BTL Mark: Resolve interoperability issues & increase buyer confidence
It is the customers not the technology
that will disrupt the industry
In June I wrote an advisory around why rising consumer expectations in
property are set to disrupt the Real Estate Sector in an extensive and
volatile manner. My arguments were that many industries have already
undergone rapid and transformational change due to a convergence of
technologies that allow customers to fundamentally alter the way they
interact with the supply chain.
Retail, entertainment, airlines and communications are all examples of industries that have experienced a radical and tumultuous change in every aspect of their industry from the way they go to market, advertise, transact, deliver and support their products and services. When an industry reaches this tipping point where the technology can underpin the required changes in commercial activity, the businesses that fully embrace the new paradigm tend to do spectacularly well. Those that continue business as usual but with some concessions to technology change falter equally as spectacularly - think Amazon versus bricks and mortar book stores.
I still believe it to be true that the underlying technology is the driver for any revolution in industry transformation. But this year I have learned it is not the technology itself that causes the change but rather the customer’s willingness to adopt the technology that will drive the disruption.
In November 2012 we attended Coretech to learn more about the North American Corporate Real Estate market and to promote our viewpoint that cloud will completely transform the way building systems are deployed in the future. Our background in controls and automation combined with software technology had convinced us by early 2010, pre the iPad, that controls would be cloud based in the near future.
At Coretech 2012, we were struck by the number of large USA companies struggling to collect building operational data into a single enterprise-wide platform. Those case studies were exemplary examples of how specific companies had solved the world-wide problem of inaccessible building data spread across a vast array of disparate systems and spread sheets throughout the organization and inside every building. While those case studies were impressive, they are arguably customized solutions for their patient and deep-pocketed clients. Those solutions were built with huge collaborative efforts between client, consultants and software providers.
Coretech 2012 illuminated that there is a mammoth world-wide problem, an opportunity equal to any we have seen in the past 20 years, so why isn’t it solved already? There is no shortage of software and hardware solutions for the property and building industry. Take a look at this graphic below produced by Groom Energy; there is clearly a large number of clever and potentially transformational solutions, some from the large, traditional vendors and others from emerging technology companies. Why are the customers not clamoring to adopt these emerging, transformational technologies and deploy any number of the hundreds of solutions already in the marketplace?
Source: Groom Energy 2013, Energy Smart Grid Vendor Landscape
I love this image – it certainly identifies one of the biggest problems in the market, not just for the customers and vendors but also everyone in between. This market noise is just one of the obstacles holding back the transformation of the real estate industry.
I call this phenomenon “Software Fatigue”. A customer identifies they have a problem and they know the organization could be more efficient if they could find a solution that could solve their problem. The first step is self-education so the person heading the project starts by doing some internet-based research into possible solutions. The more they look the worse it gets. Everyone on the project team knows about some solution or other and when the project leader starts asking their peers and industry cohorts, they find that everyone has either a horror story to tell or yet another solution to add to this ever expanding list of possible solutions that are difficult to differentiate.
And then the project stalls. How will a project manager identify the best solution for their project if the industry itself is struggling to differentiate all these solutions? How does one cut through the noise?
Our problem is slightly different; we have spent most of the last 12 months trying to identify the channel - what type of businesses will address this emerging and colossal opportunity to move the property sector into the next generation of change. The choices are widely varied from electrical and mechanical contractors to green building engineers, energy efficiency professionals, business consultants, measurement and verification companies, system integrators. The list goes on.
We are further hamstrung by the fact that IP-based systems in buildings are not necessarily of interest to a whole market sector. Some electrical contractors, for instance, are quite content running cables and fitting power points. They have no interest in learning about networking, IP technologies and so forth. Mechanical contractors understand their business of keeping large air conditioning plants in tune so buildings have comfort levels suitable for occupants. To embrace change will not only require a major re-skilling in their staff and a strategic change in their business plan but also a complete change in their business model. There are no clearly identified market segments for potential channel partnering and we need to find companies that are both skilled and interested in strategic change.
Going back to the customer and their “Software Fatigue”, their problem is that they need a software package that spans different needs and automates as many tasks as possible while staying simple enough to use for the various stakeholders. Things like fault detection, alerts, scheduled reports and deep data insights are just the beginning. We think more intelligent behavior around building data will evolve over the next few years.
Another crucial problem, that nobody seems to have addressed so far is seamless integration with other core business software such as ERPs (SAP, JD Edwards, Oracle etc) which would include integration with work order management systems, corporate finance, bill processing, inventory, asset management, maintenance, HR (for user account management), and so on.
Many of the current building management solutions are siloed at a building level with building performance data and a user interface over the top making them difficult to integrate into the business workflows used in the real estate industry. We would argue it even goes further than that. Currently we mostly see two separate silos within the emerging building management industry; monitoring and analytics on one side and controls, including demand response and load shedding, on the other. The customer will be hard pressed to find an integrated solution which does both in our industry. On top of that you'll find that many software packages come with tight coupling with specific hardware, reducing options for other integration.
The good news is that many of the newer entrants into the software
space understand they are only part of the overall solution and they
are building sophisticated 'hooks' or connectors between their own
software and other packages. This will be the bridging of the first gap
between the monitoring and analytics silo and the building controls
silo with the second wave bringing integration with traditional
The bad news is the customer needs a high level of sophisticated knowledge to navigate through this landscape and select solutions that will finally allow corporate real estate to be treated as part of their business. One of the smarter things we have seen recently is large companies adopting highly skilled building controls consultants to help them in this process. Earlier this year we responded to a survey from one such initiative that took us more than a week to complete. It was by far and away the most knowledgeable, insightful and sophisticated approach we have seen to date and I believe this is a sign of things to come. The customer is driving the purchasing decision by enlisting skilled advisors rather than allowing their existing service providers to make that decision for them.
The other just as insightful thing we are seeing is large corporate
decision-makers recognizing that, here, today there is no silver
bullet. In 2013 there is no single software package that can solve all
of the functionality for all of the departments across a large
organization with hundreds or even thousands of buildings. They are
selecting solutions that can make a start on their big picture, solving
one aspect of their operations well. They take the approach that they
will solve one thing then grow the solution by introducing more
features from the same solution provider or by integrating compatible
solutions that can eventually provide them with a single seamless
solution. This is a smart approach because it contains both costs and
The shakeout will happen in the real estate and related fund management industries. There will be players who adopt real time building monitoring and management software at the core of their business and build that solution out to integrate every other aspect of how they manage buildings. When this tidal wave begins, it will be driven by the customer and their need to run a much more highly efficient business and the vendors, service providers, consultants servicing the real estate sector will find enormous opportunity in the ensuing wake.
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