1 Problem That’s Guaranteed to Slow Adoption of the Internet of Things

Will conflicting proposals for connecting the Internet of Things lead to an all-out standards war?

Jul 21, 2014 at 10:00AM

Standards wars are nothing new in the world of tech. Think of VHS vs. Betamax, HD-DVD vs. Blu-ray, WiMAX vs. LTE, and so on. Everyone wants to own the "standard" in hopes of owning the resulting market.

Which of course makes sense when you look at history. Qualcomm (NASDAQ:QCOM) set the standards by which most mobile phones communicate and now earns royalties on nearly every handset sold. In 2013, licensing accounted for $7.9 billion, or 30%, of consolidated revenues. No one's going to loosen Qualcomm's grip on the market at this point.

For The Internet of Things, the fight to name a standard-bearer is just getting under way. And like the HBO series of the same name, this "game of thrones" involves different companies with different agendas. Several you know just teamed up to form the Open Internet Consortium, including Dell, Intel (NASDAQ:INTC), and Samsung.

What they're after
Intel appears to be leading the effort. In an interview with Computerworld, two of the chipmaker's executives said that the three companies plan to develop guidelines for discovering, connecting to, and securing devices across the Internet of Things. The idea? Figure workarounds for seamlessly exchanging data between devices that use different OSes, data transport techniques, and the like.

Which isn't at all surprising when you consider that Intel has spent years and billions making chips for connecting PCs to wireless networks. Taking that same technology to the Internet of Things is a smart next step, and could result in billions in new revenue if predictions about the vastness of the Internet of Things are any indicator. One estimate pegs the number of connected devices rising to 50 billion by 2020.

If only it were that simple ...
Competitors may not be so willing to concede the market, however. In December, Qualcomm teamed with about two dozen companies to form the AllSeen Alliance. The goal is roughly the same sorts of interoperability the OIC promises, the key difference being that Qualcomm's AllJoyn open source communications technology serves as the framework for connecting devices.

"Products, applications and services created with the AllJoyn open source project can communicate over various transport layers, such as Wi-Fi, power line or Ethernet, regardless of manufacturer or operating system and without the need for Internet access," the Alliance claimed in its launch press release.

Foolish final thoughts
If history serves -- and it usually does -- these groups will spend years sparring over which standard is better, serves users' interests, and so on. That's not ideal for the development of the Internet of Things, but it also isn't a disaster. Rather, I suspect that we'll see Intel, Qualcomm, and their partners come to some sort of accord for the good of the industry. When they do, it'll be good for owners of both stocks.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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