If companies want to thrive in the connected home market, they need to open up their APIs and connect with other manufacturers' devices or ecosystems without prejudice, Moss says. More than half of all U.S. households with at least one smart home device say interoperability is very important, and the sentiment increases with each new IoT device they add, according to the Parks Associates research.
"Connectivity is changing the business models for a variety of products, and while consumers have multiple channels available to acquire smart devices and solutions, they clearly recognize the added value of connectivity," says Stuart Sikes, president at Parks Associates. "As home automation solutions become more common and affordable, interoperability will be a differentiator."
In defining smart home market, Nest limited its own potential
Nest helped validate the concept of IoT by breathing new life into many ordinary devices, such as the boring old thermostat, but it failed to keep the momentum going with new products. "It seems like they may be having some internal issues getting products off the ground," Moss says.
Earlier this week, the company also announced plans to shutter Revolv, a smart home hub manufacturer it acquired in 2014. Nest also said it will stop supporting Revolv."This move creates a general atmosphere of distrust for consumers who are exploring connected home solutions," Moss says. "I think this is bad not only for Nest's brand and Google as it relates to the trust that they're trying to build in their consumer base, but this is coming at a time when the IoT market is growing and consumer awareness continues to build. Companies in this space really need to band together to make this new phase of the Internet actually work well for real people."
Smart home needs "hubs" to connect their various components, and without a product such Revolv, Nest will struggle to scale, according to Meagher. "Nest is very good at smart devices, but that doesn't make them a smart home provider. That's where they get confused. A smart home is about working with all the other things in the home."
Meagher says Nest's assumption that its thermostat can serve as an IoT hub shows arrogance. "Frankly, Nest is still just a smart thermostat," he says. "It's definitely not a smart home, and that's because they are confused about what they are, and their strategy's just wrong. The hub strategy's the only way to go forward."
Sign up for CIO Asia eNewsletters.