How Are We Doing As An Industry?On one hand, we should be very proud of our results. We consistently construct buildings that follow some of the toughest codes for safety and efficiency in the world. And we do all of it very cost effectively. Yet, on the other hand, there is a lot of frustration in the industry as well; your personal view will largely depend on what role you play in the industry.
For example, if you are a consulting engineer you may be frustrated with reduced fees, continued value engineering of projects, changing technology, and isolation from endusers. For contractors, there is frustration with strongly competitive markets. Facility managers are frustrated with systems that they see as hard to operate and too complex. Financial owners want to push more costs out of buildings, and, finally, the occupants are rarely satisfied with the comfort and usability of these buildings.
While we are doing very well, it turns out that we can be doing better as an industry.
What is the building management industry? This is a broad category that refers to all who are involved with the design, installation, and operation of BMS. These systems include HVAC, lighting, fire alarm, security, video monitoring, and electrical distribution. We rarely look at ourselves as an industry, but rather more typically as an unaffiliated collection of building managers, contractors, consultants, and manufacturers. But we are an industry, and as a group we are charged with three primary business drivers which are:
Safety. A safe environment has many factors, starting with health, in terms of having good air quality and adequate lighting. Safe environments not only keep the building occupants from getting sick, they include physical safety as well. Physical safety controls provide cameras and guards for security, intrusion detection, fire monitoring, proper fire control, and occupant notification and evacuation to protect both the occupants and the property. Safety is non-negotiable. Whether determined by code, insurance regulations, or organizational policy, the design and construction of the facility must maintain safety.
Productivity. Buildings exist as an asset intended to make the employees, students, patients, and other occupants productive. In most facilities, the human resource cost dwarfs the operating cost of the facility by a factor of five to 10. Productive environments go beyond safety in providing a comfortable and efficient environment, including lighting, temperature, humidity, and air quality and physical factors such as building circulation, décor, vertical transport, and signage. As an industry, we know how to design and construct buildings that are very productive. Unfortunately, we rarely do this. Productivity is hard to measure, and the benefits of a productive environment accrue to the occupant - not to the designer, contractor, or developer. Therefore, we rarely work to increase productivity in buildings today.
Efficiency. Building efficiency covers the cost of operating the building. This area covers costs attributed to energy, staffing, maintenance, repair, and replacement. Arguably we have done a good job in this area as an industry. Buildings today largely conform to code and are relatively energy efficient.
However, we know that they can be much better. We also know that they can be immensely more operationally efficient. This can be achieved through automating many functions of facility management as well as by providing additional tools for intelligent management. Unfortunately, like the area of productivity, the benefits of an efficient building accrue to the occupant and not to the construction channel or developer. As a result, we often are more focused on the first cost of projects than on the larger issue of life-cycle costs.
So, as an industry, how are we doing on these issues? While today's buildings meet or exceed codes and are well constructed and safe, they could be significantly more productive and efficient. Fortunately, there are new technologies and solutions that are allowing us to deliver these results in a cost-effective manner and can allow us to move the industry to the next level. These needs, coupled with this new technology, are what is driving the changes in our industry.
Technology ChangesIn the building management industry, we are governed by code, convention, tradition, and a need to construct buildings economically and of high quality. As a result, we are often slow to adopt change. In the area of technology, however, changes are readily accepted and appear to occur at the speed of light.
In general, this is good; speedy technology adoption results in greatly improved business efficiency, global competitiveness, and massive productivity improvements. When these technology changes intersect with a business need, the result is often the generation of high value solutions that can rapidly change an industry.
One interesting example of this is the change that has occurred in the area of telecommunications over the last five years. The advent of high-speed, low-cost, networked-type communication has allowed phone calls to now be carried as small packets of digital data instead of a continuous stream of analog data. The end result has been a rapid acceptance of voice over Internet protocol (VOIP). This change has eliminated dedicated telecommunications groups within organizations and has changed the entire telecommunications industry. Similar change is starting to occur in the area of building management.
So what technologies have changed in the area of building management? There are several areas that have come together. These include Internet technologies, wireless, open systems, enterprise solutions, threats and changes, and outsourcing/offshoring.
Internet TechnologiesInternet technologies are the rules created initially for moving information over the public Internet and later universally adopted for use within business and organizational networks. Internet technologies include common solutions such as Ethernet networks, and the TCP/IP protocol for use of Web browsers and XML. From a buildings perspective these technologies provide several valuable benefits. These include:
- The ability to easily operate a building using a Web browser. This allows for easy operation of all building systems from HVAC to CCTV using a PC, PDA, or other device without expensive software.
- The use of local and wide area networks, and structured cabling provides dramatically reduced connection cost and ubiquitous access to the systems.
- The ability to use Web services and XML to provide ready connection of BMS to business systems. This provides the ability to provide an enterprise-level of integration that launches a new generation of applications such as energy information systems, analytics, remote management and operation, as well as integration.
- The capability to remotely monitor and operate facilities allows for decreased on-site operating costs and increased performance.
WirelessWireless communications offer benefits in building management both in terms of increased mobility as well as decreased cabling costs. Wireless devices such as PDAs and cell phones allow operating personnel to be out with tenants and not be tied down to a desk - offering better responsiveness as well as increased productivity.
New wireless technologies such as Zigbee offer the potential to eliminate some or all of the communication wiring required for the installation of a BMS. This new technology uses a concept called "mesh networking" that eliminates many of the uncertainties of wireless communications in buildings. Not only do these new technologies offer a potential to reduce costs, but they also have the ability to open up new applications such as enhanced sensing, asset tracking, occupant comfort monitoring, and fresh air routing.
Open SystemsThe use of open standards such as BACnet, LonWorks, and Internet communications offer the ability to meet many of the goals of open systems. They can be used individually or together to provide a common user interface and systems integration. These systems also allow you to readily bid work between suppliers both on new projects, expansions, and for service. With open systems, owners are no longer tied to a specific supplier but now have the ability to select the best suppliers based on price, service, features, and capabilities.
Enterprise SolutionsEnterprise solutions are the latest addition in the area of building management. Enterprise management is the ability to operate many buildings centrally as well as to tie building systems into business systems.
Remote operation offers the ability to reduce staffing in buildings and also to provide greater expertise and tools at a central location. For example, by centralizing building operation functions, owners have been able to improve the analysis of building operation, better negotiate for utility rates, and be more responsive to tenant needs as well as reduce costs.
Tying building systems in with business systems helps to streamline information and also allows for better decisionmaking based on accurate, current data. For example, by integrating a card access system with the human resources system (such as People Soft), an access card can automatically be validated when the employee is hired and immediately invalidated when the employee resigns or when employment is terminated. Enterprise integration offers strong financial results through the ability to make better and faster decisions, reducing operating expenses, and cutting energy and maintenance costs.
Threats and ChangesIn addition to the challenges that we have as an industry in achieving our goals and the changes placed on us from technology, we also have a series of global threats and challenges.
Outsourcing/OffshoringOne of the side effects of the Internet and global communications is the easy ability to perform services from any location in the world. Outsourcing started in manufacturing with assembly line production moving to countries because of lower operating costs. Over the last decade, it has expanded into knowledge-based services to countries with low cost and a large number of technically skilled workers such as India and China.
Today, it is not unusual to see highly skilled work such as software development, accounting, or CAD work being outsourced to firms in Canada, India, Singapore, China, and the Philippines. Outsourcing is a mixed blessing. It helps to keep businesses competitive by reducing costs. On the other hand, it also threatens job security and our American "way of life." One of the challenges we face as we look toward the future is to ask, "How secure is my career in the future?" Could the services that you or your firm provides be done in a country of lower cost?
In general, services that provide higher value and require more collaboration are those that are less inclined to be outsourced. If you are a consulting engineer, tasks such as load calculation, duct layout, and specification creation are likely to be automated or outsourced over time. Tasks such as working with owners to create value or pulling together building and business systems are unlikely to ever become outsourced.
Industry Structure ChangeThe building management industry had been in an unstable global position for many years. While the industry had some large global suppliers, none of them had a dominant market position. In addition, there were many suppliers who had very modest market shares coupled with strong product lines and reputation.
Over the last three years, there has been a massive consolidation of these small and mid-size players by a handful of global suppliers. The end result has been the emergence of large suppliers who cover a broad swath of the building management space - from HVAC control, to fire alarm, security, and electrical distribution and services. These firms are now poised to create broad solutions that will utilize much of the new technology to take the industry to the next level. At the same time, look for small innovative companies that will be creating the next level of enterprise-based solutions that allow owners to gain additional returns from their buildings.
One of the results of a movement toward open systems is that control devices used for building management are now sold at a market price. When you have a truly competitive market, the products move to the point of being standardized and interchangeable. When this occurs it is called commoditization. This is a very healthy thing for a market, and the result is increased competition, better products, and lower overall costs.
However, in a commodity-based market only the largest, most efficient suppliers who have the highest volumes and greatest efficiencies can afford to compete. For example, look at the personal computer industry. Ten years ago, there were hundreds of personal computer manufacturers; they competed by having slightly different products, varying service offerings, prices, vertical market niches, etc. Over the years, the personal computer became more of a commodity and the number of suppliers decreased. Today, most business PCs are provided by three dominant global suppliers. The products are generally of high quality and low price. The large suppliers have moved from making the most of their revenue through this commodity piece to distinguishing themselves through additional services, solutions, and other value-added functions to their buyers.
What Does It All Mean?So what does all of this mean to you? What do you need to do as you move forward into the new year? Granted we are an industry in change, one that has, by long tradition, been hesitant to change. What is the overall score on these changes?
On the positive side, we see an industry that can do better, one that can take advantage of the consolidation and standardization to introduce a broad variety of new products and services that better meets the needs of building owners and occupants. We also see new technologies that will enable this change to occur.
On the negative side, we have an industry that is being pressed for performance and is struggling to make facilities as safe, productive, and efficient as possible. We are dealing with a mature industry that is in the midst of consolidation and is competitive on a global scale.
The challenge in front of you as you go into the new year is to decide what this means to you and to your firm. You need to take time over the next several weeks to stop what you are doing and do a careful evaluation of your strengths and weaknesses. Use a flipchart or white board to chart out your strengths, weaknesses, opportunities, and threats (commonly called a SWOT analysis). Do this regardless of whether you are a manufacturer, consultant, designer, contractor, facility manager, or financial owner. Look at where you are today and where you see yourself in five years. Use this information to determine how you need to change. Do you require education? Need to hire staff with new skills? Find new partners? Change focus? You are the best person to determine this plan and direction. Finally, keep in mind that these changes are real and imminent. Ignoring them is not an option as building management moves into the future. ES