Summary:

The enterprise is where the big bucks used to be, but home is where the heart and consumers are. As the web becomes more integrated in people’s lives, the home will become the battleground for the coming generation of startups and big-name companies.

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The enterprise is where the big bucks used to be, but home is where the heart and consumers are. As the web becomes more integrated in people’s lives, the home will become the battleground for a coming generation of startups and big companies. There’s a huge hole in the market where broadband hits the home, and normal people struggle to connect their ever-growing number of devices to a wireless network they may not understand.

After watching big companies aim products at the home consumer and talking to venture firms trying to see which business models might have the most success, the question seems to boil down to whether applications or hardware are better way to deliver connected home services? Fundamentally, every entrepreneur should realize that in a broadband world, what they will deliver is a service, and the rest is just the wrapping.

Hardware makes consumers happy

The Nest thermostat (in cooling mode).

Earlier this week, we saw the launch of Nest, a smart, connected thermostat, which is both beautiful and simple to use. All its complexity is hidden in the simplistic touch wheel design, but it aims to control the heating and cooling in your home in a manner that will save consumers up to 30 percent of their energy consumption. At $250, this isn’t a cheap thermostat, but what people are buying here is the intelligence that rests in the service (and a pretty thermostat).

A similar example is the Sonos system, which is awesome-sounding hardware that acts as a music delivery service. Again, the Sonos system isn’t cheap, but it does offer consumers aesthetically pleasing (in terms of sound, the boxes aren’t all that attractive) hardware with the true purpose of delivering music services from the web. The box is also easy to set up and manages to mask any problems with the quality of a user’s home Wi-Fi network, so the consumer doesn’t need to worry about allocating bandwidth to the box.

The list goes on with devices such as the Roku, which, like Sonos, is easy to set up and helps ensure a solid experience. And I can’t avoid mentioning Apple, which might be the king of building out hardware that hides its complexity and is heading toward becoming a means of delivering services such as iTunes, iCloud and MobileMe. It’s not quite there on the services side, yet, but I have no doubts it will get there.

The app-ortunity is unclear

Comcast's Xfinity app

While the app economy is huge on mobile devices, its ability to deliver services designed to be consumed at home are unclear. So far, apps designed to help consumers manage network-based services inside the home have faltered. On the energy management side, Google’s PowerMeter and Microsoft’s Hohm products were shuttered after low adoption. That may be a lack of interest in home energy monitoring, so we’ll have to see if Nest makes an impact where these services failed.

The television industry hopes to build apps for its screen, and pay TV providers are offering apps in the form of TV Anywhere products that might count as an example of success. But it’s hard to pinpoint specific apps that provide a connected experience tied to the home or gadgets residing in the home. I wonder if services such as security and TV apps might be the best way to hide a service in the form of an application.

With TVs and TV content, an app strategy makes sens,e because the content will come via IP to a multitude of devices from different manufacturers, (although for traditional TVs, a set-top box might work too). For security, which would require a professional installation of equipment (or people are more willing to buy professionally installed equipment) an app strategy may also work.

The other area where I’d love to see some sort of user-centric app or device is for managing the network. Right now, I don’t have the ability to easily allocate bandwidth to certain areas of my home or to certain applications. I think as more devices compete for limited Wi-Fi, such services make more sense. It could be built into a router or perhaps managed through the web via an ISP-provided app.

Either way, consumers are beginning to get frustrated with the toll of maintaining, updating, troubleshooting and having mediocre experiences on their connected devices. Instead of bringing the glitchy-PC experience to homes, let’s get it right this time around with something that looks more like electricity. I don’t care if it’s hardware or an app; I just want to be able to flip a switch and have it work.

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