Like Kobe Bryant knifing through the lane for a thunderous slam-dunk, the home automation market is getting ready to explode. Fueled by advancements in technology, homeowner desire and commitments from leading manufacturers, software developers and retailers, the connected home has become something to cheer about.

According to J.P. Freeman and Co. Inc. of Newtown, Conn., this estimated $8 billion market, which was valued at just $340 million in 1990, is expected to top $27 billion by 2005. In addition, Dallas-based Parks Associates projects broadband Internet services—the lifeblood of the connected home—will account for half of all residential Internet access revenues by 2004.

Surprisingly, Security Sales’ 2000 Dealer Survey found that revenue from home automation and home entertainment made up just 3 percent of total dealer revenues in 1999. The good news is that, as low-voltage wiring experts, alarm dealers are uniquely qualified and positioned to capitalize on this market.

Earlier this year, a couple of major announcements served as an exclamation point validating the viability of the connected home. First, Sears, Roebuck and Co. partnered with Home Director Inc. to launch its Connected Home Initiative, with Home Director handling installations and Sears taking care of servicing. Then, General Electric Co. (GE), Microsoft and SMART LLC formed a new company to offer simplified connected home solutions.

Herman Cárdenas, founder, president and CEO of SMART, is one of the pioneers and visionaries driving the home automation revolution. He has more than 22 years of experience in home and commercial controls, electrical engineering and contracting, electronics manufacturing, and custom homebuilding.

Security Sales recently traveled to SMART’s Las Cruces, N.M., headquarters for an exclusive interview with Cárdenas, who shared his insight about the home automation market and its impact on the security industry.

Security Sales (SS): Could you describe your background, where you’ve come from and where you are today?

Herman Cárdenas (HC): Well some people might call me a nut! I have a very eclectic background. My formal background is in electrical engineering, while my informal background is business, through the school of hard knocks. I am originally from New York City, and wound up in New Mexico about 21 years ago.

I initially started out as an electrician, came out to New Mexico and started my own company. Then, completely by accident, I got involved in the building business.

I built a house that I called Hometech, which had a voice-synthesized computer in it that you could talk to and the computer would respond back. I then completed another house, which I named Sapphire, that I could tell, for example, I was in a romantic mood and have it respond by dimming the lights, closing the shades, filling up the hot tub and turning the stereo to a jazz station. It was a big hit. I stayed in that business for 10 years.

At the same time, I picked up a background on the installation side because I installed many types of systems, including security, home automation and energy management systems.

I became very heavily involved with the National Homebuilder’s Association, serving as a board member. That affiliation got me involved with Smart House, which was the National Homebuilder’s Association’s attempt to solve the problem of too many systems in the home.

I developed the Smart Bridge, which very quickly became the nucleus of their Smart House system. In order to accomplish this bridge, I started a business that we initially called Smart Interface Corp. Ultimately, we changed the name to just SMART, which is what it is today.

We started the company with a couple of part-time engineers and myself. Then, Amp, a connector company now owned by Tyco that had poured $20 million into the Smart House program, offered to invest and partner with us. I accepted their offer in order to grow the business more quickly. In 1995, I began focusing exclusively on SMART.

SS: How did the relationships with General Electric and Microsoft come about?

HC: In 1998, we were told by Amp they were undergoing a hostile takeover by Allied Signal and could no longer fund us. I kept the company hopping along for about a year and a half until late 1999, when General Electric saw what we had developed: our own technology for making home control extremely simple for both homeowners and installers. They agreed to come into the company and invested very heavily into it. GE brought us instant credibility. We closed our deal with them in January 2000.

GE wants to work closely with integrators in the field to offer end-to-end solutions. That, in a nutshell, is how we got Microsoft involved.

Our primary target was Microsoft because we needed a very strong technology player that had the wherewithal to create the glue for all these software-based systems. We believe Microsoft will help us accomplish the main advancements in the connected home going into the future. They also have a very strong name on the technology side of the market.

SS: How long will it take for your team and its mission to coalesce into a unified whole?

HC: Like everything else, nothing happens overnight. In our first effort as a company, GE SMART Microsoft is to collaborate to create a specification for the industry. The industry today is plagued with standards, but none of them are cohesive. We want to create a very strong specification that provides the basic infrastructure.

How long before the connected home becomes a full reality? I believe it starts today. However, the connected home will probably not be commonplace for three to five years.

By adding electronics to integrate other networks into the system and software to glue it all together, we have taken it to the connected home level. We are working on the next generation of connectivity, called SEP or simple control protocol.

All these things will begin to gel later this year and into next year. By 2003, we will be rocking and rolling in the connected home market.

SS: What about retrofitting existing homes?

HC: Today, it is difficult to retrofit structured wiring. There will be many wireless solutions. Currently, we believe there is enough business to go around just in the new construction market alone. However, by no means are we discounting retrofits.

As for the retrofit market, the security guys have an advantage because they have been in it for quite some time. We believe security installers have the best opportunity because they are constantly dealing with retrofit customers who are having security systems upgraded. Once you are in the home and have the homeowner’s attention, there is the possibility of selling them other products.

SS: How can a security dealer become an authorized GE SMART dealer?

HC: It is open to any dealer who contacts us, has the capital to do it right, has been in business at least three to four years, and is willing to commit several days to getting trained. After they have been properly trained, we certify them as an authorized dealer to install any number of our systems and products.

Our dealers are our partners. They are the extension of us that the consumer sees and needs. We not only want to sell them products, we also want to make them successful. That’s why we are very choosy about whom we work with. We don’t want the trunk-slammers or part-time security guys.

SS: Are you concerned about competitors such as Sears and Home Director?

HC: Competition will always be there. We love competition. We wish all success for all companies. We wish ourselves the most success. We are going after the No. 1 position. Companies like Home Director are not known brands to consumers.

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