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The problem with taking these things out of the cloud is that you're then a hardware provider rather than a service provider.

Your revenue would come from selling increasingly inexpensive hardware and/or trying to sell your software to run in a consumer environment where you have very little control.

Very few companies can make money that way. Smartthings is backed by Samsung (800 lb gorilla). They appear to be playing a long game now because they provide cloud-backed service (for free) and cheap hardware. The strategy will very clear shift towards subscription service eventually, IMHO.

Perhaps a hybrid business model could be achieved by setting the hardware to talk to a central server of the user's choice. The server software would be open source and be manageable via a web interface, which is mobile-friendly. The company would simultaneously offer a cloud-based alternative for a monthly fee, so that the user could avoid having to setup his/her own server. As a third option, each device could be managed individually; this is likely most appropriate if the user only has a single device.

So long as the company does not go rogue and purposefully brick the devices, then the company could shutdown and the devices could still be usable. Further, other companies could provide remote management services for these devices. Being IoT devices, though, would make them still susceptible to security issues, but at least being able to use them on a segregated network could limit that from happening.

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