When did IoT turn into a Tooth Fairy?

|June 17, 2015 0
Many billion devices talking to each other in just three to five years from now- that sure did sound like a thrilling page-turner but then why has consumer demand for connected home products petered out in the first half of 2015? Why is the rapid plunge expected to go on?Bed time?

Pratima H

CA, USA: A few days back when at the I/O conference Google unwrapped Brillo, an Android-derived operating system for IoT devices, it was not exactly a news quite out of the blue. After all, we have become inured to IoT making a splash in headlines every now and then. Sometimes it is the communication layer Weave (Google again) for enabling common grammar between connected devices, at other times it is the noise made by Apple HomeKit for enabling configuration and discovery (read – the glue among networked devices), and then, there are times when IoT becomes the blue-eyed boy for FTC regulators (FTC  recently laid down a report urging companies among other things to build security into devices at the outset rather than as an afterthought in the design process) and malware snoopers alike (experts stay more connected-ness and less-standards would make IoT points ripe for hackers). One day we hear that Intel balked when it came to joining AllSeen and another day we see Broadcom dropping out of Open Interconnect Consortium.

Between these dance-offs, debates over the ‘how’ keep swinging too -among Bluetooth, Wi-fi and cellular connectivity and as that happens Forrester argues that IoT is nothing but hype if businesses fail to build a foundation that provides essential analytics capabilities and at the same time, other experts worry about lack of enough developer footprint or standards-simplification (400 standards! Gee) to push where IoT is supposed to be.

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Accenture has already started garnishing terms like ‘an era of living services’, not to forget what Gartner projected – that some 4.9 billion connected things will be in use in 2015, (a spike of 30 per cent from 2014) hitting 25 billion by 2020. When it added that by 2020, the connected kitchen will contribute at least 15 per cent savings in the food and beverage industry, or that we might have 26 billion installed units by 2020; it only adds more color to the fantasy that we have started weaving in our minds and future-plans with the dream-scape of intelligent refrigerators, clever TVs, wise-owl thermostats and Jeeves-sharp light bulbs swathing us in a new blanket of comfort in a few years from now.

Fantasies look good with fairies but they are incomplete without dragons. Challenges, spoilers, pot-holes always give a reality-check to fiction and sometimes even conspire to convert it to the ‘happily-ever-after’ paragraph in weird ways.

So when we look at some fresh-from-the-oven findings that Argus Insights released in its Connected Home report, it’s hard to not dig deeper and further.

Today, Argus Insights shared footprints it detected on the direction that the home automation segment of the IoT space has taken. Surprises surface as we read that though the connected home market has seen growth throughout 2014, the scene is shrinking and product segments have started to bear long reported flaws in connectivity.

The chapter it discovers may not exactly rhyme with the excitement brewing for IoT numbers, but Argus peels some hype off when it sniffs that early adopters have gotten what they need, and now products are not compelling typical consumers to create a connected home installation encumbered with lack of innovation.

In a quick Q&A, John Feland, CEO of Argus Insights (a big data driven Market Coach in Silicon Valley) takes the cloak off this new turn of events and tells us why stuff like ecosystem, installation factors, open-ness, simplicity, market nuances, and compatibility matters here.

Ok, first of all – what is this report about, and which of its parts attract the pencil?

This report by Argus Insights is very fascinating and shows a lot of interesting angles about Home Automation devices. We see that despite investments in Nest and Dropcam by Google, and SmartThings by Samsung, consumer demand appears to lag. It’s clear that Home Automation was gaining attention and experiencing robust growth in 2014, but now the report interjects, the sector is quickly losing steam. We look at this data and notice that as of May 2015 consumer demand for connected home devices such as thermostats, light bulbs, locks, sensors and cameras experienced its first drop below the level of a year ago. Now, that’s a sign that consumer interest is stagnating. Look closely and you can see that Argus Insights proprietary data on the Connected Home unravels that as of last month, consumer interest in the devices actually fell to a level 15-per cent below where it was 12 months ago. All smart home devices could have suffered from waning interest, and while security cameras consistently generate the most interest, they are also suffering a significant drop in demand compared to 2014.

That trickles for 2015 then? Despite so much interest and appetite from big players and promising projections?

Yes, based on our review of consumer interest, the state of home automation in 2015 is not looking good for anyone who sells or makes these devices. You have to understand here that even if early adopters have bought what they want, other consumers are expressing frustration that these products are complicated and difficult to set up and use. We found that echoing when we looked at an analysis of social conversations regarding the IoT and observed the same waning interest and investment in the Connected Home market.

Where is the pea in this bed?

Looks like those consumers are not seeing the value yet from these home automation devices. I would reckon that there is a lot of confusion about standards with Google introducing Brillo and Apple’s new HomeKit. Add in WiFi, Bluetooth, Zigbee and Z-Wave. The market faces issues when we see there is still a lot for any consumer to grapple with during installation. Things will have to turn easier and reach a level where consumers don’t have to cobble together a total solution. Till then, get used to this stagnation continuing for the rest or 2015. Unless of course, a new offering addresses these issues and injects some vigor in the market.

Let’s go deeper. Is there a different pattern for consumer segment here vis a vis enterprise market?

The reason for consumer slow-down even as enterprise heats up, is because consumer products are difficult to install, benefits are elusive and not as transformative as people thought it would be.

 

Would consumer adoption appetite differ from that of enterprise segment? Would standards, privacy, compatibility, interoperability play the same impact in both markets for the IoT?

Corporate standards for privacy and inter-operability are not the same as consumer. A consumer is more interested in open ecosystems. A Corporate is concerned with security. A consumer is concerned about privacy. Consumer perceptions of Nest dropped once Google bought them due to concerns about privacy.

With this plateauing spotted, is it a hockey-stick curve or some other tech-adoption pattern that we might sketch here?

Effectively what we are seeing is that the IoT is stuck in the chasm. Developers will need to stop developing for early adopters and address the mass market before we will see the hockey stick take off.

We keep hearing big numbers like 25 billion connected devices by 2020 or IoT’s economic benefit worth 2 trillion dollars? What’s going amiss? Is the bubble of hype bursting?

It will not be driven by consumers at this stage. It will be driven by enterprise. Blue tooth low energy will grease the skids for enterprise deployment. There has been enough development on consumer side to lower the risk on enterprise deployments. Getting to that number is not ridiculous, but it will not be from home automation.

In a post-Homekit world, why or why not open ecosystems matter for the IoT to really take off? Without jeopardising business models that the likes of Apple usually pursue? Can we see an OpenStack, Linux-ish drama in this plot too?

One thing we see in the data – interoperability is such an issue, we see open standards driving adoption because homes are unlike smartphones. They don’t transition from one technology to another overnight. So market adoption favors open model so consumers transition over time.

If you were to summarise the report in short, what would you glean out of it?

First, year over year slowdown in growth is certainly indicating that the home automation market is not just stalling but may be even contracting. It is palpable that consumers are unsure what products they want or need while first adopters have already made their purchases. Also important to pay attention here is the aspect that Google investments in Nest and Dropcam and Samsung acquisitions in home automation are not growing at the rate expected from such acquisitions. I would say that overall Connected Home device market is shrinking as product segments lack innovation.

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