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App Economy

Samsung's $100 Million Internet of Things Bet Is Even Crazier Than You Think

The company dreams of making all our devices and appliances live in harmony. Even with a humongous bankroll it won't be easy.

[Photo: Flickr user Kārlis Dambrāns]

When you think of impossible dreams, Samsung probably doesn't come to mind.

While the South Korean tech giant is a capable creator of mobile devices, computing components, TVs, and household appliances, it tends to be more of a fast follower than a visionary. It sometimes leans too heavily on gimmicks, or takes too much inspiration from Apple—with an occasional exception—and is still figuring out how to make a killer smartwatch despite six attempts in the last 18 months.

But let's give credit where it's due. Samsung has some big ideas about the Internet of Things—the concept that everything from your lights to your car to your coffeemaker could gain some intelligence through an Internet connection. At CES, Samsung declared that it wants an entirely open ecosystem for these devices, so the door locks, garage door openers, and light bulbs of the future will all speak the same language. For startups that want to help build this ecosystem, Samsung co-CEO BK Yoon even pledged a funding pool of more than $100 million.

Taking a vow of openness isn't too remarkable on its own—that's how Google got its foot in the mobile door with Android, after all—but we're talking about a market with hundreds of devices, very few of which are under Samsung's control. Getting them all to work in harmony and make smart decisions on the user's behalf is no simple task. It might be the most ambitious thing that Samsung has tried to do.

Samsung co-CEO BK Yoon

Standards Stand-Off

If you're looking to build a smart home today, you can't just go on Amazon, buy whatever lightbulb or door lock you want, and expect everything to play nicely together. In most cases, you need a hub device that links all the individual pieces, and you need to make sure those pieces are all compatible. The more pieces you add, the more you become locked into a single platform.

Samsung and plenty of other companies rightfully see this as a problem, but they hardly see eye to eye on the solution.

Part of the issue comes down to networking. Today, many devices rely on a 10-year-old open standard called ZigBee, which wasn't originally designed to communicate across different product types. The proprietary hubs you see on the market today are a workaround, aimed at letting each system's lights, locks, and thermostats work in tandem. To truly fix the problem, several new standards—including an updated version of ZigBee—have emerged to accomplish what the old standard could not.

Samsung has thrown its weight behind an effort called Thread, which also has the backing of Nest, processor designer ARM, and a few other industry players. As Parks Associates analyst Tom Kerber explains, Thread works by assigning every device its own IP address, and brings numerous benefits including end-to-end encryption and low power consumption. "If you think about longer-term, it's very likely that a lot of the intelligence is going to be in the end devices rather than in a central controller, so these end devices need to be addressable, and IP is kind of predominant," Kerber says.

Still, Thread requires specific radio hardware that not all devices have today. So while it's a forward-thinking solution, Kerber doesn't think it'll gain traction for another five years or so. That gives plenty of breathing room for other solutions such as ZigBee, Wi-Fi, and Bluetooth to update their own respective standards.

The other problem has to do with smart home applications themselves. Even if every smart home product used the same networking protocols, they might not be compatible without specific software to link them together. So in addition to the networking standards race, Samsung is also part of a battle over software standards.

So far, Samsung has sided with the Open Interconnect Consortium, a group hosted by the Linux foundation that lists Intel, Cisco, and GE Software among its core membership. Recently, the group announced a framework called IoTivity that will allow devices to communicate across different network protocols and operating systems. The idea is that future smart home apps could control any IoTivity device, across all brands that support the standard, with the same piece of code.

But again, IoTivity isn't the only standards effort in town. The competing AllSeen Alliance includes heavyweights such as LG, Microsoft, and Qualcomm's Connected Experiences division, and a U.K.-based group called HyperCat is pushing its own standard. It's unlikely that they'll come to terms anytime soon—especially with reported licensing issues at the core of their discontent.

Products from SmartThings, now part of Samsung

With all this in mind, BK Yoon's impassioned argument for an open Internet of Things almost seems quixotic, though the company likely realizes that it won't win every standards battle outright. Alex Hawkinson, founder and CEO of SmartThings (which Samsung acquired last year for $200 million) acknowledges that one dominant standard is unlikely to ever emerge. Instead, he expects to see a consolidation over the next few years. Even if competing standards remain, he believes consumers will benefit through lower prices (as devices require fewer radios to communicate) and simpler security.

"There is room in the world for multiple standards," Hawkinson says.

All Locked Up

Interoperability may be the dream, but it's not like the smart home can't go on without it.

Google's Nest, for instance, has built its current business around not working with everyone, and instead focusing on a limited number of tie-ins that make clever use of the company's smart thermostat, smoke detector, and Dropcam cameras. Install Automatic in your car, and Nest will learn to warm up the house when you're close to home. Wear a Jawbone fitness tracker, and Nest will turn the temperature down when you go to sleep. Nearly everything still revolves around the thermostat, but the other devices are adding data points to make the core product work better. That approach seems most likely to propel smart home products in the near future.

"People just want the simplest thing to work well," says Brian Bedrosian, senior director of embedded wireless at chipmaker Broadcom. "[The industry gets] people engaged by building quality products that work consistently and build a fundamental value proposition."

Apple, meanwhile, is using its marketing power and mindshare to bypass the open ecosystem problem altogether. With its HomeKit platform, all smart home apps have a common method of finding and controlling devices, and if users have an Apple TV in their living rooms, they can remotely command those devices through Siri. For users, simply looking for the "Made for iPhone" logo would ensure this level of interoperability. While this doesn't solve the problem of being locked in, it's unlikely that many users will care given iOS's historically high loyalty rates.

Samsung could easily go either of these routes. It has a huge range of mobile devices, living room products, and appliances that it can tie together—even without an open ecosystem—and its appliance business could allow for smart home integration that Apple and Nest can only achieve through partnerships. A closed ecosystem with a handful of trusted partners could still be a success.

So why is Samsung so interested in an open ecosystem? It could simply be a way for the company to win affection, portraying itself as a crusader against walled gardens. But that explanation seems suspect, given how many other Samsung products (from smartwatches to VR headsets to streaming music services) don't work with other companies' hardware.

An EE Times article from late 2013 may hold a clue: In it, Samsung speaks of building an open ecosystem for the Internet of Things, with a $100 million accelerator fund for participating startups. The ultimate goal, the story says, is to build artificial intelligence technology that can gather data from smart homes, cars, and wearable devices, and turn it into useful advice. Samsung says that $100 million is separate from the fund that BK Yoon referenced last month, though it'd be surprising if they weren't pursuing the same goal.

If that sounds like a stretch, just consider Yoon's CES keynote, in which he spoke of the ability to "transform our economy, society, and how we live our lives." It seems he has more in mind than just making sure all your smart lightbulbs play nicely in an open ecosystem.

Samsung played up the Internet of Things at CES 2015

Besides, this is ultimately where the Internet of Things is headed, and we're already starting to see some early applications. Ryan Maley, ZigBee's director of strategic marketing, told me how he was impressed at CES by a system that could monitor the daily habits of seniors, and let their caretakers know about any concerning changes in behavior. It's an example of how smart home technology can move from luxury concepts—such as a house that turns on your lights for you—to providing peace of mind for everyone.

"That is something that, quite frankly, you don't have now today," Maley said. "... That is kind of a game-changer for home automation."

SmartThings' Hawkinson says the company is simply trying to "do what is right by customers" by giving them more choice and flexibility, and by leading through example. But he also hinted at greater things to be done on top of that ecosystem. "We will focus on creating amazing experiences in both software and hardware, and win through the power of our innovation rather than trying to win by locking others out or limiting choice," he says.

Samsung, then, wants to skate to where the puck is going, and the way it wants to get there is by making sure all smart home data is available to collect and synthesize into actionable intelligence. But by jumping into the mess of open standards, it's no longer just Apple that stands in the way of Samsung's goals. It's the entire industry.