A throng of thermostats

What Google's purchase of Nest means for contractors

Jan. 16, 2014
Google can create infrastructure inside which Nest products can operate. Google tried this before with a software product and failed. The hardware is key. Google’s play has given the imprimatur to the “Internet of Things” connected home market. This transaction demonstrates that customers want these products and that the market is here. There will be no substitute for the professional contractor. The best contractors will use these tools to enhance their business.

MOUNTAIN VIEW, CALIF. — So Google bought smart thermostat maker Nest Labs for $3.2 billion. That’s a lot of dough that’s hard to justify with the hardware involved, so the $3.2 billion isn’t about selling widgets. It’s about access into consumers’ homes.

On the surface the transaction makes a lot of sense for both parties. Nest Labs co-founder Tony Fadell told Fortune magazine that he and his partners — many of them ex-Apple engineers — want to create products and services but they don’t want to create infrastructure. Google can create infrastructure inside which Nest products can operate. No doubt that thermostats and the CO/smoke detector that Nest makes now are just the beginning.

Having that hardware is crucial, said Geoff Godwin, vice president of marketing for the White Rodgers unit of Emerson Climate Technologies.

“I think what this means is that there is even more interest by companies trying to gain access into the connected home,” Godwin said. “Keep in mind that this is not Google’s first foray into the connected home … they had launched PowerMeter but they had no real hardware components — it was just a software tool.”

(Google’s PowerMeter was a software tool to help homeowners track their energy use. The venture lasted less than two years and it was shelved in September 2009.)

They needed hardware

“They and Microsoft attempted it,” Godwin continued, “and neither one was successful because there was no hardware component going into the home. So the acquisition of Nest, even if they have the software, the hardware into the home is key. And the HVAC system, being such a major energy consumer in the home, they believe that that’s a natural connection point.”

What does this mean for contractors? Better study up on the available smart thermostats because Google’s play has given the imprimatur to the “Internet of Things” connected home market.

“I think it’s fantastic,” said Stuart Lombard, president of ecobee. ecobee essentially created the smart thermostat market when it released its thermostat in 2009.

“Three years ago people were asking ‘why connected thermostats?’,” Lombard said. “This transaction, $3.2 billion, demonstrates that customers want these products and that the market is here. It validates all the work we’ve done.”

Lombard said that by 2015 50% of the thermostat market will be smart ‘stats.

“I think it’s fabulous for our industry,” said Tony Uttley, vice president/general manager of Honeywell’s Home Comfort and Energy Systems Business. “It shows and continues to highlight the opportunities for having connected products in the home.”

There will be no substitute for the professional contractor. Brian Nelson, co-owner of Nelson Mechanical Design, Vineyard Haven, Mass., and White Rodgers’ Godwin both pointed out that there are so many ways to screw up an HVAC system that the services of a contractor are essential.

“Just because Google likes them doesn't mean that these thermostats are easy to install in a retrofit installation,” Nelson said. “It means more and more homeowners will need help installing these thermostats when confronted with a tangle of colored wires sticking out of the wall. We had a recent Nest ‘rescue’ — we thought for sure that the homeowner had cooked it with their attempt at wiring, but after we straightened out the wiring mess it actually came back to life a day later!”

Uttley and Godwin made the point that each house is unique and the assemblage of HVAC components in each house is unique, so contractors must be involved. Thermostats and other HVAC system components will be connected wirelessly and can provide homeowners and their contractors with a wealth of information to better manage the home’s energy, water, life safety and security systems.

Connect to your customers

“The contractors that we talk to, the top 1,000 contractors, most of these guys are embracing it,” Godwin said. “They see what’s going on and they want to connect their business to the customer. Contractors will be in the mix and the best contractors will use these tools to enhance their business.”

Chimed in Brian Nelson, “It means more thermostats that can communicate with us to tell us we have a service call to a seasonal home in danger of freezing in the winter — instead of a broken pipe, a frozen home, and an insurance claim, we have an opportunity to repair and service their HVAC system. The HVAC contractor becomes the hero for suggesting the smart thermostat and for preventing the catastrophe.”

Keep in mind that the Nest is a thermostat; it’s not a control system.

Radiant Professionals Alliance stalwart Bill Shady, P.E., who has worked as both a contractor and as a consulting engineer, encountered that in a high-end home. The homeowner was one of the early investors in Nest. He had a radiant system and thought that the Nest thermostats could be networked and could communicate and be controlled over the Internet.

“I’ve programmed these things,” Shady said. “Ironically, it did one in a house owned by one of the early investors in Next, a venture capitalist. He had a radiant hydronic system with seven zones and the guy wanted them to connect so that he could see his whole house and run his boiler off the Nest. And I said to him, ‘this is a thermostat, not a control system. You can’t link them’.”

There are a couple of ways that this smart thermostat/connected home market can diverge, so watch out for these developments.

First, in Shady’s experience with wealthy customers, they want to automate their whole home and you’ll run into audio-video contractors — Crestron, Savant Systems or Control4 — who want to connect with your HVAC system.

“You have to have 15 different conversations with the Savant contractor,” Shady said, “about how to program the slab sensors because he has no idea what a slab sensor is. This may make the world harder for contractors.”

It’s data mining

The second divergence is how smart, connected systems are used. Honeywell’s

Uttley talked about all the things that his company’s products can handle — energy conservation, security, and life safety. Honeywell has 2 million communicating thermostats installed that can connect with utilities and Smart Grid systems for demand-response.

Conversely, Shady and Godwin believe that energy conservation is just a side benefit for Google, which really wants to gain access to customers’ homes. They want to know when you open your front door, when you turn on your TV and what’s in your refrigerator so they can sell you something. It’s data mining, Shady said.

That kind of intrusiveness may be inevitable. “That boat has long sailed,” Godwin said. “Trying to hold back that information flow is very difficult.”

The direction the market will ultimately take will be up to the guy who writes the checks, the homeowner.

Connect with me on Twitter @bobmader

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