-thirds of respondents to the survey said that they were unable to complete the set-up with their current Internet-connected devices, and 54 percent needed to ask for help. In late 2014, research by Parks Associates found that 16 percent of US broadband households owned a smart home device and one-third have experienced at least one technical problem with their devices. Among these households, 56 percent were willing to pay up to €9.09 per month for a technical support service, and 43 percent were willing to pay up to €33.19 per month.
"The range of devices that we expect to become connected is numerous, from kitchen appliances, motion sensors, and lights to music systems, vacuum cleaners, radiators, and much more."
All of the evidence suggests that for both installers and integrators these developments will bring a major growth opportunity. We also believe it will create the foundation to build deeper relationships with consumers by recommending enhancements that they can make as new connected devices come to market, thereby building a regular revenue stream and enhancing profitability.
One key advantage of such connected technology will be the ability to remotely monitor and control devices. As such, an installer, with the customer’s permission, will be able to remotely monitor a device’s status in the event of an issue, reducing the cost of servicing customers, determining what is wrong, and in many cases, potentially fixing problems without actually making a site visit.
According to Frost & Sullivan remote technical support for IoT devices will grow to reach €2.4 billion by 2020, a 12.1 percent CAGR. A recent report by Accenture has found that the majority of consumers would welcome the opportunity to have one company providing technical support for most or all of their connected home devices—whether they described themselves as being a heavy, medium or low user of such devices.
One approach for installers and integrators is to offer a portfolio of on-site home technical services that are integrated with connected home technology, as an extension of their service offering.
Take the current home security market, where home owners face a complex choice: self-install self-monitored home security solutions, with multiple drawbacks in terms of the ability to respond in the event of an incident; mid-value consumer electronics-branded camera solutions, again with limited ability to take action; or costly professional monitoring solutions. This inherent complexity presents opportunities for connected home installers to enhance their offering, potentially leading to partnerships with security companies and insurers.
Indeed, insurers are suddenly recognising what the smart home could mean to them – Accenture has looked at the market and reports that nearly half of insurers believe that connected devices will be a driver of revenue growth in the next three years. This is a dramatic change from 2014, when a much larger number said they had no interest or plans to use connected insurance tools as part of their strategy.
One of the opportunities for installers is to work with insurers to strengthen their connected home propositions, which for many consumers will be perceived as too complex, and where access to a trusted technician will bring multiple benefits.
One approach for installers and integrators is to offer a portfolio of on-site home technical services that are integrated with connected home technology.
Digital Plumbing and Open Platforms
There is a related opportunity for more entrepreneurial organisations 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. Such a service could be offered as part of a home makeover, or when a family moves to a new home.
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 launched our connected home platform last year 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.
All of the Tools
Despite immense industry effort to enable intuitive set-up and use of connected devices, it is clear that given the level of technical complexity involved, there will always be some segments requiring a level of third-party support, whether it be remote or face-to-face. Technical support represents a means for installers and integrators to deepen and strengthen their relationship with customers by proactively resolving customers’ issues and extending the range of services that they provide. Companies that currently operate in the high-end custom electronic design and installation industry can leverage the capabilities that the connected home will enable to provide enhanced features to a broader range of consumers, and players that currently operate in PC support or even HVAC installation and maintenance could potentially consider broadening their range of capabilities.
Connected home devices have great potential for installers and integrators with security and customised installation expected to be increasingly important routes to market. Providers can significantly improve the revenues and margins by offering in-life support services, leveraging remote capabilities meaning that on-site support is not always required.
Jon Carter is Head of Business Development – Connected Home at Deutsche Telekom based in London, UK.