Part III: Why Infrastructure Problems Hold Back So Many Great Smart Home Startups

This is Part III in a five-part series titled, “What The Next Billion Dollar Smart Home Startup Will Look Like.” Be sure to read Part IPart IIPart IV, and download the free eBook to catch Part V.

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While looking into what the next billion dollar smart home startup will look like, it’s also worthwhile to dig into into some of the obstacles that have held so many consumer IoT companies back in the past.

When a smart home startup fails, tech reporters and consumers will often focus on a device’s design, price point, or mobile app for why it was doomed. While those are all important aspects of creating a great product, those in the industry know that these issues are often signs of a much deeper problem below the surface.

More often than not when a promising connected home product fails, the root cause can be traced back to its cloud infrastructure. So why is it that in 2018, when tools and services abound for deploying scalable infrastructure in minutes, so many consumer IoT companies are crippled by infrastructure problems?

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Cloud Infrastructure For Consumer IoT Is A Different Beast

First, it's important to point out that building out cloud infrastructure for a consumer IoT product is a completely different beast than developing one for an app. Platform companies like Heroku have made deploying an app to the cloud so simple, it's almost an afterthought by now.

Today, app development teams are freed up to focus completely on features that differentiate their product from the competition. They know that the third-party tools they use to deploy their backend ensures that it just work.

Consumer IoT product teams haven't had this luxury. Building out cloud infrastructure for a successful smart home device is incredibly more complex.

A consumer IoT platform must be able to connect to thousands—if not millions—of devices in the field without any downtime. It should be able to stay on top of the health of devices in field and send back real time analysis for product teams. It must be able to provide APIs between your connected devices and mobile apps. It must provide flexible user roles so that the connected device works as intended for everyone in the home. And finally, it must be secure enough to withstand hacking and complex attacks.

It's no wonder that things often go so wrong for consumer IoT teams trying to build their cloud infrastructure from scratch.

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Why It's Still So Tempting To Build Consumer IoT Cloud Infrastructure In-House

In light of the fact that infrastructure is such a tricky issue for consumer IoT product teams, why don't they just entrust that work to a third-party? After all, the backend is not going to be where your product stands out from the competition. Why not free up your developer resources to focus on areas where your company can really innovate?

Well, for one, there haven't been many third-party platforms for consumer IoT companies to choose from. Like the days before app developers had Heroku, consumer IoT teams are used to taking raw ingredients from Amazon Web Services or Google Cloud Platform and starting from scratch.

But unfortunately, even now that powerful third-party cloud platforms have entered the market, some IoT companies still spend months—if not years—trying to build out their infrastructure in-house. There is still a misguided sense that building custom instead of buying third-party will make your product more robust, or more secure.

The truth is that it's very hard to differentiate your product with its backend infrastructure, and spending years on a custom-built solution can often lead to disaster down the road.

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How IoT Infrastructure Problems Go From Bad To Worse

Besides requiring huge amounts of internal resources, building your own infrastructure from scratch may lead to a minefield of problems for years to come. Without extensive experience in building scalable IoT platforms, even the most talented engineering team can make mistakes that hobble the company's future profitability—or even put it out of business.

What makes consumer IoT so tricky, even when compared to commercial and industrial IoT businesses, is that in most scenarios the only time the customer exchanges money with the company is at the time of purchase. When a company sells a connected lock for $150, it is promising to support that device every single day for five to ten years despite not seeing another penny from the customer over that time.

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If the company has built an efficient, scalable backend to support these devices, their annual cloud costs should remain below their projections throughout the life of the device. But one small mistake in how much cloud resources the average device uses each day or each year and you could quickly be losing money on every device sold.

Too many smart home startups have put their heads down and built their cloud infrastructure from scratch without the proper experience, only to discover years down the road that their business model is upside down—perhaps far too late to be able to keep the ship from sinking.

At that point, don't expect a lot of sympathy (or subscription revenue) from your existing customer base.

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Third-Party IoT Cloud Infrastructure Platforms Are Key

So how can consumer IoT companies save themselves from the headaches and risks of building their cloud infrastructure in-house? Just like with app development, the key will be finding a reliable third-party platform that will help you scale from zero to 1,000,000's of users. 

Finding the right third-party IoT platform ensures that your team spends less time keeping your cloud infrastructure up-and-running and more time finding ways to truly innovate in the market. The right platform will also be able to help you keep your annual cloud costs much lower than if you're built everything from scratch, no matter how many devices you plan to support.

For consumer IoT teams to be able to reach their potential, they need more third-party solutions that free them from the infrastructure trap so they can stop focusing on keeping their head above water and more time delivering world-changing experiences to consumers.


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This was Part I in a five-part Series called “What The Next Billion Dollar Smart Home Startup Will Look Like”. Click below to download the entire series as a free eBook. 

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