16 Oct Is “Home Automation As A Service” The Future?

Home Automation

As I prepare to head to CEDIA this week to visit with companies such as Comcast, Control4 Corporation, Core Brands Nortek, Honeywell International, Insteon, and Napco Security Technologies, I’ll be excited to see what’s new in the Home Automation space. Tradeshows are a fountain of information, and as I try to determine who (and what) consumers are going to buy, I keep coming back to the same question: Will Home Automation as a Service (HAaaS) dominate the market? My basic instincts tell me that though the large players are not consumers’ favorite companies to deal with, the factors driving customer “purchases” have already given incumbent providers of services to the home a leg up—but maybe not for the reasons most people think.

The world has changed. If you are a bit older (like me), you’ve spent the last few years adjusting to this “cloud thing”. For those of us who have grown up in the computer generation, we’re very protective of our data and still often married to the combination of local applications (like Microsoft Office) and keeping our data in folders on our personal machines.

In today’s world, this dynamic has gotten very difficult to maintain. Now that I have a laptop, cellphone, and tablet, I often need to use them interchangeably to access a document (and photos) while I’m not at home or close to my laptop. I fessed up to this fact years ago, and I made the switch to cloud-based storage and mapped “Documents” to a Dropbox account, so I can access all my data anywhere. I often end up using online tools to view and edit instead of local applications. I haven’t yet taken the step to subscribe to the Microsoft Office 365 suite online, but it’s not out of fear of the usage model.

 The point is most of us have been forced to move many things we used to do locally to the cloud, using a combination of cloud data storage and Software as a Service (SaaS) applications such as Google Apps, SalesForce.com, Cisco Systems WebEx, and Microsoft Office 365. SaaS offers a number of compelling advantages over application ownership including easier administration, automatic updates, version control (everyone has the same one), simpler collaboration, global accessibility, and platform independence—which is why so many people are now choosing SaaS applications.

These same changes have also had a serious effect on how people pay for what they need. This is how it used to work. I bought it, I owned it—until it was time to pay for an upgrade. It was something my father taught me: own it, don’t take on debt, and don’t make payments unless you have to.

How many of us still do that? Every technology item we use now seems to have a very low up-front cost (often subsidized by the seller) and monthly payments. Cell phone providers (primarily in the US) have embraced this model for years, and it’s getting harder and harder and often more expensive to actually buy a phone. Check out the Apple upgrade plans for their new phones, as well as how AT&T (and everyone else) bundles phones and services. SaaS embraces this same model, often with no up-front costs, just monthly fees from day one.

The question is, Will this same dynamic extend to the Home Automation (HA) market? My contention is that it will. The HA market was born out of the home security market, a small niche that has mostly been targeted at the “upper 10%”. The market has been dominated by home installers selling you a system and monitoring companies charging you monthly. I guess you could call that Security as a Service (another SaaS?).

Fast forward to today’s market. Looking for DIYers, early adopters, and lower price points, the latest forays into the Home Automation market entered with more standalone products / systems such as Smarthings from Samsung Electronics , Iris from Lowe’s, and Wink. These products are targeted directly at consumers using today’s main advertising channels, including TV and internet. Many of these were targeted at shoppers who liked the idea of a one-time purchase and didn’t want to deal with paying monthly fees over and over again—and I think that’s an increasingly older crowd.

But just like SaaS, HAaaS has some strong advantages. Someone installs the system for you, maintains it, upgrades it, and adds the latest devices you may want. The systems are primarily controlled from cell phones and tablets, and you can personally arm and monitor them from wherever you are—or still have a monitoring service.

In addition, HAaaS seems to mimic how people buy technology and media today. Today’s generations (the Millennials and later) have no problem with the monthly payment model. It’s what they are used to. Their primary providers of their lifestyle products (cell phone, internet, and HDTV companies) are all selling based on monthly payments. We all grit our teeth (i.e., if you look at the list of most hated customer service businesses, it’s full of these companies), and we forge ahead. And the providers know it. They also know that once they own the service relationship, the payment method, and actually roll a truck to your house, then it’s a “no-brainer” to provide you just one more service—and for years at a time.

Enter Home Automation as a Service. Comcast, Time Warner , and AT&T, among others, have all already caught the bug and are selling HAaaS solutions. Place one call, they roll a truck and install the system—all integrated with your existing service. Why not? For these providers, what’s another install when you just added $50 to the monthly bill for the next two years…and beyond? For the future—though many a nose may be held when it comes to doing business with these companies—the ease of purchase and usage will push them to the forefront of Home Automation delivery.

Disclosure: My firm, Moor Insights & Strategy, like all research and analyst firms, provides or has provided research, analysis, advising, and/or consulting to many high-tech companies in the industry, including Cisco Systems, Microsoft, and Samsung, mentioned in this article. I do not hold any equity positions with any companies cited in this column.