This Startup Is Looking to Cash In on Cisco’s ‘Internet of Things’

SmartThings wants to make all your devices connected

   

Cisco (CSCO) might have been hammered late last week in the face of not-so-hot earnings guidance and a host of layoffs, but its long-term goals still offer plenty to like.

Specifically, I’m talking about Cisco’s focus on the “Internet of Things” — a trend CEO John Chambers believes has a potential $14 trillion in profits for companies in the space. Of course, while CSCO has its eye on dominating the IT industry by dominating the Internet of Things, startups are trying to get a piece of the pie, too.

One prime example: A Kickstarter-funded company called SmartThings.

Earlier this week, New York Magazine’s Kevin Roose published a piece — cutely called “The Internet of Things Taught My Dog to Text” — that showcased his one-week foray into the world of the Internet of Things via SmartThing’s connectivity kit.

His main takeaway: ”After a week of testing it, I’m convinced the Internet of Things is almost here. And it could be huge.”

If you’re like me, the Internet of Things isn’t easy to wrap your head around — one reason I was so drawn to this explanatory graphic last time I covered the subject. Luckily, Roose does a great job of explaining it via his personal experience and some money quotes from SmartThings CEO Alex Hawkinson.

See, while it’s a no-brainer that more and more things are, and will be, connected to the Internet, Cisco’s estimation that 50 billion devices will be connected by 2020 is just an astonishing figure that takes some digestion.

What became clear from Roose’s piece was that the figure — while impressive — actually misses the point. It’s not the sheer quantity of things connected to the Internet, but how they are subsequently connected to each other.

SmartThing’s CEO describes his connectivity kit as a ”centralized brain for your everyday devices,” while Roose smoothly describes that SmartThings didn’t just create a ”cornucopia of different kinds of sensors, all of which speak a common language and can send information back to a central hub,” but also is an ”open-source platform that anyone can build on.”

That means all those connected devices — Philips’ (PHG) app-controlled light bulb and Belkin’s Internet-compatible gadgets, the Internet-connected cows and water pipes that Cisco likes to use as examples, NFC-equipped toys from Disney (DIS) and Activision Blizzard (ATVI), and even the smart parking meters I’ve encountered that let you pay from your Apple (AAPL) iPhone or Samsung (SSNLF) Galaxy — all work together in one big, Internet-driven ecosystem.

Of course, the natural follow-up question beyond how Internet of Things actually works, is whether you actually want it to. Despite Roose’s overall enthusiasm, even he had his qualms with the technology. He wrote:

“I couldn’t deny that SmartThings solved several small, annoying problems. Within an hour, I’d gotten a simple security system for my front door, made sure I’d never forget to turn off the light or lose my keys, and created a way to keep my dog from running away — all well worth the $199 price of a basic kit …

“(But) … with so much of your daily routine outsourced to apps and gadgets, you start to have the strange sense of being a passive actor in your own life, mindlessly tripping sensors and watching the effects unfold — not to mention the privacy concerns associated with a device that keeps track of literally every step you take.”

Still, Roose was a fan of the Internet of Things after just a week and, considering consumers left and right seem to value convenience over privacy in most corners of the Internet, it seems likely that this kind of connectivity will be no exception.

With that in mind, Cisco and SmartThings both seem to be on the right track.

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/08/how-this-startup-is-looking-to-cash-in-on-ciscos-internet-of-things/.

©2014 InvestorPlace Media, LLC

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