Following our attendance at the Connected World Summit 2019, the message is clear: IoT will take over the world. Industry leaders including Microsoft, Cisco and Honeywell all predicted IoT installation numbers in the tens of billions by 2020, with many of these being connected devices in residential homes. But how will these devices be connected? And most importantly, how is this going to affect the market?
Through our research here at Delta-EE we have identified three key trends of connectivity in the residential market that we think you need to track:
- 1) A centralised connectivity monopoly controlled by a few tech giants. Companies such as Amazon, Google or Apple could dictate connectivity protocols and associated hardware in the home.
- 2) Multiple connected systems, made on white-labelled hardware, from several home services providers. A playing field controlled by different OEM manufacturers, either with their own proprietary protocols or a unified standard.
- 3) No central system of connectivity –all IoT and smart devices can directly interlink to each other and the cloud, through an internet router or gateway without the need for a hub.
Given the size and diversity of needs of the IoT market, these trends are not necessarily mutually exclusive, but will see a great deal of overlap and tension between each other, as IoT becomes more common-place. A more detailed description is provided below:
A centralised tech giant monopoly: As the tech giants become more entrenched, end-users could be facing a choice between isolated device ecosystems, dictated by the likes of Google or Amazon. This could affect everything from their choice of EV, to heating or security, and lock them in to a given brand. Going forward, manufacturers of connected devices will have to carefully consider how they align with the ecosystems of tech giants. Amazon and Google have been hard at work consolidating their connected home platforms. Amazon, with its recent inclusion of Zigbee radios in its newer echo hubs and its investments in Tado, Ecobee, Blink and Ring; Google, with its merging of the Google Home products-line into its Nest brand and the support of the Thread protocol. Both companies are now aiming to become the de facto system in the home, in order to unlock the vast markets of associated home services.
Multiple OEM systems: As the connected home market becomes more saturated with identically functioning hardware, it will be more important than ever for companies to differentiate their services. In the future, it could be that the ready availability of white-label technology will make product features less relevant – leaving the focus on providing the right services. The Connected World Summit showed great interest from service providers (namely the telcos, entertainment system manufacturers, utilities and security providers) to partake in the market. Since the majority do not have the internal capabilities to produce connected hardware, they instead seek to procure them. DSR & Develco are examples of two producers, present at the event, producing white-label hubs and IoT devices. By supporting all major connectivity protocols, these devices are targeted at large service companies who wish to sell an IoT related service. We expect to see many similar partnerships emerge in the future.
IoT with no central hub system: Developments in communication protocols, such as Zigbee, Z-wave Thread and DotDot could soon eliminate the need for hubs all together. A key trend for these technologies is their development towards being IP compatible, and able to independently communicate with internet gateways. If the industry moves in this direction, one could easily paint a picture of a future where houses have no central hub. Then, each IoT device would be set up using a smart-phone and could proceed to communicate independently with the local-network or a gateway. While this development could potentially solve the issue of eco-system entrenchment, it raises a new issue of protocol compatibility – which will be an important topic in the future.
It is unlikely that the entire IoT market will go down only one of these avenues. In the future, we should be prepared to see many different business models aligning themselves with these three models of connectivity and competition is already intensifying. Through the white-label industry, anyone can play in the connected home market – from utility to telco. Adding to this, the tech giants are rapidly moving to consolidate their home platforms. We should expect to see many new and diverse offerings in the future but differentiating the service as well as the product is going to be critical for success.
At Delta-EE we will be following the developments in this space. Connectivity and interoperability are only a very small subset of the questions around the future of Home Energy Management. Our Connected Home Service team is currently developing a new report exploring the value-streams of HEM, as well as the state of the market. If you are further interested in the HEM topic we have covered it on our podcast, featuring one of our CHS experts . If you have any questions or want to talk about the work that we do, you can reach our - David Trevithick, principal analyst at Delta-EE.