April 2010

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“Change or Die”
Developing a Successful Future for Facility Automation and Integration
Part 1

Richard K. Warner, PE, LEED AP
President/CEO
William L. Parrish II, BSME (Rose-Hulman)
 General Manager, Graphic Services Division
O&M Engineering, Inc.

We have all heard this phrase numerous times in our life in a number of different contexts. There are library shelves filled with books on the subject. We would all agree that some change is necessary as a matter of course correction to prevent us from going down paths that lead to undesirable results. How does this apply to the building automation and integration industry?

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Whether you view this phrase as a precept, axiom or cliché term, for those of us in the industry utilizing today’s technology at the highest levels, this term has never been more applicable.

There will be a remarkable ground shift in the industry in the coming years. In fact it has already begun. This planned series of articles will examine recent industry trends, their impact and the strategies that have facilitated recent success. We will also examine continuing and coming industry changes and the strategies that will drive success in the future.

Recent Trends

The rise of the accountants
Facility automation and systems integration is obviously a technical business. In the industries’ formative years, most of the decision makers had a perspective that put more emphasis on the technical merits of solutions. These early decision makers had a thorough understanding of why customers chose their products and services over the competition and a clear sense of the value provided. Inevitably, as the industry developed, the overall perspective of the collective industry management developed more of a financial bias. This led to larger focus on cutting costs to deliver solutions at the expense of a focus on delivering better solutions that offered more value to customers.

We distinctly remember, during the 90s when working for the major commercial controls vendors, the influx of “accountant types” into to the middle management at both the corporate and branch office levels. This produced an irrational focus on reducing fixed component costs without careful consideration and vision regarding the impact on variable labor costs in an industry that was destined to become dependent on specific high technical expertise. The “accountant types” wanted to use the less expensive part, without understanding that it took longer to install and commission it which more than offset any cost savings (usually by a several orders of magnitude). They didn’t understand what would be equivalent to the “total cost of ownership” in that context. To them one part was as good at the other and they made little effort to factor a qualitative differentiation into their decision making calculus.

Although the accountants were eventually rebuffed in that particular scenario, the mindset continued to slowly permeate into the industry decision making calculus. Decisions progressively became more quantitative and numbers driven. Qualitative differentiation progressively became less of a factor and those capable of such differentiation became increasingly marginalized. Subsequently, many of those marginalized resources with vision moved on and formed their own entrepreneurial interests where their high expertise supplied the niche fringes of the coming wave of high technology solutions.

This new “quantitative calculus” failed to adequately differentiate based upon quality. Through its eyes “parts is parts” to coin a phrase from another industry that often shares the same values. Everything is a commodity. Unfortunately this perspective views human resources through the same lens and fails to realistically differentiate based upon experience and expertise. This is the “warm body” perspective where all resources are viewed as having undifferentiated levels of productivity, capability, and commitment. Those of us who actually provide sustainable solutions to real problems understand that nothing could be further from the truth.

It’s a small world after all: Globalization and Outsourcing
The impact of globalization on the facility automation industry probably started in the early 1990s when manufacturing was rapidly moving out of the United States and into places like Mexico. Multinational companies were lured to places with dramatically lower labor costs driven by the “quantitative calculus” that had reached critical mass. This new calculus first took hold at the vendor level and drove the manufacturing of components to low labor cost centers. Vendors then applied the same calculus to software development. Before long this calculus filtered down to the installing contractor level extending to things like the building of control panels. It then spread to application engineering, and has now even reached the point where you actually see technical labor from places like India on jobsites performing system checkout.

Control Solutions, Inc We would argue that outsourcing is not a bad thing. In fact we feel strongly that it has to be part of our industry strategy. However it cannot be viewed as a panacea and applied indiscriminately.

Application of this quantitative calculus has been largely regarded as an overwhelming success. If one were to review the annual reports of most of the multinational vendors during the decade of the 2000s, it would be difficult to argue against that assessment. However the numbers don’t tell an important part of the story. While the quantitative calculus did drive margins and growth, it came at the expense of customer satisfaction. In the same way that it does not realistically value expertise, it also does not value long term customer relationships.

As a result, it has produced tremendous opportunities for innovators who are still close enough to customers to have maintained a focus on delivering real sustainable solutions to client problems. Those who understand the value of expertise and experience and that without these key ingredients, there is no recipe for sustainable long term success. There is a place for quantitative calculus in the decision making process. In fact we would argue that you’d be unwise to not include it as part of your overall analysis. Ultimately clients care a lot more about solutions to their problems than they do about your business. Your long term viability depends on your ability to demonstrate to clients both the capability and commitment to produce actual sustainable solutions. In a fast paced industry with continually changing technology, effectively leveraging expertise and experience is the only way that this can be accomplished.

Recent history has shown that increasingly the building automation and systems integration industry has focused more on short term financial performance than on actually solving customer problems. Many in the industry are still focusing on the contractor and profit center performance in their solution approaches as opposed to true client satisfaction. That gap represents a tremendous opportunity for those who can implement strategies that balance the equation.

Future articles in this series will focus on balanced strategies that will drive sustainable growth in today’s environment. Topics will include “Know thyself: Establishing Your Expert Identity”, “All Integrators Are Not Created Equally: Identifying the True Experts”, “Not a Panacea: Strategically Leveraging Outsourcing”, “If They Only Knew: Expert Customer Advocacy”.


About the Authors

Richard K. Warner, PE, LEED AP is currently the President/CEO of O&M Engineering, Inc., an industry leader in innovative solutions for the facility automation industry. As an electrical engineering graduate student at WVU, he published research in the area of evolutionary algorithms for large-scale power system stabilization. During his career, he has focused on solutions for complex control and automation systems in the Power, Steel, Waste Water, Manufacturing, Healthcare, Research Laboratory, Mission Critical Computing and Facility Energy Management industries.

In recent years, he has focused on solutions for large-scale system integration in the area of real-time information analysis, user interfaces, data visualization and actionable information intelligence.

William L. Parrish II, BSME (Rose-Hulman) is currently General Manager of the Graphic Services Division of O&M Engineering, Inc., an industry leader in innovative solutions for the facility automation industry. During his career, he has focused on user interface solutions for Facility Management Industry.

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