As IFA Berlin opens its doors, Thomas Rockmann, VP for the Connected Home at Deutsche Telekom, gives us his views on how the connected home will transform the installer business. He argues that while Smart TVs, connected ‘multi-room’ sound systems, integrated set top boxes, IP cameras, digital door locks and smart thermostats are increasingly available on the high street, the ability to network these devices is where the real opportunity for innovation resides.
“connected home devices, generating about €446.6 billion in revenue, and this looks to be just the tip of the iceberg now. It’s certain that IFA will showcase significant new IoT technologies.
While connectivity may be the major technological enabler, this development could be seen as a negative for installers, as it tends to play to the DIY end of the market. Increased online connectivity also creates the prospect of OTA (Over The Air) software upgrades, decreasing the need for scheduled professional maintenance. However, the flipside of this is that many consumers are now looking for professional help to setup complex systems – ‘do it for me’ (DIFM) rather than DIY. Offering technical support for both installation and ongoing use, either directly or through partnerships, can then enable DIFM providers to up-sell other installation and integration services.
This ‘digital plumbing’ type of service won’t reach the mass market tomorrow of course, but an extension of what members of the Custom Electronic Design and Installation Association (CEDIA) do today in high-end homes doesn’t look unsupportable in the near future. This new opportunity is far from a one off. Installers and integrators will be able to build deeper relationships with their customers, transforming warranty and assistance contracts, increasing loyalty and therefore longer-term profitability.
In addition, the ability to deliver manufacturer OTA upgrades isn’t necessarily the preserve of the original hardware supplier. Just as the mobile network operators often customise new software to suit their network settings – and affiliated product ranges – there is also an opportunity for similar value add in the smart home.
Improving the customer experience
Very few connected building implementations will be alike, and actively managing the ‘health’ (or continued smooth operation) of this complex web will be a valuable service indeed, no matter whether the building in question is a standard terraced home, or a concert hall. This prognostic monitoring of devices is one of the greatest new opportunities created by IoT as a whole, enabling new business models, optimising costs, enhancing the customer experience, and facilitating the development of new propositions that extend and significantly strengthen the customer’s lifetime value.
Although they may have had a bad rep in the past, extended warranties will be a major business opportunity in the connected home. Take-up rates in the UK range from 18 to 67 per cent, depending on the category, and recent figures from Assurant Solutions, a provider of device protection and extended service contracts, show that up to 47 per cent of consumers buy an extended warranty.
For example, kitchen appliances such as dishwashers or HVAC systems will increasingly be financed, and as part of that agreement will be connected to continuous remote diagnostics to monitor usage and ensure the reliability of components. In the event of an expected defect, customers can call the service engineer to replace the faulty part. The service package could include monthly fees, flexible on demand charges or even payments for demand-based deliveries of consumable supplies.
Service and support
By utilising the new datasets created by smart home networks to actively monitor, provide remote diagnostics and if necessary provide warranty support, a new, more automated, service-based subscription approach will be possible. According to Frost & Sullivan remote technical support for IoT devices will grow to reach €2.4 billion by 2020, a 12.1 per cent CAGR.
A recent report by Accenture found that the majority of consumers would welcome the opportunity to have one company providing technical support for most or all of their connected home devices. However, in order to realise these new service-oriented business models, much higher levels of collaboration across the value chain will be required in the future, far beyond the existing relationship between the manufacturer, installer or integrator and warranty service provider. Reselling these services will become a core revenue stream for many, and with replacement cycles expected to shorten in many product categories, warranty services are predicted to become increasingly valuable – especially as many European markets remain immature and penetration is still low.
It’s already clear that the connected home offers one of the most fertile opportunities for cross-selling in the entire technology market, mainly due to the ecosystem-like connectivity. A journey that began at the phone, through broadband and quad-play TV, or dual fuel energy tariffs – as the number of connected devices grows, establishing powerful interactions between them is set to become a service sector of its own, as management, maintenance, assistance and on-site support become more onerous and complex.
Interoperability
Of course, a key technical element in this picture is still in the mix – the assumption of widespread interoperability is still just that. There is continued significant market debate over overarching ecosystems, with a considerable number of strong options battling for supremacy. These include platforms such as Apple Homekit, Works with Nest, Google Brillo, the open source framework Eclipse SmartHome and protocols such as Zigbee and Z-Wave. While this slew of different technical approaches may be beneficial for covering different application scenarios in the best way possible, the challenge increases as the range of incompatible technologies grows.
At Deutsche Telekom, we believe the connected home industry needs to abandon proprietary and closed approaches and open up for collaborations, such as open software communities and alliances – a move which will benefit all parties. By ‘open’, we mean offering APIs (application programming interfaces) and software developer toolkits (SDKs) to enable easy and seamless interoperability with other products within the ecosystem.
Fragmented market
Encouraging and inspiring developers and integrators to create personalised experiences for their customers by supplying them with the best tools is essential, and a key shortcoming in the current fragmented market. By leveraging open white label offers, integrators and installers can differentiate and extend the range of services they offer their customers. The Deutsche Telekom connected home platform already has over 40 partner companies of all sizes across a range of industries utilising the platform to bring their own products and services to market quicker, as part of a larger connected ecosystem. The open platform and white label offer enables both cross- and up-selling potential as installers and integrators can use the agile and ever expandable architecture to integrate their own offering with new connected devices and support innovative new revenue generating services.
Overall, smart home and associated devices offer vast future potential for installers and integrators, not just by providing entirely new business models, such as those through emergency assistance, remote prognostic monitoring and extended warranty streams. Providers can significantly improve the profit margin of maintenance services by optimising the effectiveness of engineers through prognostic monitoring and response, first time fix and more. These value add services represent just the tip of the iceberg, where innovative business models focus on the core value proposition – the customer experience itself. Improving this experience and enhancing customer loyalty, by minimising churn are set to be the most vital – and valuable – elements of the entire value chain.
For more information, please visit: http://connectedhomeplatform.telekom.net/
