Google, Nest and the $3.2 Billion API

This guest post comes from Roberto Medrano, EVP, SOA Software, a recognized executive in the API, SOA, Internet security, governance and compliance fields. Prior to joining SOA Software, he was CEO PoliVec, GM HP Software, President Finjan, VP Avnet Inc., and Marketing Manager Sun Microsystems. Medrano holds an MBA from UCLA, an MSEE from MIT, and a BSEE from USC.

The pundits are abuzz with Google's $3.2 billion acquisition of Nest, a move that could take the tech giant further into your home, your habits and the way you live. Some see this as a move with Machiavellian overtones, as in, Google already wants to own all your online data, and now it will be watching you every time you crank up the heat and snuggle up to a marathon session of Girls reruns. Others are overjoyed at the possibilities of the intersection of the various components of our lives, enabled through technology. When all is said and done, the reality is that one of the most important technology companies just paid approximately 12 times the revenue for a company that makes thermostats.

Although some are scratching their heads and trying to make sense of the purchase, we look at it a bit differently. This acquisition isn't just about thermostats or monitoring people's behavior. Google might have an innovation fetish, but it isn't just for the sake of being a first mover. The company is one of the most savvy organizations on the planet, and the people at Google tend to figure out, before most of us, not only how to develop and sell products, but also how to leverage Google's  existing footprint and capitalize on it. What Google gets in this acquisition is a whole new region for its brand. The potential in that "region" is every home on the globe.

Realistic? If you ever talk with a Google product manager, you'll find that realism doesn't always factor into the equation. Perhaps that accounts for the company's wild success. However, Google has clearly figured out an element that gives it a major advantage—this extension into your home really isn't that hard. Why? The Nest API, combined with Google's heavily secured application Platform, makes it rather simple for users. Invisible to them is the API working in the background to connect their thermostat and home environment data to their Gmail account, Android app, or any other piece of the Google product powerhouse. The API is the little nugget that will drive whatever success comes out of this acquisition.

The rub will be in how Google handles the API question. Google has always been good at providing APIs, Documentation and encouraging developers to innovate with its applications (Why do you think you are always using Google Maps when you look for directions?). Nest allowed access to its API only in late 2013. The company's focus seems to have been mainly on product development and keeping a fairly tight lid on how and where its product is used and extended. To not open up that API broadly and encourage development would be a shame -- because that is where the residual benefits of that $3.2 billion will come from. By allowing developers to find other ways to innovate and carry Nest functionality into cars, devices, home furnishings...the possibilities are endless.

Is Google making a play for your house? Perhaps, but this is an indicator of what's to come, so we can forgive what might look like Orwellian overtones. This scenario deals with where we're headed, and Google, as usual, is just the first to make it happen. Believe me when I say that there will be many, many other acquisitions mirroring this one (although probably not on this scale, at least not for a while). These decisions will be strategic business and financial ones, but they will all be enabled by the use of APIs. Without the API involved, the work required to connect products such as Google and Nest would be too complicated or costly. We are watching a great example of the API economy.