Business Case for Smart Homes

  • Eric Franck
  • Joram NautaEmail author
  • Robin de Haan
Living reference work entry


The application of domotics in what is often referred to as “smart homes” has encountered an odd obstacle. Many people agree that domotics are a highly promising development. They make life easier, can help the elderly continue living at home for a longer period of time, and can reduce the involvement of professional care providers and case managers, causing healthcare costs to go down. You’d expect to see massive growth in domotics applications. However, that is not the case as of yet, particularly not in extramural healthcare in the Netherlands (Nivel 2011). Applications in intramural institutions regularly involve infrared sensors, noise-level sensors, bed mats, door locks, cameras, speaker-microphone systems, alarm buttons, and chips in clothing. Figures on the amount of extramural application of domotics do not appear to be available in the Netherlands. Applications in the extramural setting appear to primarily involve the personal alarm button (RIVM National Institute for Public Health and the Environment 2013).


Healthcare Facility Control Room Smart Home Business Case Labor Saving 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


The application of domotics in what is often referred to as “smart homes” has encountered an odd obstacle. Many people agree that domotics are a highly promising development. They make life easier, can help the elderly continue living at home for a longer period of time, and can reduce the involvement of professional care providers and case managers, causing healthcare costs to go down. You’d expect to see massive growth in domotics applications. However, that is not the case as of yet, particularly not in extramural healthcare in the Netherlands (Genet et al. 2011). Applications in intramural institutions regularly involve infrared sensors, noise-level sensors, bed mats, door locks, cameras, speaker-microphone systems, alarm buttons, and chips in clothing. Figures on the amount of extramural application of domotics do not appear to be available in the Netherlands. Applications in the extramural setting appear to primarily involve the personal alarm button (RIVM National Institute for Public Health and the Environment 2013).

We argue that most of the projects so far have dealt with technology-push developments, adding or increasing the technological dimension of smart homes and the implications for service or healthcare providers. Most of these types of projects have had some sort of (external) financial stimulus, allowing the technology to mature, as these projects mainly covered new development of technologies, systems, or software.

Question and Structure of this Chapter

This chapter addresses why the positive business case for smart homes is so hard to establish. We hope to increase insight into business cases of smart homes and to formulate what could be done to help realize more benefits, thus improving the business case.

The approach we take will first focus on the three key effects that interventions in smart homes are likely to have on an aging population that is in need of some form of care. Secondly, we will demonstrate how interventions can be observed and reformulated in a societal business case by using two case studies. Finally, we will provide implications in how to successfully launch the business case for smart homes for the aging population. Before doing so, we will first present a definition of a business case.

The chapter will be based on relevant literature and practical experiences from working with healthcare providers and SMEs, trying to build positive business cases for smart homes for the elderly.

What Is a Business Case?

A business case is a description of the business considerations involved in an investment in healthcare innovations. A business case systematically assesses the advantages and disadvantages of healthcare innovations by describing how the costs and efforts involved in an innovation compare to the benefits and effects of its application. In our opinion, a good business case also addresses the risks, support, and feasibility of the proposed healthcare innovation. Business cases are often used to decide whether or not to launch an innovation, continue its application, or develop the innovation in a more specific detail.

The figure below outlines the different aspects of a business case (Fig. 1).
Fig. 1

Aspects of a Business Case; a step by step approach

When using the term “business case,” we should distinguish between two different types of business cases: an organizational business case and a societal business case.

The organizational business case has a limited scope that comprises costs and benefits over time for a specific stakeholder. The costs of the investments are calculated and the effects of the investments are monetized for that individual stakeholder. For example, an SME selling a smart-homes product to an end-user at a profit would have a positive business case.

The “societal business case” looks at the situation from the perspectives of all the various stakeholders, comprising all key actors that are affected by the initial investment. As costs and benefits are spread out over time and across multiple stakeholders and are harder to predict and monetize, it is at this level that we need to pay more attention to the business case.

What Is the Problem in Assessing the Effects of Domotics for a Business Case?

We can summarize the key effects of domotics in three categories:
  1. 1.

    Saving labor in healthcare processes (improved efficiency or substitution; both are “short-term” or direct savings)

  2. 2.

    Effects on the quality of life and effects on the quality of care

  3. 3.

    Long-term effects (which include postponement effects)

We will look at each of these categories below and list what makes it difficult to establish its contribution to the business case:
  1. 1.

    Labor Saving

    Labor saving is the easiest return for financiers to understand. It is not difficult to explain to financiers that there are costs involved in scheduling employees to provide care or nursing – and that everything that could reduce employee hours or be done by less expensive staff will cut costs. What is difficult is determining exactly how many employee hours are saved, since no one knows where to start calculating how many hours are saved. Yet these types of calculations are easier to make in other sectors. It is a long-standing practice in the chemical and industrial sectors to conduct thorough analyses of how labor is deployed in the production process; the effects of automation or robotization on production process efficiency are subjected to careful consideration. Very bluntly stated, that is to some extent what domotics is about: automating healthcare tasks. Geriatric care has less of a tradition of thoroughly analyzing the production process, in part because healthcare is said not to lend itself for measurement or analysis. Healthcare is provided on an instinctive basis and is tailored to each individual person receiving it. In the healthcare sector, so this line of reasoning goes, each healthcare activity is unique and difficult to automate. However, when taking a deeper look at geriatric care, it becomes apparent that it involves many repetitive activities. Employees open and shut the curtains in a room every single day. Alerts are sent to a central control room every day, notifying a nurse to go check on the person in question. Home care staff prepares meals for clients living at home on a daily basis. And medical aids and devices are used in the healthcare sector. For instance, lifting aids and chairlifts are commonplace these days. And dust is no longer swept up by hand but hoovered up with a vacuum cleaner. In point of fact, there are a number of repetitive tasks that could effectively be automated using domotics. Various assessment tools are also available to help identify how many employee hours can be saved. The website (TNO 2013) offers an example. This tool offers a systematic assessment of the steps that need to be taken in order to identify labor savings resulting from domotics. Calculating labor savings may take more getting used to in the healthcare sector than in other sectors. This may be due in part to the fact that employee hours are not all that changes; the quality of care or quality of life also changes.

  2. 2.

    Improvement in the Quality of Life or Quality of Care

    Healthcare requires personal involvement. That means that the work also evokes a certain “emotion” in the client who perceives how the care is provided. In marketing terms, this is known as the “experience.” A meal prepared centrally in large quantities using modern kitchen equipment is produced much more efficiently than a meal prepared in the kitchen of a small-scale residential unit. However, the latter may be the preferred option, since that self-prepared meal improves the quality of life. In this situation, the residents are there during the cooking process; they can see or hear how the meal is being prepared, which is a fun activity for them. It not only evokes pleasant memories of being young in their mother’s kitchen but also ensures that residents remain mentally and physically active. That constitutes quality of life. And that quality of life is worth something in healthcare. At the same time, quality of life is very difficult to assess objectively and difficult to compare with improved efficiency.

    However, there are methods available for assessing quality of life, such as various questionnaires. On the website www.businesscase-longtermcare (TNO 2013), for instance, questionnaires are used that are based on the “Standards for Responsible Care” that were established after extensive consultation with professionals working in the field. The easiest way is to ask clients themselves, or their informal care providers, what experiences they have had with different approaches with or without domotics.

    If you have then managed to assess labor saving and the contribution that domotics have made to the quality of life and care, there is still one more return on investment to consider – and one that is even more different to assess.

  3. 3.

    Long-Term Effects

    An important third effect is the contribution to preventing or postponing the need for care. For example, domotics may make it possible for clients to continue living at home for a longer period of time, avoiding the need to use more expensive intramural facilities, or domotics may make clients more self-sufficient, avoiding the need to rely on care providers.

    These effects may be the most complex to identify. Almost no (validated) studies have been conducted that show how domotics can contribute to allowing the elderly to continue living at home independently for a longer period of time or dare to state that costs are saved as a result. That is unfortunate indeed, since domotics offer major benefits due to long-term effects.


Obstacles to Drawing Up the Societal Business Case

Even if you can provide a substantiated estimate of the three effects discussed above for each stakeholder, the societal business case is still more than the simple sum of the costs and benefits of the three effects per stakeholder.

The relevant obstacle here is caused by the Dutch system of healthcare funding. It is compartmentalized and complex and primarily pays for direct, client-oriented care activities. This issue is not limited to the Netherlands, either. All European countries have complex and compartmentalized systems of healthcare funding, paying for client-oriented care activities to a greater or lesser extent. The consequence of this complex funding system is that many investments in domotics involve costs for one stakeholder, e.g., a healthcare facility, and benefits for another, e.g., the health insurer or municipality.

As a result, healthcare facilities have, more often than not, no incentives to save labor, improve quality of life, prevent healthcare demand, or resolve healthcare needs in cooperation with other care organizations.

Practical Applications

The following section looks at two case studies of how domotics have been applied in practice. The case studies offer tangible examples of the obstacles that occur in practice in making a positive business case for domotics.

The first case study is about the use of an alarm system in assisted living facilities. The second case study examines the use of cameras and sensors for elderly people living independently.

Case Study 1: Use of Alarm Systems in Assisted Living Facilities via a Video Link to a Control Room

The Homes and Residents

The healthcare facility provides extramural residential accommodations for elderly people with mild health problems (230 residents in 207 apartments). These elderly people live in assisted living units that are attached to a nursing home. Nursing staff and care providers have an indoor connection to walk from the nursing home to the assisted living units. The residents rent the apartments from a housing cooperative. During renovations, a camera with a video link was installed in a fixed central location in the living room of all the apartments. The domotics panel (with a 5 × 5 cm screen and audio link) and the associated nursing assistance call system (alarm button in the apartment and around the residents’ necks) replaced the old nursing call button and are intended for emergency use.

The 110 residents who use remote care pay €15 a month for a mandatory alarm response system. The subscription is required by the landlord.

Old Call System Versus New Alarm System with the Video Link

The new alarm system works as follows: when a resident presses the alarm button, it establishes an audiovisual link to a control room several kilometers away in the same city. This control room responds to all calls, logs them, and takes action as needed; the notification is forwarded to the coordinator of the extramural care team, who then sends a nurse to the person requesting care. The control room is staffed by healthcare professionals (up to the expertise level of a nurse). In the previous situation, an audio-only link was established with the reception desk of the adjoining healthcare facility. The receptionist at the healthcare facility answered the person requesting care and notified the care coordinator. Outside the receptionist’s office hours, the call was forwarded directly to the care coordinator of the extramural care team.

The expectation was that the domotics would change a number of processes. First, the receptionist would be under less pressure, since the control room handles the alarm calls and can assess whether assistance is needed in the home via video contact (audiovisual link). The process of reassuring the client changes, since the video link also offers a visual connection between the client and the care provider, giving the care provider a clearer impression of the situation than they might get via an audio-only/telephone connection. Moreover, the video contact may also increase the residents’ sense of security, allowing them to continue living independently for a longer period of time. The control room handles all calls and only sends a care provider to the client’s home as needed; employees on the extramural care team know that they’re not being sent out for no reason, preventing “unnecessary” trips. Moreover, if the healthcare facility wants, the control room can provide “remote care” thanks to its professional staff. This reduces the immediate need to deploy the extramural care team, since “remote care” can take over some tasks, thus saving walking/travel distance.

Although the equipment used here could also be used for other purposes, it is not, since the facility wants to use the control room’s services as little as possible due to cost considerations. The analysis of the case study only looks at the measurable effects on the work processes that were studied. The chart below shows the difference between the old and new situations (Fig. 2).
Fig. 2

Mapping the differences in work processes with (right) or without (left) domotics

Analysis of the Reports

In order to gain a better understanding of the added value provided by domotics, the facility analyzed the residents’ calls. The data logged by the control room and follow-up actions between 1 January 2010 and 8 December 2010 were used to analyze how the services were used. The logs kept by the control room also included what the resident’s question/report was. This results in the following overview:

Nature of the questions




Questions related to activities of daily living (ADL)

Assistance with going to the toilet, going to bed, catheter, waiting for regular assistance, soiling, ostomy care, hunger/thirst)


15 %

Medication-related questions

Administering, forgot


<1 %

Medical nursing questions

Pain, dizziness, injuries, trouble breathing


3 %

Other questions

No verbal contact


32 %

Fall-related questions

Client has fallen


1 %

Non-alarm-related questions

Nothing wrong, unknown


47 %




100 %

In that period, the control room received a total of 1,324 calls from 119 residents. 759 of those were emergency calls. This comes to an average of 3.3 calls per resident. However, the frequency distribution reveals that approximately 1/3 of all calls came from eight residents.

Analysis of Labor Saving

It is striking to note that 360 calls were made with no action taken in response; no care provider was sent to the resident. The control room only notes that no action was taken; this definitely means that the call was not based on a request for medical care. However, there is no way to tell based on these records whether the resident was reassured in those cases or whether they pressed the alarm button accidentally. The adjoining healthcare facility noted that the nursing call system was often used for trivial matters in the old system (e.g., ordering extra gravy with meals). Once the residents grew accustomed to the new system, the healthcare facility says, they became aware that they were really only allowed to call for “serious” matters. The more trivial issues are now arranged by calling the receptionist.

A second striking note is that the questions asked were only medical or nursing related in nature in a limited percentage of the calls (approx. 4 %), in which case a video link does save labor. The labor savings come from the fact that the control room can probably handle the call based on resident medical records and the questions asked about medication or other medical or nursing issues, without having to send a nurse to the client’s home. However, this form of savings does not occur more often, because the contract between the healthcare facility, the landlord, and the control room stipulates that this form of service is not included. The potential labor savings (replacing the need to send a care provider for the control room) are not utilized in this case.

Effects Regarding Quality of Life

In analyzing this case, quality of life aspects were not measured:
  • Increased sense of contact due to the combination of audio and video compared to audio-only.

  • Increased sense of safety and security among residents due to the addition of a video link to supplement the audio link.

  • Reduced sense of loneliness, thanks to the video link.

  • Higher quality of the response to the call. Instead of the receptionist, there is now a healthcare professional.

There are also advantages for the healthcare facility and the resident:
  • The extramural care team only receives necessary nursing calls, thanks to the intervention from the control room.

  • When the resident uses the alarm, if the resident is standing in front of the fixed camera and screen, he or she can see that an employee in the control room is answering the call.

  • The reception desk no longer has to handle the nursing call system. Although this does not save labor, it frees up the receptionist for other tasks.

Obstacles to Achieving Labor Savings

  • The video link does not save time for healthcare staff, due to the fact that the control room is not contracted to provide other care services to the residents, although they would be competent and willing to do so.

  • Moreover, the limited distance (the apartment complex is an annex attached to the healthcare facility) means that the potential time saved by reducing travel time is limited; it is often easier to send a care provider to the apartment than to try to help the resident via the video link.

  • There is insufficient consideration of situations in which the control room would have been able to provide added value, e.g., a “wake-up service” that checks every morning to see if the client is out of bed, or an on-demand question line for explanations and advice regarding medication use.

Obstacles to Achieving a Positive Societal Business Case

The healthcare facility wants to maintain control of as many extramural care tasks as possible, since it will otherwise miss out on payments for the provided care. When tasks are outsourced, it takes time away from the facility’s own staff, thus removing a source of income from extramural care.

The resident is unwilling to pay a monthly contribution for alarm response. Although the domotics application could also be used for other care, welfare, and comfort services, there is no interest in those applications.

The owner of the building, the housing cooperative, pays for the maintenance of the domotics system. However, the benefits for the owner are not financial in nature. It involves an improvement in its image and reputation because the owner can offer potential tenants assured alarm response due to the availability of the domotics application. This could be a selling point for the owner to use in marketing and rental strategies.

Because the equipment consists of a fixed camera with a fixed screen, rather than a mobile device such as a laptop or tablet, the equipment is less suited for, e.g., talking to family members.

Creating Added Value

The control room could take over some of the services from the healthcare facility. For example, the morning checkup for patients who need more care could be replaced, as well as social control, someone to talk to, or assistance in deciding how to structure day-to-day activities. The control room could also offer assistance or support to informal care providers or other care-related staff. Another option would be to make more active use of the video screen to provide information, both for the resident (calendar, activity schedule) and for the care provider (client file). The control room also seems to be the only party involved that could continue providing high-quality alarm response and other services on a 24-h basis, due to the economies of scale it offers.

Case Study 2: Cameras and Sensors for Elderly People Living Independently

The Healthcare Facility

The facility provides intramural nursing home care and extramural home care. The facility has been actively involved for some time in projects that provide alarm response and support for elderly clients living independently with a physical handicap or problems with their memory. The effects of domotics on labor saving, quality of life, and postponement of care needs have been evaluated, and a business case has been drawn up.

The Domotics

The domotics used here were developed in order to provide day-to-day support for people in the early stages of memory problems or dementia, allowing them to live at home independently for a longer period of time. The system “recognizes” fall incidents and immediately calls in the medical care team.

The surveillance system consists primarily of motion detectors and a single camera at a fixed position in the living room. The sensor system detects when a client leaves the house and can tell the difference between different individuals entering and/or leaving the house, thus preventing false “runaway” reports. The “departure” detection makes it possible to allow a client to continue living independently without having to lock them in.

The camera is only turned on if a hazardous situation is detected. These images can only be accessed by the extramural care team, who can, e.g., view the images on their mobile telephone.

Because the system uses fixed sensor points installed in the home, the clients do not need to wear detectors on their bodies. The system is suitable for use in one-person or two-person households. The system is most suited to middle- and end-stage dementia and advanced Parkinson’s, when wearing an alarm necklace is no longer functional or preferred.

In the event of an (potential) emergency situation or unplanned departure, the system generates a text message and sends it to a care provider or control room, reporting the nature of the incident and the room in the home where the incident took place. The care provider then checks whether there is an emergency situation or unplanned departure by using a speaker-microphone connection or a camera installed in the living room. If there is an emergency situation or a situation that cannot be verified, then the care provider goes to the home.

The computer program produces very few false alarms, so the mobile care team can be notified directly without requiring intervention from a staffed control room.

Care Processes Affected by Domotics

The potential labor savings due to the domotics have been assessed.

The figures involve estimated savings based on estimates of process times and incident numbers reported by care providers.

The domotics affect three care processes, initiated by:
  1. 1.

    Alarm response

  2. 2.

    Straying incidents

  3. 3.

    Falling incidents

The following section briefly addresses these processes and the impact of the domotics:
  1. 1.

    Alarm Response

    Fewer employee hours are needed in the Alarm Response process, since domotics avoid the need for nursing staff to respond to false alarms. When an alert comes in, it is standard practice to use the speaker-microphone connection to contact the person reporting the alarm and verify the situation. However, remote verification is not always possible, e.g., if the resident does not respond to the nurse’s call.

    In that case, the nurse goes to the home to verify what’s happening; in some cases, it turns out that nothing was wrong and the alarm was false. The domotics could prevent unnecessary alarm responses by using the video camera on the domotics system to inspect the living room.

    The team leaders estimate that false alarms occur about 130 times annually in a group of 35 clients suffering from dementia. The inventory of process times shows that an average of 9.5 min per call is saved on unnecessary alarm response This brings the total employee hours saved annually due to the use of domotics to over 19 h.

  2. 2.

    Straying Incidents

    Care staff are sent to the location when a straying client is identified, as reported either by people in the surrounding area or by a family member or a nurse making a house call. When the client has been located, the client is generally picked up and brought back to the home. If the client has not yet been found, secondary organizations (e.g., the police) should be notified, and a search of the surrounding area is generally launched.

    Domotics can prevent some of the straying incidents; if the door opens at an unusual time, domotics can detect that the client is about to leave the home. The system then calls the client, who receives an automated voice message stating that it would be better to stay home.

    With domotics an estimated 25 straying incidents can be avoided annually, saving 12.5 min per straying incident, saving 612 labor minutes per year. This is due primarily to a decrease in follow-up activities such as filing reports and notifying family, since half of the straying incidents can be prevented. It takes less time to find the clients in the remaining straying incidents, since straying incidents are reported earlier. Also nighttime checks are no longer necessary.

  3. 3.

    Falling Incidents

    When a client falls in the home, he or she is generally able to alert the staff via an alarm button on a necklace. This method is less effective for senile elderly clients, since they may forget to put the necklace on or may not remember how to use the alarm button after a fall. In such situations, a client may spend some time after a fall lying helpless on the ground without assistance because no one has been notified. This situation is frequently traumatic for the client and may lead to additional physical complications. As a result, the client generally needs extra care when he or she is discovered during a routine visit or when a family member drops by.

    Domotics are capable of detecting when a client falls or slowly collapses and alerting staff to the situation.

    In the current situation (without domotics), a falling incident without an alarm response is only discovered when the nursing staff make a scheduled house call. In that case, the client receives care, but it can be assumed that additional follow-up care will be needed due to the fact that the client has spent some time lying helpless on the ground. Falling incidents are always discussed with family in order to adjust the client’s care as needed. Reports are also filed. In a situation that does involve domotics, the alarm goes out immediately and an extra house call takes place immediately after the incident. This eliminates the need for follow-up care or discussions with the family.

    Despite the extra travel time, the domotics save 43 min per incident in these cases by preventing the need for follow-up care and family talks. With an estimated 43 falling incidents without an alarm annually, this saves 1,832 labor minutes per year.


For the group of 35 relevant clients at the facility, it was calculated that the annual care savings would total approximately 121 h annually.

Long-Term Effect: Postponement of Admission to a Nursing Home

The domotics system was tried out in a longitudinal pilot before implementation at the care facility. Seven clients were monitored during a 2-year period. Three of them were able to stay at home longer (for more than half a year) due to the surveillance of the domotics system (Vilans 2012). Based on this fact, the assumption is that postponement of the nursing home admission would be approximately three months.

Lessons Learned and Suggestions for Domotics Application

The following lessons can be learned from these two examples of how to compile a societal business case:
  • Express the employee hours saved in tangible terms by analyzing the work process with and without domotics and by assessing the changes in task frequency and duration.

  • Talk to care facilities and brainstorm with them about more effective use of current domotics functions that could save employee time or improve client quality of life.

  • Objectify how domotics contribute to quality of life by having clients specify what contributions they perceive.

  • Calculate costs and benefits separately for each stakeholder (facility, health insurer, housing corporation, supplier, etc.).

  • Identify which costs per stakeholder are not covered according to current care funding rules, such as investments in domotics that make clients more self-sufficient or investments in domotics that postpone or prevent more expensive care, such as intramural care.

  • Make sure that there is a transparent overview of which costs and benefits go to which organization. This information can be used to start negotiations with funding organizations, such as health insurers or municipalities.


  1. Genet N, et al. (2011) Home care in Europe; a systematic literature review. BMC Health Serv Res 11:207.
  2. Hilbers ESM, de Bruijn ACP (2013) Domotica in de langdurige zorg. RIVM National Institute for Public Health and the Environment.
  3. Social Businesscase for UAS-AAPS, EDS, EDN. Vilans (2012)Google Scholar
  4. TNO Netherlands Organisation for Applied Scientific Research (2013)

Copyright information

© Springer International Publishing Switzerland 2014

Authors and Affiliations

  1. 1.Work, Health & Care Organization: TNOLeidenThe Netherlands
  2. 2.Dutch Centre for Health Assets Organization: TNOSoesterberhThe Netherlands
  3. 3.Chamber of CommerceUtrechtThe Netherlands

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