The building equipment and services industries have always been highly fragmented. While leaders such as Honeywell and Johnson Controls have large, multinational presences, most of the market is divvied up among thousands of smaller companies with a relatively narrow regional or technological focus. Even CB Richard Ellis, the real estate firm with the largest footprint of space under management (2.9 billion square feet), has only captured less than 1% of the world’s 400 billion sf of commercial space.
The result is an industry that has historically consisted of an overwhelming array of service providers, each with different capabilities. This has posed a challenge to tying building systems together into single solutions, as I explained in my last blog. In the past, vendors designed products such as building automation systems, controls, and certain types of equipment specifically so that they would not work with other vendors’ products, ensuring the vendor a long-term market for replacements and upgrades.
These vendor-specific fiefdoms are starting to break down as demand for building energy management systems (BEMS) as well as comprehensive, end-to-end solutions for energy efficiency including new capabilities such as demand response and energy procurement continue to grow. The word of the decade in the building sector is convergence: the integration of building control technologies with ICT. No single player on either the HVAC or IT side can do it all, so the drive toward convergence has resulted in “co-opetition” – i.e., partnerships between competitors that would have been pitted squarely against each other in the past, and in some cases still are.
This week Schneider Electric and Cisco announced that they were expanding their partnership efforts to deliver better enterprise energy management solutions. The partnership will pair the strengths of Cisco’s EnergyWise platform, which is ideally suited for data center and IT energy management, with Schneider Electric’s building management system (BMS). The union is mutually-reinforcing, as the BMS can be used to monitor and control parts of the information and communication technology (ICT) network, and vice versa.
This is not the only example of this we’ve seen over the last few years. IBM made one of the earliest moves toward co-opetition in smart building technology when it launched the Green Sigma Coalition in 2009, an industry alliance that has helped tie smart building technology into enterprise energy management and includes Honeywell, Siemens, Johnson Controls, and others. There are also countless sub-rosa partnerships between rivals to enable a wider range of offerings in RFP responses and major contracts.
The co-opetition trend, however, isn’t all about vendors deciding to play nice. It’s about vendors finding that the combined capability of two systems – whether ICT systems linked with BMSs, demand response services tied with energy procurement services, or one of the dozens of other possible permutations – is often greater than the sum of the parts. Combining two powerful solutions from separate vendors can open up new opportunities that are impossible to achieve individually.
Make no mistake; competition is still alive and well in the building sector, and that’s a good thing for the industry as a whole. But these co-opetion arrangements demonstrate that the highly fragmented building industry is finding opportunities to pair technologies in novel ways to deliver smarter buildings in mutually beneficial ways.