Doing business in the smart home market

Jon Carter headshot

By Jon Carter, UK Head of Business Development – Connected Home, Deutsche Telekom.

The smart – or connected – home market will be worth more than $100 billion in a few years. The opportunities fall into several, but interconnected, camps.

The smart home market really started to take shape in 2015, and this year kicked off with some exciting announcements at the Consumer Electronics Show in Las Vegas that will undoubtedly fuel more customer interest. Samsung’s new smart fridge, and devices such as a pet camera, and a rather clever robot cleaner caught our attention.

These might seem like novelty products, but they introduce consumers to the concept of the smart home, in a way that a humble smart thermostat hasn’t. Additionally, stories about home owners enabling their houses with an array of inexpensive technology are picking up pace in the mainstream media, and the various revenue projections of billions of dollars for the smart home market are starting to look realistic.

Deutsche Telekom’s market analysis report, ‘How to create growth from the connected home’, states that connected entertainment, energy, appliance, security and healthcare systems were predicted to surpass 100 million in number worldwide by the end of 2015, and will triple in the next ten years’ time to over 300 million, more than breaking $100 billion in revenue on the way in 2020 [1].

Entertainment systems are certainly a major driver in the connected home market – Netflix and its peers are testament to this. However, other sectors will increasingly take more market share, and will be based on the same core backbone technologies (i.e. broadband, wireless, smartphones and tablets, both in and outside the home).

We have identified four key business opportunities beyond entertainment that are open to a wide range of players, from telco and energy utilities, to retailers, insurers, installers and integrators, as well of course to device and technology developers.

1. Security and safety. MarketsandMarkets has recently forecast that the total European home security market will achieve a CAGR of over 25.4 percent over the next five years, driven by new and innovative developments in monitoring, the growth of digital door locks, wireless sensors and more sophisticated integrated cameras, with the latter contributing the largest share of overall growth. People’s homes are their safe places in a busy world – and this is much more than about protecting possessions. It also extends to guarding against internal and external threats to the fabric of the house, by water leaks for example, and also to monitoring the movements of children and the safety of vulnerable relatives living in other homes. For many in the industry, security and safety are the ‘low hanging fruit’ – the entry strategy into the connected home market – and there are now innovative propositions in this category, including integration with traditional monitored security operations, and with new social media platforms such as Life360 or; and new connected devices that can greatly reduce the cost of previous high-quality systems. This is a market where the proliferation of sensors in the Internet of Things (IoT) will play a major role.

2. Energy management. Here a growth trajectory is already clear partly because of government intervention into mandating (or encouraging) the installation of smart energy meters with the aim of giving consumers more control over energy costs. These energy meters are a first step towards the addition of smart thermostats that enable consumers to monitor and control heating around the home. Berg Insight, an industry analyst, forecasts that by 2019 the number of smart thermostats will grow at a compound of about 65% in Europe and North America. When one considers that in Northern Europe about 60% of household energy is consumed by central heating, it is clear why thermostats that can control energy usage will see such traction.

3. Home automation. This is a broad category that refers to applications that make life easier and indeed more pleasant, and includes control of lighting, music systems, blinds/curtains and all manner of appliances (including new smart fridges or robot cleaners). Many early adopters will clearly be gadget lovers, and the arrival of a number of major consumer electronics manufacturers in the connected home space – for the most part enabling convenience and control – will bring with it much of the buzz, excitement and education that this industry requires to mature and grow. And like most smart home categories, there is a crossover with other sectors, especially security (such as by controlling door locks, cameras and lighting remotely).

5. Insurance. The insurance industry had until recently shown relatively little interest in the connected home market but has now changed its tune. Recognising its minimal level of customer contact (unless things go wrong), and not always being perceived in a good light, insurers’ involvement with the smart home can help the industry reinvent itself to provide assistance and maintenance services, in partnership with support companies. The connected home will give the industry far more insight into patterns of behaviour and the frequency of possible threats to the home. New models already exist in the motoring sector, thanks to technology that tracks driver risk, and the home market is likely to follow this trend.

While 2016 is looking like a breakthrough year for wider education and interest among consumers around the connected home, it’s difficult to predict which industry sectors will become most popular. New devices and technologies are being launched continuously, but there is still much to do in establishing standards to enable interoperability. One thing of which we can be certain is that an open platform will be the way forward given that no company can hope to cover all bases.

[1] Source Strategy Analytics

Related posts