Tag Archives: Nest

Google Squarely Targets the Smart Home With Its OnHub Router and Bets on ZigBee and Bluetooth

A few days ago, Google launched a new product called OnHub, a router that focuses on improving the Wi-Fi network inside the home. An interesting feature included in the OnHub is its compatibility with other wireless communication protocols such as ZigBee, Bluetooth, and Bluetooth 4.0 (also known as Bluetooth Smart or Bluetooth Low Energy). According to the company’s blog, these protocols are aimed to support smart home devices in the future as well as the future OnHub devices that Google will develop with partners (e.g. Asus). The OnHub will cost $200 and will be commercially available in the coming weeks.

This is the first move Google has made to enter the smart home space since it bought Nest in early 2014 (client registration required), and in doing so, it is making a wise bet to further take its router and turn it into a smart home hub. The OnHub is not aimed to be a smart home gateway today, but the company is surely laying the basis to pursue this capability in the future. We have seen this strategy used before by Nest, when it enabled previously dormant embedded sensing capabilities in the Nest thermostat (client registration required). By supporting additional wireless communication protocols, Google is preparing to tackle the interconnectivity problem that has been plaguing the smart home industry. We have established that interoperability is a problem (client registration required), and other industry stakeholders have echoed this view. For example, during the CES earlier this year, the “Evolution of the Smart Home” panelists, including executives from Bosch, Lowe’s, Lutron, and Yetu, highlighted the challenge that users face with interoperability across the smart home platforms that are available in the market. Lutron’s executive stated that the way this company is dealing with the interoperability problem is by developing a closed ecosystem, allowing interaction with specific devices using their proprietary protocol, called “Lutron Integration Protocol.” Many smaller startups in the home automation space are also taking the same approach, by attempting to own the whole ecosystem. An example of this is Fibaro (client registration required), which manufactures its own smart home devices, focusing on aesthetics and using Z-wave exclusively as a communication protocol.

Other companies are eschewing the exclusivity of a closed ecosystem and are working together to adopt a standard specification for wireless communications, with the purpose of tackling the lack of interconnectivity between smart home platforms and separate devices. These companies formed various alliances, such as the ZigBee Alliance and the Z-wave Alliance (client registration required). In 2013, the Linux Foundation started the AllSeen Alliance, where companies like Microsoft, Qualcomm, LG, Panasonic, and Sony aim to develop an open and universal framework to increase functionality and interactions across various brands and sectors involved in the Internet of Things (IoT), with a strong focus on the connected home. Another player in this search for interoperability is the Open Interconnect Consortium backed by companies like Cisco, GE, Intel, IBM, Siemens, and Samsung. This consortium is looking to define the specifications for an open source communications framework to allow connectivity across IoT platforms. Google has chosen to align itself with the ZigBee Alliance, and is actually discussing how its “Thread” application could interface with the new forthcoming ZigBee 3.0, according to our interview with an executive.

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While several companies from different industries (e.g. telecommunications, consumer electronics, IT) are working together to find a solution to the problem, there are others that are embracing and exploiting the lack of a unified communication protocol by making their own hardware to interact with the wide variety of smart home devices that exist in the market today. The figure above shows companies that offer multi-protocol gateways that can wirelessly communicate with a variety of third-party devices; in other words, they offer open home automation platforms. These companies focus on a pain point that the consumers are experiencing, having the freedom to choose the smart home devices that apply to their lifestyles and still being able to operate the whole ecosystem with one single mobile application. A clear example of this is Zipato (client registration required), a company that achieved profitability and impressive geographical expansion, while its “Zipabox” hub has only been on the market for two years. Moreover, Wink is not only offering one mobile application to operate third-party devices, but also partnered with manufacturers of smart home devices to increase compatibility. Nevertheless, devices that are not Wink-certified can still connect to the hub and feature basic support. It is important to point out that Google is not directly competing against other smart home platforms, yet. Google is aiming to replace the router in the residential space, but after it enables its smart home gateway capabilities it could become a threat. Its pricing, though higher than several of the other smart home hub incumbents, will make it competitive because it is integrating two devices in one.

By comparing compatible profiles showing the figure above, it is clear that Google is betting on ZigBee and Bluetooth, and not Z-wave. This is significant, because the OnHub likely draws on expertise resulting from Nest’s acquisition of Revolv (client registration required), a startup which produced a multi-protocol gateway which then supported Z-wave. While we recently pointed out the potential of ZigBee ([specifically the forthcoming ZigBee 3.0] client registration required), clients are also encouraged to explore the potential of Bluetooth Smart. Even when it is not widely adopted today, several startup executives with whom we have spoken have cited this as high-potential, such as Cozify (client registration required).

Clients interested in evolving smart home ecosystems should pick their allies, and act fast. It is only a matter of time before Google enables OnHub to begin communicating with other home devices, such as those running its stripped down operating system, Brillo, or other third party devices. The lack of support for Z-wave is a further nail in the coffin for closed systems, in favor of those such as ZigBee 3.0 and Bluetooth Smart. Companies interested in marketing devices need to be aware of the smart home platforms being offered, and design with compatibility in mind; Google’s OnHub would be a wise choice.

Picking Winners After $300 Million Worth of VC Investment in BEMS Software

Building energy management systems (BEMS) have attracted a lot of money in the past decade. In fact, according to a Lux Research report, BEMS developers – a category including energy monitors, energy services, semiconductors, sensors and controls, and software – had raised a whopping $1.2 billion from 2000-2014. This is almost double that of lighting companies, and more than five times the funding raised by heating, ventilation, and air conditioning (HVAC) component makers (see the report “Building a Green 21st Century – Tracking Venture Investments in Green Buildings to Uncover New Opportunities” — client registration required). As we pointed out in this same report, exits in the building systems and energy space are few and far between. While many VCs have fled the “Cleantech” space, others are staying the course. Things have changed little since 2012, with sensors and controls companies like Nest Labs (see the analyst insight “Google’s acquisition of Nest” — client registration required) and Enlighted (client registration required) showing there is still very much interest in funding sensors and controls companies. At the time of our last comprehensive survey, software accounted for 32% of BEMS funding, and it is still the king in the building systems funding rankings; SCIenergy (client registration required) is just one of many software centric companies to have raised money recently (see the analyst insight “SCIenergy raises $12 million to tap securitization of energy efficiency” — client registration required). In order to capture the more recent funding rounds, the Lux Research Efficient Building Systems team plans to publish an update to its 2012 Green Building funding roundup in Q4 of this year.

We recently offered some expertise on comparing the different capabilities in the energy data analytics space (see the analyst insight “Connecting the dots: Profiting from building energy data analytics” — client registration required); however, this analysis did not provide any comparison of the business models used to deliver these services, or the cost of each. In the table below, we have provided a comparison of the products and business models used by the leading BEMS software start-ups.


From this analysis, we present the following conclusions:

  • Costs of delivery vary widely. While this it to be expected, given these companies cut across the different capabilities (from dashboard to continuous optimization), we find the lowest-price data analytics products to be priced near $0.01 per ft2, with the upper margin being $0.12/ft2. SCIenergy is certainly an outlier in this set, with pricing near $0.80; Lux is due to re-brief SCIenergy given the company’s recent activities, and we will clarify this discrepancy.
  • SaaS dominating software delivery. This is not just true of companies which target building owners as end-users (such as Gridium — client registration required), but even of companies like Pulse Energy (client registration required), which have utilities as their end users. For a long time we have talked about the close relation between software and services in buildings; often software requires a complex implementation, and thus a software-as-a-service (SaaS) model can roll in implementation costs to smooth out expense cash flows for the customer.
  • Innovative BEMS companies sell the ancillary benefits of their tools. Complex BEMS software tools, such as that of KGS Buildings, are not just about energy savings enabled by a more granular control of building energy systems (such as lighting and HVAC). As with building systems integration (BSI) they offer benefits related to operations and maintenance, which are not easily quantified at the outset (see the report “Spinning the Web: The Case for Building Systems Integration” — client registration required). For this reason, the benchmark comparison for these products should not be simple payback alone, and the successful innovators in the space will be those who can communicate these ancillary benefits to customers. Already, SkyFoundry, KGS Buildings, and Gridium each boast deployments covering over 100 million ft2 of space. Clients are urged to look beyond at the broader benefits of these BEMS products before making engagement decisions on energy cost savings alone.

Google’s Acquisition of Nest Shows How B2C and Advanced Automation Make for Success in HEM

Yesterday Google announced a cash purchase of home automation start-up Nest Labs for $3.2 billion; Google Ventures has been a major investor in the company, whose last funding round totaled $80 million (client registration required). The acquisition represents a re-entry of sorts: Information technology companies’ initial foray into HEM last decade proved to be tricky, owing to fragmented utility sector, lack of clear standards, high hardware costs, and lack of clear incentives, leading Google, Microsoft, and Cisco to exit the space in late 2011 (client registration required). Google’s acquisition signals that home energy management (HEM) is a hot sector for investment again. In addition to Google, Microsoft has shown the intention of re-entering HEM with the acquisition (client registration required) of id8 Group R2 studios in Q4 2012.

Nest labs has done three things well to overcome the difficulties faced previously by HEM segment: 1) making an aesthetically appealing device with a simple payback under two years, which is the tipping point for the residential consumer; 2) combining a B2C distribution strategy with advanced automation capabilities; and 3) moving beyond energy management into security and smoke detection to offer a more complete user-comfort package (client registration required). Lux Research mapped 25 innovative developers in the HEM space based on their distribution strategy and automation capabilities (see upcoming report “Master of the House: Cutting through the Hype in the Home Energy Management Space“). What is striking is that there are just three companies that have both B2C and advanced automation: Nest Labs, Tado, and There Corporation.

Although the price for the acquisition looks rather high, 4X of the valuation in the last funding round in January 2013Google has three distinct motivations for it: 1) innovation in smartphones and tablets is incremental and arguably with diminishing marginal utility; 2) a smart thermostat and smoke detector are good additions to the line of connected gadgets from Google such as Google Glass; and 3) the acquisition fits with Google’s long standing strategy (client registration required) of clean energy and energy efficiency investments.

The Nest acquisition has critical implications for utilities, venture investors, and consumer electronics companies. Utilities are looking for differentiation and customer retention, especially in a market like the U.S., which has 3,200 utilities, so partnering with large analytical powerhouses such as Google can now be very attractive. There have been early signs of such collaborations between Nest Labs and NRG Energy. For investors like Nest backers Kleiner Perkins, the attractive returns underscore the appeal of energy IT or “cleanweb” sector for the 10-year venture fund, no doubt prompting the VC herd to keep sniffing around for me-too deals. Finally, Nest’s success will increase the already high interest in “smart homes” from consumer electronics companies such as LG Chemicals and Samsung. Conventional thermostat manufacturers such as Honeywell have been behind the curve on this, and have previously tried to stop Nest through legal means (client registration required). These laggards should change tactics and seek a second mover advantage by coming up with a better version of the smart thermostat.

A Summer Blue-Ocean Strategy for Manufacturers: the Internet of Things-in-Motion


“Smartphones plateau and decline.” It could be the title of a scary summer shark flick for the electronics industry, but it’s a reality that a mounting body of evidence supports: handset sales, profits, app downloads, and even innovation itself are flatlining, hitting financials at Samsung and Apple (which both now spend more on patent litigation than R&D) while RIM, HTC, and Nokia struggle to survive at all. In the same process that desktops, notebooks, feature phones, PDAs, and every other information appliance in history has passed through, smartphones are poised to peak and then plummet between now and 2016, leaving electronics industry execs scrambling for the safety – the next big thing, like:

  • Wearables. Smart watches and glasses may buy the industry one more cycle, but competitors like Pebble and Google Glass beat the incumbents to those markets. And how much smaller can computing go after that – smartrings and smartpens? Wearables offer temporary safety, at best.
  • The Internet of Things (IOT). Low-cost computing, communications, and sensors will allow billions or trillions of objects to share data – an internet of things. Hundreds of startups are spawning at places like HAXLR8R, shipping products like the Nest thermostat. But the corporate IOT is mired in unimaginative smart lightbulbs, personal weather stations and coffeemakers that text you when your java – the drinking kind – is hot. In the scary summer movie, the consumer IOT is the red ocean in management strategy terms, full of sharks and blood.
  • Industrial IOT. We certainly see environmental and economic opportunities in the industrial IOT: smarter commercial buildings (client registration required), water management systems (client registration required), electrical grid (client registration required), city infrastructure (client registration required), farms (client registration required), and factories – and have written extensively about them. But as leading manufacturer Bosch put it in a recent Harvard Business Review article, “the mere prospect of remaking traditional products into smart and connected ones is daunting… embedding them into a services-based business model is much more fundamentally challenging.” The technology is hard for outsiders, and incumbent manufacturers will fight consumer electronics companies who try to take too much of the market.

Possibly the biggest promise of all – the blue ocean strategy – is in networking things in motion. The things that move – from smart-textile garments and self-driving cars to robots and satellites – are wholly different from immobile devices, and constitute a vastly greater set of challenges and opportunities. In many industries, the greatest growth over the next years and decades will come from these emerging distributed, mobile hardware platforms.

Why is “motion” a step change? Because it requires real-time interaction with a changing, immediate physical environment – guided by sensors and actuators that can’t rely on network connections that may not be there when needed. Because the virtual environment of nearby devices and protocols is in constant flux, so messages between devices may be incompatible, incomprehensible, delayed, or dropped. And because the physical/virtual hybrid world – optimizing a vehicle’s route through traffic to a fueling station, or a patient’s dose of post-meal medicine – demands real-time calculation of equations that no human yet understands. These critical differences make the IOTIM vastly different from fixed IOT – giving innovative manufacturers an opening they should quickly seize.

Click here to join Research Director Mark Bünger on September 4th, for a complimentary webinar describing the cross-industry threats, opportunities, and strategies identified by Lux Research’s analyst team.

Click on the following terms from the above graphic to open relevant Lux Research profiles, insights, and reports (client registration required): desktop PCs, servers, lab instruments, building automation/mgmt systems, smart grid, charging stations, fueling stations, farms, notebook PCs, factory equipment, in-home medical monitoring, smart packaging, nanosats, food and beverages, pharmaceuticals, cosmetics, smartphones, wearable computers, personal diagnostics, autonomous vehicles, aerial drones, medical implants, smart textiles, mobile robots.