It seems that up until recently many companies had plans to bring the Internet of Things to every home, but with no actual idea of how to win mass acceptance for the technology. That looks to be changing as three major consumer companies have made clear moves to enter the space.
Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and Apple (NASDAQ:AAPL) all have taken steps to participate in the world of connected devices, even though the IoT has yet to prove itself a major moneymaker in the consumer space. Businesses have been faster to adopt IoT, which is logical because having pieces of manufacturing equipment communicate with each other makes more sense financially than building a coffee maker that speaks to your alarm clock.
That may be about to change. The worldwide market for IoT solutions will grow from $1.9 trillion in 2013 to $7.1 trillion in 2020, according International Data Corporation in a recently released report. IDC defines the Internet of Things as a network of networks of uniquely identifiable endpoints (or "things") that communicate without human interaction using IP connectivity – be it locally or globally.
The IoT will do everything from allowing an individual to use his smartphone to turn on his oven to letting a multi-million-dollar piece of medical equipment alert a technician to its repair needs. The IoT will theoretically allow every device to be "smart," which should improve efficiency and be useful in ways that could revolutionize how we live (if you consider saving energy because your air conditioning is tied to your phone revolutionary).
(For a more thorough explanation of the IoT, my fellow Fools Eric Bleeker and Rex Moore went on an epic journey to explain it which you can watch here.)
Up until relatively recently the IoT -- at least for consumers -- has been more theory than reality. Certainly there have been business uses for it that are not mainstream (like the medical equipment example), but major consumer companies have been spending on it without knowing if this was technology people would actually want.
IDC's predictions suggest that the tech will move beyond behind-the-scenes business applications and into everyday life.
"The worldwide IoT market is exploding," said IDC Vice President Carrie MacGillivray. "IoT solutions are at the heart of ... mobility, social business, big data/analytics, and cloud — resulting in millions of applications available to billions of end points."
The technology exists and more uses for it are arriving regularly, but it remains to be seen whether enough people will adopt it to make IDC's predictions come true.
Who are the consumer players?
The IoT -- even at $1.7 trillion in 2013 -- has generally been a novelty/gimmick business in the consumer space. Much of the existing technology like the thermostat offered by Google's Nest brand or Belkin's WeMo line of connected light switches and power outlets seem cool but are ultimately unnecessary. The current generation of connected devices feel like modern versions of the Clapper. They might impress friends the first time they see it, but the actual benefits are limited.
Still Google, Apple, and Microsoft clearly saw what IDC is predicting and in recent months all three have tipped their hands as to how the will make a mass-market IoT play. What are they working on?
- Google: In addition to buying Nest for $3.2 billion, the search giant has been buying a number of smaller companies in the space. "It seems like Google is rapidly collecting the individual pieces to put together a 'real-life Internet,' a network of AI-driven robots and objects that could improve transportation, manufacturing, and even day-to-day consumer life," according to TechCrunch. Google has spent around $4 billion on these acquisitions.
- Apple: The iPhone maker has come late to the IoT party, but the company announced plans at its Worldwide Developers Conference earlier this week to introduce software that will allow people to use their iPhones to remotely control their homes. Apple may be slow in making its move but integrating IoT technology into iPhones gives the company a good chance of leapfrogging its competitors.
- Microsoft: Much like Apple, Microsoft is integrating home control of IoT technology on phones running Windows Phone 8. To do this the company has partnered with Insteon, which earlier this week launched a customized version of its household automation app for Windows 8 and Windows Phone. Insteon already has hardware available that allows for connected light switches and access control (such as controlling whether a child can allow friends over).
Clearly we are still in the early days of home automation through the IoT. But having three consumer giants making moves in the space suggests that the long-anticipated boom is much more likely.
Will consumers care?
Apple taking an interest in the IoT gives me hope that the technology might become something that non-early adopters will want. What form that takes remains to be seen because current consumer uses for connected devices don't really seem worth the trouble. If Apple, Google, Microsoft, or some other player can deliver a Jetsons home without requiring much from the customer, then IDC's numbers will likely pan out.
Integrating an IoT play into phones people already have removes one barrier to entry. The remaining barrier, however, is creating easy-to-install add-ons that allow for connected devices. It's easy to download an app on a smart phone, but many people won't want to plug boxes into their outlets and light switches in order for them to become IoT-enabled. This hurdle may disappear as appliances and other household technology comes with connected technology on board. Until that happens however Apple, Google, and Microsoft will have to find something more enticing than letting me remotely dim my lights before connecting my home to the IoT seems worthwhile.
It seems possible, perhaps even likely, that the IoT will become a massive consumer business. But for now it's still a novelty for techies.
Daniel Kline is long Microsoft. The Motley Fool recommends Apple and Google (C shares). The Motley Fool owns shares of Apple, Google (C shares), and Microsoft. 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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