Multiple players, from original equipment manufacturers (OEMs) to service providers, are now competing in the smart home, each attempting to grow and shape the market.
Manufacturers are adding connectivity and integrating with other products and systems using application programming interfaces (APIs) in the cloud. Systems providers are using the centralized control hubs and the growing ecosystem of products that support common protocols such as Z-Wave and ZigBee Alliance to offer a group of interoperable products.
These technology advancements are impacting both home networks and the broader smart home value chain, and understanding these trends is essential for all players. Each component of the smart home ecosystem is changing, from the technology in individual products to the gateway sitting atop the home network and connected to the cloud.
Technology changes impacting smart products
Manufacturers are integrating sensors into smart products in growing numbers, creating a data stream that is the key to intelligence. The connection to the cloud enables that data stream to be stored and analyzed, resulting in the potential for new product and service offerings that add substantial value to the end product.
Product categories are also changing and merging. The resulting combined sensor products are much more powerful than individual sensor products, and mash-ups are essential to differentiation. As the competitive landscape for connectivity-related features evolves, the market will judge success based on the value created from more advanced features. Smart home solution providers must add value by integrating external data sources. For example, by combining weather data with a door sensor, a household can be notified if their garage door is open and a thunderstorm is approaching.
Technology changes impacting smart home networks
The Internet of Things will require scale, but today, the smart home platform that runs on a hub or gateway is application-specific, meaning that it must be upgraded when new devices are added to the system.
The Smart Grid Interoperability Panel (SGIP) addressed this deficiency by creating a group to transition to IP-based standards. Thread, advocated by Google (Nasdaq: GOOG), is another IP-based solution. Internet protocol is the key to non-application-specific gateways and peer-to-peer networking. Presenting standardized upper layers on top of an IPv6 transport layer allows gateways to be non-application-specific and forward-interoperable.
Protocol vendors are resistant to implementing IP because of the higher overhead associated with an IP frame, and because it removes a competitive barrier. These protocol vendors -- particularly Z-Wave, ZigBee, and DECT ULE -- have strong allies in the service providers that value the large ecosystem of interoperable products these alliances have built over the years. However, the ultimate benefits of innovations that expand interoperability will likely outweigh the cost, and the market will start to see more IP implementation in the smart home, especially as OEMs move in this direction.
Technology changes impacting gateways
The Open Services Gateway Initiative (OSGi) has created standards for middleware embedded in devices that allows applications to run on top of the operating system without affecting the core functionality of the device. The middleware is ideally suited for gateway products, where the core functionality -- VoIP, broadband and video delivery -- is protected and isolated from other hosted applications. Creating this isolation and protection is important to operators and gateway vendors that face financial penalties for extended downtime.
Another initiative, the Home Gateway Initiative (HGI) , is expanding into the home network and other home devices to provide end-to-end solutions and new applications. The smart home is currently one of HGI's key focus areas, and one of the key components is an abstraction layer for the many different protocols in the home. The abstraction layer will work with leading protocols such as ZigBee and Z-Wave to give application developers a common way to address and interact with devices, independent of the type of local connection. This way, a ZigBee doorbell and a Z-Wave doorbell look identical to an app developer.
The value of interoperability
While the business objectives of service providers, retailers and manufacturers are not aligned, the ultimate value for the consumer is in interoperability. Parks Associates research shows that consumers want and value smart products as part of a larger smart home system. Already more than 40% of US broadband households are willing to purchase a smart home package that offers some combination of home management, safety or security features. Smart home service providers are offering solutions to meet this consumer demand. Manufacturers, on the other hand, offer point solutions with limited interoperability.
It is in the best interests of OEMs to use APIs and peer-to-peer communications schemes to provide interoperability and push intelligence away from a central controller to the edge, where products can continue to innovate.
Networking solutions that provide interoperability at the scale of the Internet of Things will be the long-term winners in the home controls market.
— Tom Kerber, Director, Research, Home Controls & Energy, Parks Associates