Why is HA so expensive?

Because it is hard to install.

Home Automation today is an expensive hobby. To play in that field you need to commit $/E100k. It doesn't need to be that way. The cost of hardware, built at $5 and sold at $500, is there to take care of the ecosystem needed to implement the solutions in the field, a.k.a the installer.

The reason the margins need to be so big is because the installation and maintenance side of the job are so time intensive. You do few jobs per year, so these jobs need to be expensive. This has confined automation to commercial and high end residential. The cost of automation becomes marginal compared to the whole but that doesn't scale down. Think Mainframe industry vs PC industry back in the early 80's.

To scale volumes and profits, one has to save time in the implementation process. Saving time with tools to help in programming, installing and servicing are ways to scale the activity up. Some of the self service tools we are developing go a long way towards that goal. We are working on a iPhone UI builder tool that we will be publishing soon. With easy to use web based interfaces, even end-users can engage in simple scene programming without having to bother their installer to remap certain buttons. Wouldn't that be nice. Not all clients will adopt that, but more and more will. The more self-service the customer is, the more the installer's time is freed up and his volume can go up.

At first, we are focusing on software-only tools. But of late we are chatting more and more about the hardware. At the moment we are focusing on the ORC, the controller. As juha has pointed out the modular design via USB seems like a good way to go about the hardware. However I believe actuators need to evolve over the next 20 years. There is also a big margin available for hardware to go up in smarts. Where standards like KNX are implemented with kb of memory from 10 years ago, today's hardware standards speak in MB. A cell phone runs J2ME or Android. Within the decade, these smart actuators could sell for half the price of their memory limited ancestors with 10 times more features. Can you imagine the day where actuators will export their features for the network to automatically register and export. Yes, we can.