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Is IoT the NBT? - ResidentialSystems.com

Is IoT the NBT?

What does the Internet of Things trend mean for integrators?
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There has been an increasing amount of industry chatter about the Internet of Things (IoT), which often is made to sound sexy... futuristic... and potentially huge. Even so, the reality of IoT up to now has been more like the dull rumble of thunder in the distance, rather than a loud roar of the next big thing taking center stage. But there was an interesting and notable transformation in the position of IoT this past January at the International Consumer Electronics Show in Las Vegas, when Samsung Electronics president and CEO, Boo-Keun Yoon presented his keynote address with a glitzy presentation about the future of the industry–a future built around the Internet of Things.

But is the IoT the NBT (next big thing)? And, if so, what exactly does this mean for integrators?

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There was an interesting and notable transformation in the position of IoT this past January at the International Consumer Electronics Show in Las Vegas, when Samsung Electronics president and CEO, Boo-Keun Yoon presented his keynote address with a glitzy presentation about the future of the industry–a future built around the Internet of Things.
How do you describe IoT?

What exactly is the Internet of Things? Well, first of all, it is a real “thing.” The term describes a global network of interconnected devices–physical devices with electronics and sensors connected to the internet, collecting and sharing data and often providing specific and enhanced functions or services for the local user.

There are generally two elements that make the IoT attractive:

1) New smarter services and capabilities. For the consumer, IoT devices offer new and/or enhanced services. Samsung, for example, offers washing machines that will send a notification to your smartphone when your load is done. Or consider Philips Hue LED smart light bulbs that connect to your network and offer an app that allows for a spectacular new level of control, including the adjustment of intensity, color, and scene programming. Appliances and light bulbs, formerly dumb, are now smarter and offer consumers an entirely new range of capabilities, thanks to IoT.

2) Big Data. Because sensors are always running and collecting data points, this information is typically uploaded to cloud-based servers and stored or analyzed. With lots of sensors across multiple devices, this can generate a good amount of data. But when extrapolated and multiplied across all users of a given device in the world, this turns into a tremendous amount (exabytes) of data. This data can be a rich resource of usage patterns. Data can be analyzed to discern new trends and patterns and to create even more capabilities or efficiencies in the system.

25 billion reasons to pay attention to IoT

Just how many devices are we talking about? According to estimates from Cisco Systems' Internet Business Solutions Group (IBSG), in 2015 there will be 25 billion connected devices in the world. Think about that for a moment. Since 2008, there have been more devices connected to the internet than there are people on the earth.

And we're just getting started. Cisco estimates that this number will double to 50 billion devices connected to the internet by 2020. These devices excel at communications: they talk to users' smartphones, they talk to each other, and they report back to cloud-based servers.

Plugging into cows

So what kinds of things are "connected devices?" Are we simply referring to smartphones and tablets? Well, how about cows? Yes, that's right, cows. Connected cows.

A Dutch company called Sparked has wired up farm cows to the internet with wireless sensors that collect hard data for analysis by the farmers at Old MacDonald's Farm. What does Farmer MacDonald learn from this data? Multiple things, such as the level of exercise of the cow, their movement and location on the farm, their sleep patterns, and their health (if they are pregnant, how is their pregnancy progressing?) From this data, the farmer can optimize his feed order, improve stall configurations, contact the vet, and much more.

Just what is a "thing?"

Connected cows are just one example, but there are many, many more. In a recent TEDx presentation, Dr. John Barrett identified connected things as: goods, objects, machines, appliances, buildings, vehicles, animals, people, plants, and soil. How do you put a "thing" on the Internet of Things? Barrett describes four steps: 1) Give the thing a unique identity (thanks to IPv6, we have an essentially unlimited ability to create unique addressable identities); 2) Give it the ability to communicate (typically wirelessly); 3) Give is "senses" (by using sensors); 4) If it is a machine, vehicle, or appliance, give it the ability to be controlled from anywhere in the world (thanks to embedded micro-electronics).

Barret went on to demonstrate how to plug a chair into the IoT and how he–from anywhere in the world– can know if someone is sitting in his chair, and who that person is.

This bird has a new kind of Nest

In our industry, perhaps one of the best-known examples of an IoT player is Nest Labs, whose self-programming home thermostat was a huge technical advance over prior products in terms of simple programming and control. Nest also offers the Nest Protect connected smoke and carbon monoxide alarm and its DropCam-connected IP camera. Like appliances and light bulbs, Nest brings a new level of intelligence, ease of use, and control to these devices that were once pretty “dumb” or hard to program. This, for consumers, is the essence of IoT devices: a new way to use and control devices that were formerly just simple on/off products, but that are now flexibly smart. And the data from the usage of these devices represents huge opportunities for manufacturers.

"The ability to add connectivity and intelligence today has reached a tipping point," said Utz Baldwin, CEO of Austin, TX-based Plum, a connected lighting control company (and former CEO of CEDIA). "Which means everyday things–they could be consumer products, they could be industrial devices, they could be medical devices–will evolve. They will begin to have some level of intelligence and awareness, and we'll be able to interact with those devices in a different manner than we have in the past."

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Utz Baldwin, CEO of Austin, TX-based Plum, believes that the ability to add connectivity and intelligence today has reached a tipping point.

Of this new Internet of Things world–Baldwin prefers to refer to it as the “Internet of Everything”–he stats emphatically, "we'll see significant changes in the next five years. We'll see explosive growth in the number of devices that are connected."

Smart building materials

Not only will the number of devices grow, but so too will the types of devices. Commenting on the connected home space, Baldwin predicts that amazing things are coming.

"I think we're a few short years from seeing, for example, intelligent building materials," Baldwin stated. "[Materials such as] joist hangers that have sensors in them that can detect shifts in load...moisture sensors that are just tacked down by the framer in the bottom plate of a home being built," he said to demonstrate possible concepts.

So much will evolve largely because sensors require almost no energy and are dramatically declining in cost. This gets the creative juices flowing for companies to develop uses that were never imagined before.

"I think the biggest explosion we'll see in IoT, to begin with, will be sensors," Baldwin said. "It's all about the input–understanding the environment, understanding behavior, understanding condition–[which] provides an immense amount of intelligence. That data can be converted into some level of intelligence."

It’s logical that sensors will be a big component in IoT, Baldwin noted. "Every company sees the opportunity," he said. "Every semiconductor company, every device manufacturer [sees the opportunity.] It expands every industry [and] every vertical."

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Electronic Design Group CEO Bob Gullo, a 28-year industry veteran covering the New York City metropolitan area out of central New Jersey, said of IoT, "bring it on!"

Sensors make sense to semiconductor manufacturers

If IoT is all about sensors, then this may help to explain why companies like Sony and Samsung have been talking up IoT. Both companies are large sensor and semiconductor manufacturers and would like to lead the charge into a burgeoning IoT business.

BK Yoon's flashy Samsung CES presentation included a variety of guests, custom videos, and a huge surround-video presentation. And Yoon was quite enthusiastic about IoT, calling it the "most important topic for our industry right now."

"It's not science fiction anymore," Yoon told attendees in January. "It's science fact." Later, he added, "actually I would argue that the age of the Internet of Things has already started. But to unlock its benefits, we have to prove it works in real life. It must be centered on humans and fit into their lifestyles. We have to show consumers what's in it for them."

After Yoon’s opening monologue at the show, he welcomed Jeremy Rifkin, president of the Foundation on Economic Trends, to further comment on the topic. He stated that in the “Internet of Things era,” sensors will be embedded in every device and appliance, allowing them to communicate with each other and internet users, “creating an intelligent technology infrastructure for a smart world.”

"The Internet of Things platform will enhance virtually every aspect of our lives–from monitoring our health to improving our athletic skills–marking a vast improvement in our quality of life,” Rifkin said.

Rejoining Rifkin, Yoon tried to evoke for the crowd the power of IoT. "[Imagine] a television that gives me a personalized morning briefing," said the CEO of the industry's largest television manufacturer. "[Or] no more breaks in the music listening experience. By 2017, 90 percent of all Samung devices will be IoT, including all of our televisions and mobile devices."

So Samsung is clearly going big on IoT. Later in his presentation, Yoon added that by 2020, 100 percent of all Samsung products, in all categories, will be IoT devices. But what does the reality of massive corporations like Samsung getting involved with IoT mean for integrators? And where is our segment of the industry rooted in this huge new world?

Custom integration slow to start

Most companies and brands in the custom integration channel were initially slow to adopt IoT into their product lines. Most major brands in this specialty AV field had traditionally created their own proprietary ecosystems with closed-loop hardware architecture and proprietary software. Major control companies, for example, had their own programming protocols and integrators had to be trained extensively in software programming to maximize system installations of each specific brand. Many of these companies developed their own proprietary system interface devices for audio, video, HVAC, access control, etc. Each brand had its own devices driving their own ecosystem. Interoperability with other systems–a fundamental tenet of IoT–just didn't exist in these proprietary-branded worlds.

The CI world began to change with the amazing success of the Apple iPad. Soon, clients began asking why integrators couldn't set the system up to be controlled by the user's iPad. Many clients resisted spending thousands of dollars on proprietary touchpanel control pads because they were just more comfortable using their own iPad. Furthermore, with the emergence of cool new products like the Nest self-programming thermostat, customers started asking integrators to incorporate these new products into their system designs. Suddenly, consumer demand for this whole new class of open-architecture devices, with easy and open software programming protocols (many providers openly publish their APIs) threw the AV integration industry into turmoil.

Today, most manufacturers are, at some level, beginning to reconceive their systems to play nice in this new IoT world. Perhaps some are getting dragged along kicking and screaming, but resistance is beginning to look more and more futile.

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Russell Radke, COO of Premier Systems in Chicago, says that IoT has been a very positive influence on his integration company.

Is this the zombie apocalypse?

And so it was with the status of some integrators and custom installers as well who, like the major brands over the last few years, also resisted this move into lower-priced, easy-to-program and operate, open-source world of IoT devices. In the recent past, many integrators expressed to us their concern about the way IoT was literally rewriting the fundamentals of their business, and not in a good way.

Many integrators have complained that–whether as a direct result of the emergence of IoT or an unintended consequence of it– hardware margins were dropping, squeezing their net profitability. Earning a reasonable profit has always been a challenge in this business, but now the decline was truly concerning.

And there was another terrifying prospect, especially for those installing home automation systems. Up until now, if someone wanted even a basic home automation system, he or she had no choice but to go to his or her local residential installer or integrator. This fact automatically drove a level of business through their doors. But now, with plug-and-play hardware and easy-to-configure and program devices, many integrators have expressed horror at the thought of a massive drop in demand for their services with the rise of the do it yourself (DIY) home technology market.

Like a kind of zombie apocalypse, some integrators were concerned that their businesses would be killed off, replaced by these empty zombie "technologists." The DIY market, some worried, could overwhelm the traditional home automation channel and obviate the need for the services of an integrator.

But as a recent series of interviews we've conducted showed us, integrators have lived to see the sun rise another day. While some still harbor skepticism, many of their worst fears have not been realized.

Electronic Design Group CEO Bob Gullo, a 28-year industry veteran covering the New York City metropolitan area out of central New Jersey, said of IoT, "bring it on!" He said that IoT has already profoundly influenced his business, and, from his perspective, that it's been all positive.

Exposing clients to what's possible

"I look at the whole Internet of Things as way to increase awareness of what's possible," Gullo said. "You know, I've been doing this for 28 years now. I used to have to explain to people what Dolby surround sound is. Then 15 years ago, I had to explain to people what a control system is and what it does. It always was a rough road because the market awareness was just so limited. So I look at this [IoT] as an opportunity to make the market awareness much greater."

Russell Radke, COO of Premiere Systems in Chicago, said that IoT has been a very positive influence for his integration company in multiple ways. "The internet being what it is, it certainly allows our customers to become more knowledgeable of the type of products that we have," he said. He added that this has opened up conversations on other types of products that the customers might not have even known about in the past. "It's opened up other avenues of revenue,” he said.

"Does [IoT] impact our business?" Mike Beam of SES Design Group in Houston, TX, asked rhetorically. "Very much so. It's going to be the heart of all of our businesses, because everything is going to hang on or off the strength or quality of the internet that is provided in a home. We have homes with over 200 devices in them."

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The Internet of Things is at the heart of everything that SES Design Group in Houston, TX, does, because everything is going to hang on or off the strength or quality of the internet that is provided in a home. The Houston-based integrator services homes with more than 200 devices in them.

Is DIY a destructive force?

As far as the emergence of a destructive DIY market, Gullo sees opportunity there as well. "If it means that the barrier of entry is no longer based on cost because there's this DIY or cheap model, that's OK because, to me, that just makes the market bigger, and at some point the people that are in the entry level...well, they'll just be my next client," he said.

That was the opinion of several integrators: their existing clients aren't likely to choose a DIY system, but IoT is more likely to create an upgrade path for new clients who want a more sophisticated, elegant, and complete home automation solution in the future.

Beam also said that, so far, the DIY market has not negatively affected his business. "We have not seen a product that fits in the DIY space that is both inexpensive and works,” he said. “You can get inexpensive...but it doesn't work.” As he put it metaphorically, "I don't care how inexpensive the food was, if it wasn't good you're not going back [to that restaurant]."

But does IoT's ease of programming hurt integrators, who add to their revenues in part by charging for programming?

"Anytime the manufacturer can help in making this a little less rocket science, I think it's a good thing," Gullo said, explaining that easier programming speeds up installations. "I just don't believe that there'll ever be a time where I'll be eliminated because customers just don't need me."

You have to know your customer

The key, many integrators said, is knowing your customer. And here, like other integrators, Gullo summed it up nicely, saying, "I'm only trying to serve the one percent of the world. I'm not trying to serve anybody else. And the one percent of the world is too busy...and someone's going to do it for them regardless."

"[The DIY customer] was never really a good customer for us because in the end they just required a tremendous amount of more time having to deal with them," Russell Radke of Premiere Systems said. "Our good customers… we have long relationships with them that provides us service revenue, and then upgrade opportunities two to three to four or five years down the road. Whereas do-it-yourselfers that are really price conscious–that are trying to really carve it up by dictating what products to use and trying to do the program themselves–we're just not the right type of company for them."

Budget levels are stable

But perhaps the best news about the influence of IoT on the custom channel is that budgets have not shrunk. If your typical installation was $100,000, for example, it's still $100,000. And if you have reduced programming costs, or reduced hardware costs, then it is simply reinvested in other technology.

"We used to have AMX proprietary touchpanels for $5,000 each," Radke said. "Those now have now been replaced by an app on an iPad that costs $600–substantial savings in their display devices. So you would think that when we had five touchpanels for [$25,000] that's now five touch panels for $3,000, that you'd see the customer holding on to that $22,000 difference and saving it. But our average proposal [budget] is remaining the same. They are taking that money and spending it somewhere else technology related. They are [adding] motorized shades, or lighting control, or HVAC control. Or they're taking those additional monies and buying a little bit higher grade audio experience–speakers and amplifiers and processors."

The Internet of Things is indeed going to be a very big thing in our lives for decades to come. And judging from the responses to our inquiries, integrators have adjusted their operations in such a manner that makes it a mostly positive influence.

As Russell Radke said, "there's no stopping it."

That being the case, we might as well take maximum advantage of it.

Ted Green (tedg@stratecongroup.com) hosts a widely read weekly CE business blog at Strata-gee.com, the online home of The Stratecon Group, his marketing and strategy agency for the tech industry.


"It must be centered on humans and fit into their lifestyles. We have to show consumers what's in it for them." - Boo-Keun Yoon, CEO, Samsung

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