Why All The Best Minds In Tech Are Starting To Flock To Hardware (Not Software)

May 17 2014, 8:03am CDT | by

Over the past few years, Jon Bruner, the editor-at-large at publisher O’Reilly Media and former data editor at Forbes, started noticing how many of his technologist friends in the software industry were taking a keen interest in the hardware world.

“A lot of these people started seeing hardware as a way for them to extend the software that they had already written,” Bruner said.

The most obvious example in this is Google. The search engine giant has been buying up a flurry of robotics companies and of course the much talked about $3.2 billion acquisition of learning thermostat maker Nest.

The past few years have seen a growing interest in the “Internet of Things,” which promises eventually every object in your life will one day be connected to the internet. We’ve seen everything from internet-connected dog collars to sprinkler systems. But the most interesting thing is the software behind these devices and how it will make them more useful. This merging of the hardware and software worlds will be the focus of an event next week called O’Reilly’s Solid Conference, chaired by Bruner and MIT Media Lab director Joi Ito.

And even hardware makers are realizing that they need better software to make more useful products. Nest, best known for its sleekly designed thermostat, is constantly refining its software algorithms and adding new features. It hired Yoky Matsuoka, an artificial intelligence expert from the University of Washington, to lead its machine learning.

In an interview in December of last year, Nest cofounder and CEO Tony Fadell told Forbes, “Through software and service, we’ve been able to transform that piece of hardware to doing so much more than when it first came out.”

Nest’s focus on software is letting it find new ways to expand its energy services business. In an interview this week, Ben Bixby, Nest’s energy services director, told me that a software push will allow its thermostat users to save more energy by better coordinating what kind of climate they live in with their living habits.

And there’s big money behind this software that powers the hardware. A Bank of America Merrill Lynch report estimated that revenue from software alone powering the “Internet of Things” was $10 billion in 2013 and will grow to $36 billion by 2017. The report lays out how there are plenty of other big software players interested in this game too: Oracle, Adobe, Salesforce.com, Microsoft and Amazon.

This current hardware movement first started taking root among hobbyist, especially with the growth of the Maker Faire. Devices like Raspberry Pi have allowed any entrepreneur a low-cost way to take their hardware dreams and add a layer of intelligence on top of it.

Prototyping hardware has also gotten faster for small startups, not only because of 3D printing, but also because factories in China have begun offering manufacturing services for small batches. Companies such as PCH International can help entrepreneurs with the logistics of these Chinese manufacturing deals.

“Suddenly, the creative pallet has broadened for software engineers, ” Bruner said. “ You don’t have to be a Sony anymore.”

Ultimately, though, people will only be comfortable with the new level of pervasiveness of all these “smart” objects if they are able to provide value with better software and services, Bruner said. Take, for example, when Google introduced Gmail in 2005. People complained about the company’s servers reading user email to offer up relevant ads. But soon it was quickly forgotten after users recognized the enormous value of Gmail.

Similar to the ridiculousness of all these new smart gadgets being offered today, they will need to actually offer value in order for consumers to be okay with it. For example, a microwave with an embedded radio chip sending consumer data back to the manufacturer will likely cause consumer pushback. But if that microwave could, say, download optimal cooking cycles for different foods, people might start feeling differently about it.

“Nobody likes to be spied on when they’re not getting anything out of it,” Bruner said.

“Eventually, the internet will be so much a part of us—40 sensors in the house, wearings things on your body and your cars, and internet-connected sprinklers—that you won’t look the internet as a separate thing, it will just have the invisibility of ubiquity; the internet just becomes part of the fabric of life,” O’Reilly’s Jim Stogdill said. “It’s kind of creepy, the possibilities that will come out of that.”


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