Parks Points

Smart Home API Strategies: Open vs. Closed Systems

by Harry Wang | May. 11, 2016

Any device maker and app developer can offer an API to their partners. However, smart home platform providers play a unique role in the ecosystem by aggregating and integrating third-party devices and apps. Platform providers' API strategies usually reflect their business strategy to augment their market position, set development priorities, and establish partnership preferences.

Parks Associates has identified more than 15 smart home platform players in this growing, yet competitive, market. These platforms can be segmented based on the extent of their openness through APIs and their support of either custom or do-it-yourself (DIY) installation. The majority provide platform solutions and professional services to business customers who, in turn, package different smart home services for end users (B2B2C). However, a few platforms also offer smart home services directly to end users (B2C).

Parks Associates segments a platform’s openness based on the following factors:

  • Closed system, proprietary API: A platform provider uses proprietary technologies to build the platform’s architecture, and its APIs only support its own branded devices. Third-party devices and applications cannot be added to the platform. Few companies are still pursuing this approach because the smart home market has changed so quickly and consumer choices of smart home products have exploded. Limiting consumers’ choices is no longer viewed as a sound business strategy.
  • Closed system, private API: A platform provider chooses to work only with partners that it trusts and with technologies that are compatible with its architecture. It has APIs but is usually reluctant to share them with its partners openly and prefers integrating partners’ solutions based on its own business needs. Control4 is a good example of this approach. AT&T’s Digital Life also takes this approach.

Platform providers that follow these two closed-system approaches usually believe that they have the assets that appeal to developers and have a clear vision of their roadmap for developing a complete smart home experience for consumers. They are concerned that an open-system approach may lead to compromising consumer experience and security holes exposed by third-party partners. Deep down, they fear that third-party partners may have a hidden agenda, including becoming their competitors in the future.

Open platforms follow these general guidelines:

  • Open system, managed-open API: A platform provider is open to integration with third-party apps and devices, but only on a curated basis. Companies taking this approach usually offer a developer program with a certification process to ensure that third-party apps and devices are consumer experience-optimized in addition to being technologically compatible. Their APIs are open to use by these certified partners only. Examples of smart home platforms that take this approach include Icontrol, Nest,, Qivicon, and Arrayent. 
  • Open system, open API: A platform provider has an open invitation to third-party developers and usually offers its APIs in the public domain with few restrictions on usage. This approach can usually attract a large number of app developers and device makers, as they can experiment with the platform’s APIs and create mash-up experiences for new use cases or differentiated apps. Wink and Samsung’s SmartThings are the best examples of platforms taking this approach.

Platform providers following an open-system approach usually believe that innovation needs trump concerns about security, compromised experience, or potential business conflicts of interest. Companies taking this approach also tend to be startups that lack brand recognition and distribution channels. By following an open API strategy, companies can build an ecosystem of partners rapidly and make a platform’s ability to innovate and disrupt a main selling point to business customers.

As is the case in many other industries, a platform that adopts an open API strategy at the beginning may choose to tighten up API usage rules after it reaches sufficient scale. Therefore, it is not surprising that in the smart home industry, the most popular platform-building approach is the one for Open System, Managed-Open API.

In summary, Parks Associates believes that APIs are not only essential to consumer smart home experience but also strategically important in smart home platform players’ game plan. As the smart home market is increasingly moving towards a battle among multiple ecosystems led by influential companies from the technology sector and the service provider industry, choice of API strategy can influence the size and growth of ecosystem and become a differentiator in competition.

This article originally appeared on TWICE

Harry Wang

Harry Wang

Senior Director of Research

Harry Wang oversees Parks Associates’ mobility and apps research, which covers mobile/wearable devices and services, apps and APIs, and mobile commerce/marketing, payment, and connected car industries. He is also the founder and lead analyst of Parks Associates’ digital health research program since its inception in 2006. He and his team cover emerging health technologies, applications, and services in areas such as chronic/preventive care, independent living, wellness and fitness, and virtual/convenience care.

Harry has published more than 40 industry reports and white papers and presented his mobility and digital health research at numerous industry events including CES, Mobile World Congress, CTIA, Open Mobile Summit, World Health Congress, the American Telemedicine Association Annual Trade Show, and Parks Associates’ CONNECTIONS™ and Connected Health Summit conferences.

Harry earned his MS degree in marketing research from the University of Texas at Arlington. He also holds an MBA degree in finance from Texas Christian University and a BA degree in international business from Guangdong University of Foreign Studies, P.R. China.

Industry Expertise: Digital Health Products and Services, Portable and Mobile Access Platforms and Applications, Digital Imaging Products and Services

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