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Wireless or Wired: Sizing Up Home Automation Business Opportunity

By 2023, the Smart Home industry will be worth over $ 53 billion. As a result, many start-ups wonder how to start a successful Home Automation business these days. In case you are one of them, you should define your target market, think of a feature that will help you stand out from the competition and…choose between a wired and wireless Smart Home solution.

How to start Home Automation business: aligning expectations with reality

As a start-up, you probably dream of overnight success and multimillion-dollar contracts and consider developing a comprehensive solution for commercial buildings. Most entrepreneurs who eye the Integrated Building Management Systems market (it’s projected to reach $ 19.25 billion in six years) somehow ignore the fact that plants, luxury hotels and business centers use security, HVAC and lighting management solutions designed by established vendors like Cisco and United Technologies.

There’s hardly room for an unknown start-up there – and that’s why you should focus on residential property instead.

What does a private house owner expect from a Home Automation solution?

  • Flexibility. It is much easier to smarten up an existing house than to plan complex wiring during the building design and construction process;
  • Reasonable price. As of January, 2017, the median US home price was estimated at $ 188.9 thousand. Your potential customers surely don’t want to spend another $ 60 thousand on a Home Automation system (which will probably get outdated in two years);
  • Scalability. 30% of US households now own at least one Home Automation gadget. Users want to connect their Nest thermostats to Belkin’s switches, smart bulbs and other devices that will hit the market in the near future. It is the lack of interoperability standards and single-vendor environments that keep Smart Home solutions away from success. Starting a Home Automation business with scalability in mind will also help you extend your product’s life cycle;
  • Value. Replacing a switch with a mobile application is not real Home Automation. According to Pavel Shylenok, CTO at R-Style Lab (you can check his profile at r-stylelab.com), Smart Home software should incorporate AI algorithms to be able to learn a house owner’s habits and preferences and manage its settings accordingly.

Wireless or Wired: Sizing Up Home Automation Business Opportunity

Also, your potential customer is most likely a rational, tech-savvy person who wants to automate certain tasks and improve the overall security of his house – and not a random big shot who’s going to spend $ 500 thousand on a sophisticated Smart Home system just for the sake of it.

Once you’ve identified your target market, it’s high time to choose between a wired and wireless Smart Home.

The pros and cons of wired Home Automation solutions

A wired Smart Home is made up of connected bulbs, electric roller blinds, intelligent thermostats, sensors, etc. – that is, all those gadgets that are referred to as the Internet of Things. However, each of these devices is connected to a 220w or low-voltage power line, has an embedded system running on it and acts as an independent and self-sufficient node.

The major advantage of a wired Home Automation system is its reliability. As simple as that. While a wireless connection can be disrupted and hacked, a wired Smart Home will continue to perform its functions even if its central controller breaks down.

After a string of high-profile cyberattacks involving compromised Wi-Fi routers, surveillance cameras and baby monitors, starting your journey as a wired Home Automation business is a perfect chance to ride the wave of IoT security hype.

Does it mean wireless Smart Homes are doomed?

Let’s take Z-Wave, a wireless communication protocol that has become an open-source Smart Home standard and boasts over 1.5 thousand certified products on the market. Z-Wave’s earlier versions indeed had a documented vulnerability: once a new device and a Z-Wave controller were put in the pairing mode, a hacker could theoretically intercept the encryption key and manage the device remotely. In 2016, the Z-Wave Alliance reinforced their security policy and introduced NFC-like pairing standards for Home Automation solutions. Unless a hacker is hiding somewhere in your living room, there’s no chance your gadget gets compromised.

When it comes to performance, a wireless Smart Home solution can indeed respond to your commands with a 1-2 second lag – simply because it is a mesh network where any message (like “the door is open” or “draw the blinds”) is transmitted by several nodes until it gets to the central controller or the intended device. 2 seconds is really not that much – after all, we’re not talking about a hospital or FBI headquarters.

High performance is a plus; but what are the disadvantages of a wired Home Automation solution?

  • Complex wiring. If your potential customer has bought a turnkey house (under $ 200 thousand), he will have to remove plaster and kitchen equipment, address an electrical wiring design company and do some major rewiring taking into account the intended location of each connected device within his Smart Home system;
  • Lack of scalability. You can’t just attach a battery-powered controller to an air conditioner and call it a day – and not just because of extra wiring. Wired Smart Homes make use of several communication protocols including HDL, KNX, BUS and OneWire. Initially designed for commercial property, these communication standards are secure and largely closed to mass market. In order to add a new device to the system, your customer will have to address a Smart Home installation company and design extra gateways and hubs (which might eventually affect the overall performance of the system);
  • High cost. The average customer cost of a decent wired Home Automation solution is estimated at $ 50 thousand. More sophisticated offerings which rely on middleware and make use of machine learning algorithms can cost as much as $ 300 thousand.

Why build a wireless Smart Home?

Except occasional performance issues, wireless Smart Homes are by no means inferior to wired ones. However, there are several factors that drive the demand for wireless solutions (and therefore improve your chances of success):

  • Lower barrier to entry. With so many vendors and wireless communication protocols out there, a house owner can purchase a couple of inexpensive gadgets (no embedded software, little power consumption) on Amazon and build his own Smart Home network in mere hours. The price of a complex Home Automation system, in its turn, seldom exceeds $ 10-15 thousand;
  • Flexibility. The installation of a wireless Home Automation solution does not require detailed planning and major rewiring; sensors and microcontrollers can be attached to any surface and are powered by rechargeable batteries. Thanks to middleware solutions like the Python-based Home Assistant, you can now connect any device regardless of its communication tech (Z-Wave, Zigbee or Wi-Fi) to the system.

Wireless or Wired: Sizing Up Home Automation Business Opportunity

How much does it cost to develop a Smart Home system?

The actual numbers depend on the expertise of your internal team (and the amount of work you plan to outsource), the novelty of the system, its tech stack and feature set. All in all, you can’t embark on a Home Automation project with less than $ 50 thousand in your pocket (that’s how much IoT prototyping usually costs).

While it’s better to craft firmware in-house, you should address a reliable mobile app development company to build sleek iOS and Android applications and a Cloud-based data management solution. In case you go wireless, you won’t have to develop an embedded system for each and every device (and contract multiple hardware manufacturers). Provided you have a decent prototype up your sleeve, you can always raise VC capital or turn to crowdfunding. Be creative, choose the right Home Automation technologies, evaluate the business opportunity – and success will follow!

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