Ever since Google “separated” from its parent company Alphabet, the lines have been a little blurred. But now with the newest shakeup at Nest Labs, it’s a little hard to see where Alphabet will end and Google begin.

Google’s “Internet of Things” is Taking Over Nest.

Or is it Alphabet’s “Internet of Things”?

Nest Labs has not had an easy go of things since being acquired by Google in February of 2014. Google acquired 100% of the smart thermostat (among other products) company for $3.2 billion with the expectation of Nest continuing to innovate upon smart home products in a big way with a massive infusion of resources from Google – now Alphabet. However, since then, Nest has quadrupled its employees, launched no new products, and acquired a few smaller companies, such as webcam maker Dropcam, for $555 million. As a result of the lack of progress, Nest parted ways with then CEO Tony Fadell three months ago. Now, Google is “absorbing” Nest's software engineers in order to form a “unified Internet of things platform” to work on Google Home, Alphabet’s answer to Amazon Echo.

So why is this a big deal?

Well, by taking Nest engineers, Google is effectively blurring the line between Google and Alphabet. Granted, that “line” has always been a bit hard to see, but Google is now serving as the software development house for a unit which was supposed to be a totally independent company under Alphabet. Google is now taking over a chunk of Nest's operations and developing software exclusively for Nest.

Alphabet branched away as the parent company of Google, allowing Google to focus on search and software. Companies acquired by Google or Alphabet would remain independent under the Alphabet umbrella, and keep their data completely separate. However, with Google developing software using Nest’s engineers for a “unified internet of things” platform, that no longer seems realistic.

So where does Nest go from here?

The IoT platform could change how people interact with their homes on a daily level. Lights, appliances, and even security devices will all be controlled from our phones. By bringing Nest in-house under Google’s care, Alphabet is alpha-betting on their IoT platform to come up big. Keep an eye out for some major announcements on this front from Google in the next year. This is the best course of action for Nest – and for Google.

The lines may be blurred, but the long-term vision is not. Alphabet’s shares will continue to do what Alphabet’s shares do – go up.

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