Prodea buys Arrayent to communicate with smart devices

The two IoT platforms will combine to form an Internet of Services company

The Internet of Things has been one of the most exciting spaces to watch over the last few years, as it has become more mainstream in both consumer and enterprise use cases. The technology is exciting for many verticals; for example, a survey from MediaPost Communicationsand Advertiser Perceptions, which was published in November, showed that nearly 75 percent or ad and marketing executives were excited by the technology, compared to 14 percent for artificial intelligence and virtual/augmented reality.

There's a huge demand for this technology, and a big monetary opportunity as well, as investment in the Internet Of Things market is expected to reach $5 trillion by 2021 with an 22.5 billion IoT devices expected by that time.

Now, two companies in the IoT space have decided to come together to create a solution that will allow them to tackle that huge market as Prodea, an IoT services company for global operators, has acquired Arrayent, a consumer IoT platform for brand manufacturers, it was announced on Wednesday. No financial terms of the deal were disclosed. Raymond James, Inc. acted as the financial adviser to Arrayent in the deal. 

Founded in 2002, Arrayent allows device, appliance and other product companies to develop and deliver connected products to a cloud platform. This enables brands to connect their products and systems to the Internet and allowed devices to work together with the ecosystem that the consumer selected. The company raised $28 million in venture funding, most recently a $4 million round in early 2016 from investors that included ORIX Ventures, DCM Ventures, Intel Capital, Opus Capital, Comerica Bank, and several angel investors.

Prodea is the provider the Residential Operating System, an end-to-end service delivery platform that enables diverse Service Providers to deliver connectivity and services between people, data and devices. It has raised $124.13 million in funding.

The two companies first met a year ago, and initially entered into a partnership as they saw right away that the two services complemented each other, said Anousheh Ansari, CEO and co-founder of Prodea Systems, and Cyril Brignone, who became CEO of Arrayent in 2015 and is now Chief Revenue Officer of Prodea, in a joint interview. He is also the co-founder and former COO of this website. 

"Arrayent's offering is really about equipping brand manufacturers with a solution to launch their IoT connected product to market quickly. That's what we have been doing. But that technology can be applied at other verticals, such as smart cities and healthcare. We had no experience with this, but we had the layer to do those integrations and bring those solutions to the market," Brignone told me.

"Prodea is pretty much exactly the mirror of what I just explained. They are extremely knowledgeable about releasing vertical solutions in IoT for healthcare, for education, for home security, but were not doing anything for the brand manufacturers, the ones building the lightbulbs, washers, dryers, garage doors and thermostats. So, by putting those two together, you get a really interesting IoT platform where it's really easy to deploy existing and new services to, not only the brand manufacturers, but also to telcos, to the government, to insurance, to healthcare markets. We got really excited, because our solution and our knowledge were the mirror of theirs in different verticals and when you combine them you have a really unique solution."

"We've been one of the early entrants into this marketplace, started more than 10 years ago, so what we've seen in IoT is that it's an exponential technology that's gotten everyone excited, and everyone talks about it. The first phase of this has been very much focused on the 'things' part of IoT and looking at how making everything smart and communicating with them and generating tons of revenue. It has generated a lot of activity and buzz in the market, however it has also been slowed down by the fact that a lot of manufacturers, enterprises, governments, everyone who talks about IoT deployment, they have been trying to figure out how to make it work for them, how to monetize, how drive value from making everything smart and driving data from it,” said Ansari.

The service part of this has been an important part that has not been focused on yet, and that's where Prodea has put a lot of their focus. We've been talking over the past year, and we kept looking at opportunities where we can partner up together and deliver something of greater value to different customers. That started the conversation for us. A few months back, we decided we were working together so closely so why not make that official? The dating went really well, so we decided to marry the two companies and take even bigger advantage of the opportunity out there. I think we will be able to offer something unique in the IoT space, and be able to really drive implementation and deployment to accelerate with a lot of our existing customers and hopefully with new customers."

Going forward, Arrayent will be folded into Prodea, with the two companies attempting to fully merge, becoming one by late August or early September of this year.

"We are fully integrating the team, so the engineering team is being merged, the sales team is being merged. We want to be on the market really quickly as one team, one offering, one positioning, one marketing, one pricing, one name. That's really the goal here," Brignone said.

"This market is already too confusing to have two offerings within the same company! There already something like 3,000 IoT platforms out there, we need to be seen as one team."

The long term plan is for Arrayent customers is for them to eventually become customers of Prodea. Arrayent currently has over 70 consumer products connected and managed across 82 countries and five continents. Some of its brand clients include Whirlpool, Pentair, Maytag, Commercial Laundry, Salus, OSRAM, Braeburn, Schumacher, Chamberlain and LiftMaster.

"There's a lot that needs to be done. Of course, we're both established companies with existing customers so it's important for us to make sure there's no disruption to our customer's activities, so we're going to do that as fast as possible without creating major disruption," said Ansari.

"The way I look at it, there's no line dividing Arrayent and Prodea anymore. We are all basically one company, and we're going to use the best and the brightest in both companies to build something very unique and special together. We're going to act as if we all started together, which is ironic because we almost started, if you look at the history of the companies, around the same time. We just took different approaches and paths to the IoT market and we're just now coming together. We don't see the company as operating separately in any shape or form. We just think that now we have a lot more goodies in our sales toolbox, and we can go to our customers with a lot more comprehensive offerings."

For Prodea, the company gets access to Arrayent’s ability to connect different devices into a single solution.

"Our focus was not on making anything smart or communicating. We took that part for granted and basically worked with companies, such as Arrayent, to find a way to communicate with devices, whether it's a camera, a medical device, an appliance in the house. We basically didn't even address that part of the equation. We took that layer, and then built on top of that, so whomever was providing that part of the solution, we would communicate to that layer and then try to extract data and create value to a service from the data set and the interaction,” Ansari told me.

For example, in the healthcare industry, one of the services Prodea offers is chronic disease management, in which it would work with a healtcare provider and build the service capability, providing a doctor or a nurse with data analysis that they could then use to see if there was something wrong with the patient. But, now, the company will be able to provide more than just being able to talk to medical devices to get data about the patient’s vital signs, but will be able to get data from other devices that they interact with. For example, a smart pill box that knows if they’ve taken their medication or not, or a smart scale to monitor their weight, or a voice activated device that would be able to detect if they’ve gotten up and walked around.

"By combining our forces together, the solution that we can bring to the customer will be more comprehensive. We can provide them with very competitive price points and business models, and, because of our experience in these industries, I think what we can offer is a very unique in terms of offering our experience deploying solutions in different marketplaces and cross pollinate across our customer set,” said Ansari.

“We've been focused on governments and operators and healthcare companies. We can bring a lot of the capabilities that Arrayent has into those relationships and enhance our footprint with those customers. The same thing can happen with Arrayent and their existing customers, where they're bringing a lot of capabilities but they need to turn those smart devices into services. We can help them bridge that gap and also deliver services quickly. Together we will be a much stronger company as we go out and address these opportunities.”

As for what effect this merger will have on the IoT space, Ansari and Brignone both believe that it will give manufacturers the solutions that they.

“Initially, there was a lot of focus in the IoT space on the ‘things,’ and how to make everything smart, how to communicate with them, how to extract data from them. A lot of work and products focused on that part of the market. Where we see the market moving is going from an Internet of Things to an ‘Internet of Services,’ because, at the end of the day, once you make everything smart, you want to drive value from the data you extract. The services you build around those devices and data is what really matters to anyone in the industry. That's where we see the market going and I think that's why Arrayent and Prodea coming together makes sense, because, together, we can deliver on that promise of going having smart things to having smart and valuable services,” said Ansari.

The reason that building those services is so important is that, for the consumer, IoT brings no value, Brignone said.

“Connected IoT adds zero value, I'm sorry to say. Turning on and off the light from my mobile phone or opening and closing my garage door or increasing my thermostat by one degree, even though it's five yards from me, is fun, it's cool, I look like a geek to my neighbor, but, at the end of the day, the value is really small because, for any of that, nobody will pay for it. Are you going to pay $1 a month to be able to control your thermostat? No. The value for the consumer is not high enough,” he said.

However, if those same solutions can be wrapped up into a larger service, then they have value. Consumers don’t want to pay for a motion sensor, he said, but they do want to pay for a home security system that includes those motion sensors. Now Prodea and Arrayent will be able to provide those services.

“It has to switch to a valuable solution, but those manufacturers don't know how to do that because they're not service companies. They're product companies. They know how to sell product and hope to never hear about it again. The service aspect is something new to them. They're trying to figure it out, but they all understand that that's what's needed if they want to monetize IoT. This is what Prodea brings. It's not just the API to turn on and off the light and to launch a connected product, which is what we were doing. They also bring turnkey solutions to monetize those connected devices and services. Also what they're bringing is this carrier grade quality of service, because of their background working with telcos. That's something that is needed in the IoT world, this higher quality, higher experience. A lot of the connected devices out there are crappy. What's really exciting is that it’s not just selling connected devices anymore but selling solutions our customers can monetize, and secondly, that really bring the quality level of those connected devices to another level.”