HTINews Interview

Interview with Herman Cardenas
CEO / President, Smart LLC

QUESTION 1 - In his State of the Union Address, President Clinton gave the nation 1000 days to have a PC in every house and Internet access for every child. How does this vision affect the Home Automation industry and where will we be in 1000 days (Year 2000)?

ANSWER 1 – If President Clinton’s aspirations come to pass, they should have profound effects on all industries related to the home, including Home Automation. I believe his aspirations are focused more on the educational side of the Internet. However, I do not share President Clinton’s optimism for such enormous market developments. In addition to computers having to come down in price, the Internet, its associated cost, and what I call the ‘ramps off of the highway’ would have to change and improve substantially in a very short time in order to support such growth and traffic. Just imagine what would happen if we doubled the traffic on our US highways over the next 3 years. This is what would occur to the Internet. The total infrastructure to support what will be the Internet of the future is just now in the planning stages.

My crystal ball is not clear yet on whether that infrastructure will all be in place by the year 2000, but I do know that we can expect big changes on that landscape. When the Internet is more common place in the home, programming or controlling your house from a remote computer, and having the home contact you and advise you of different situations will be so common we will wonder how our grandparents or even our parents managed to live without it.

QUESTION 2 - In another article this month, Joe Comerci calls Home Automation "The World’s Best Kept Secret" and challenges the industry to "Blanket the media with the virtues of Home Automation!" Do you agree that Home Automation needs a major marketing push and if so how, when and who do you see providing the leadership and financing?

ANSWER 2 – I tend to agree, although I don’t think that the lack of media coverage has been the bottleneck of our industry’s success. Home Automation has historically been the purview of the engineering hacker, the entrepreneurial individual who was driven by what could be done and not what the market or customer wanted done. There is nothing wrong with these roots. We needed this to happen in order for others to come into the market to speed its development. Now, Home Automation can count AMP, Honeywell, IBM, Leviton, Panasonic , RCA, and many large utilities amongst its ranks. These are very serious companies that have enormous marketing resources available to them. I really believe you will see a combination of activities developing between these companies and the utility industry. It is starting to occur now, but I see 1999 as the watershed year. I think 1997 will be better than any year up until now, with 1998 as the beginning of a breakthrough year, and 1999 bringing it all together. This will occur as a result of the right distribution being put in place to address the demand, consumer awareness rising, consumer electronics manufacturing entry price points dropping dramatically and the awareness of the inherent advantages that Home Automation products can bring to them.

QUESTION 3 - CEBus has been a long time in the development stage. Rumor has it that Smart LLC is ready to release some new CEBus products. Can you give us a hint as to what the product range and prices will be like? Are the products only aimed at the dealer/installer or will the DIY enthusiasts get some new toys to play with as well?

ANSWER 3 – Yes the rumors are true. Smart LLC plans on debuting a new line of SmartOne products for the professionally installed marketplace. Another product line that will address the needs of the DYI and be distributed through the DYI channels will be announced in the future.

As to price ranges, you can expect to see systems as low as $1,500 on up to $10,000 for a loaded installation to the end user. Without letting the cat out of the bag, you can expect to see many of the same features and functionality of traditional high-end systems that today sell for $20,000 plus, for between $5 to 10k. Our distribution plans will be announced and the release of six CEBus products will occur at Habitech '97. As one dealer has said, "this is a system worth waiting for." It is very modular and scalable in design. Many other exciting products will be released throughout 1997. Smart LLC plans to release other CEBus products throughout 1997.

QUESTION 4 - If you were on the verge of investing in a Home Automation system, how would you protect yourself against obsolescence and the continuous upgrade trail made popular by the PC industry?

ANSWER 4 – This is difficult to do by the average consumer today. The PC industry really has consumers in a vicious cycle of cannibalizing itself every 18 months or less. This may work for the business market, but I do not see how it can continue in the consumer market. To think that you would have to purchase a new stereo component or television or worst yet a new telephone every 18 months in order to stay current is unbelievable. My advice is that they look for a product that uses industry standards such as CEBus, LonWorks or X-10. This will not completely guarantee obsolescence, but it will help. To purchase a product with a proprietary protocol is a guarantee of obsolescence, or a fixed system that may not accept expansion if the manufacturer is no longer around. For Smart LLC this is a very real issue. We plan on delivering systems and products that use industry standards and are easily expandable at any time during the life of the home.

QUESTION 5 - Who buys Home Automation systems now and will that change over the next few years with ... hopefully ... the introduction of new and more economical products and services?

ANSWER 5 - For the past number of years, buyers of Home Automation products and systems have been the classic "hobbyist" and "technology enthusiasts"; some refer to these buyers as "innovators" as well. These types of buyers are always the first to get their feet wet with new technology, and they enjoy exploring new ways of using products. They like to see for themselves the benefits of new technologies, and they don’t need to be sold very much. Now, and for the next two or three years, you will see what is commonly referred to as the early adopters; these buyers will begin to appear as the clarity of value in Home Automation increases.

While not necessarily computer programmers, they are active computer users, and probably have home offices. They value entertainment, aesthetics are important to them, and they probably have a net worth over $500,000.

Future buyers of Home Automation products and services will be less technically oriented families who are seeking clear benefits and who have lower family incomes less than $100K. These buyers will begin to show themselves over the next 2-3 years. It’s a classic marketing model, as technology benefits increase and prices go down, more mainstream buyers will enter the market. We are headed there, but still a few years away.

QUESTION 6 - Do you see the Internet playing a role in the future of Home Automation? How will Smart LLC use the Internet to provide services and information to its customers?

ANSWER 6 – Let me polish up my crystal ball for this one. The answer is Yes. I do see the Internet, or its derivative, as a major player in Home Automation, or what I prefer to call Home Management. Home Management being the blending of services within the home (HVAC, security, A/V control, and lighting control) in combination with services entering the home, such as the ones that will be sold by utilities, cablecos. and telecos. The obvious first application is direct customer support. Through the pipeline of the Internet, companies such as Smart LLC can access a home server or controller, upload, download or accomplish remote diagnostics. Smart LLC is working on this as you read. A second application is remote access for the user. This means they can monitor or control their home from their computer at the office or lap-top while are on the road. This can be done today, but current technology makes it a difficult and slow process. Finally the biggest role the Internet plays for us involved in the Home Automation industry today and for a long time to come is marketing, consumer awareness, and sales and information through our individual, trade and industry Web Sites.

BIOGRAPHY - Herman Cardenas is CEO / President and founder of Smart LLC, a New Mexico based manufacturer of smart electronic products. Smart LLC is a recognized leader in the development of CEBus technology and home management products and systems.

Mr. Cardenas currently is the Chairman of the CEBus Industry Council (CIC) a multi industry trade association charted with developing open communications standards for consumer products. With over 18 years of experience with electrical engineering, home automation, electrical contracting, home building/design, manufacturing, and computer software, Mr. Cardenas has been instrumental in leading the CIC to the adoption of the Home Plug n Play standard and the separation of the Common Application Language (CAL), which has recently been adopted by the IEEE 1395 committee for Audio-Video consumer electronic products and positioning CIC as an Interoperability organization.

Prior to founding Smart LLC, Mr. Cardenas founded and established several successful businesses including an electrical contracting company, a multi-million dollar manufacturing business and one of New Mexico’s largest and most successful custom home building companies.

Mr. Cardenas enjoys the opportunity to serve on numerous national boards and trade associations including tenure as an active and recognized member of the National Association of Home Builders. Smart Interface, now known as Smart LLC was responsible for the development of the innovative SmartBridge controller, which was a highly regarded critical product for Smart House product set.

Known and highly respected for his vision of this industry, expertise in home management systems, product development, system integration, controls and his marketing insight, has earned Mr. Cardenas praise and respect from electronic manufacturers and dealers alike.

Today, Smart LLC shares a strategic relationship with AMP Incorporated (a Fortune 100 company) and is leading the way in innovating, developing and manufacturing CEBus products and systems.

Mr. Cardenas can be contacted at cardenas@ge-smart.com .

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