Why would you buy a building management system (BMS) at a huge upfront cost when you can get one for free, in return for monthly service fees that actually drive down the total cost of ownership?
The Internet of Things (IoT) is disrupting virtually all industries but it is particularly effective in challenging conventional approaches to control systems. Building management systems (BMS) are archetypal control systems with multiple sensors driving actuators to optimally maintain a comfortable working environment. Historically, large commercial and industrial projects have looked to proprietary systems from large vendors, partly because they were initially the only options on the table, and perhaps with a bit of the ‘if you buy IBM you won’t get sacked’ mentality.
However, the IoT is changing all the assumptions that underpinned previous procurement decision making and, in particular, it is opening up the market to competition from a wide range of start-ups. These start-ups aim to not just innovate the technology, but challenge the entire business model.
The first impact of IoT on the BMS industry has been the dramatic plunge in the cost in sensing, communication and installation. Traditional BMS systems typically have a price tag in the order of AU$5000 per sensor point plus ongoing maintenance, and budgets typically allowed for a small number of devices. One consequence is that a large percentage of BMS systems are just used for alarms.
Moving away from proprietary systems, that price point is now closer the $150 mark per month including maintenance, allowing thousands of sensors to be deployed for the same price. This opens the possibility of not just a finer level of control in more locations but an increased ability to diagnose system wide issues.
In addition, the advent of new communication technologies in the form of low-power wide area networks (LPWAN) is facilitating cheap secure communication without the need for wiring. The cost of data wiring is prohibitively expensive and wireless connection with low-power devices that can run on a battery for years has been a game changer. There are other benefits as well, including LPWAN’s superior performance in building penetration, inbuilt security protocols and much longer battery life.
Large BMS vendors have been responding to the challenge with their own versions of the ‘Industrial Internet of Things’, opening up their devices to be more interoperable with other systems and trading off their brand recognition to maintain market share. However, the procurement process remains the same with all the associated issues around the lowest cost tendering process and the adversarial relationships arising from dealing with faults during the Defects Liability Period.
With the coming of IoT and all the associated start-ups, the competitive landscape has been radically altered. These challengers are now looking to escalate the challenge by upending the entire business model of the BMS industry – by doing away with set price contracts and delivering BMS as a service. Under this new business model, the client pays no upfront fee for the sensors or whatever associated building services such as HVAC that are included as part of the contract (depending if it is a new install or a refurbishment). Rather, the costs are absorbed in monthly service fees that include all maintenance and optimisation of the system. Importantly the service includes a human layer where data coming back from the system is analysed by electrical, mechanical and controls engineers who specialise in determining root causes of issues and fixing the problem the first time.
The crux of this new model is a guarantee that the system will deliver specified savings (if the project is a refurbishment) or function at an agreed performance level. If the system does not there are associated penalties for the service provider. Another big change is that the client owns the data and, if it serves out the agreed contract span, it also takes ownership of the sensor and actuator hardware, which is all non-proprietary. This allows the owner to change service providers if they wish, but of course, the service provider will be doing their level best to keep their business.
At the heart of this paradigm shift is a move away from the adversarial relationships that have plagued the building industry. Traditionally, tenders are awarded on the basis of lowest price and there is typically no margin for error – either in the delivery of the product or in the original specification. What results is buck-passing from the lead contractor right down to the smallest suppliers and back to the client if they dare to ask for the smallest change to the original spec. With a service model, the building services integrator is completely incentivised to deal with all the problems and get the system performing at the highest level.
There are a number of beneficial side effects arising from this change in responsibility for system performance. Typically, facility managers would see alerts relating to a particular part of the system, say a pump, and call the relevant contractor to fix it. However, the root cause of the problem may be elsewhere in the system and facilities mangers are not typically experts in diagnosing problems in what are increasingly complicated systems.
However, service providers have the benefit of being able to collate data across the hundreds or thousands of different building management systems and sensors they manage and develop expertise not only in diagnosis but in preventative maintenance. A key game changer in service based IoT solutions is that all data is typically uploaded to the cloud where big data analytics can be usefully deployed to pro-actively monitor and optimise smart buildings and cities. Over time, machine learning will play an increasing role in analytics, delivering a step change in performance. It is these kinds of IoT technologies that give service providers the confidence to offer performance guarantees.
This paradigm shift of turning products into a service is at the heart of the IoT revolution. We see it over and over again in the most successful IoT startups. Swimming pool filtration systems are now being delivered free in return for a service contract guaranteeing crystal clear water quality. Garbage bins can be delivered free to Councils in return for a service contract guaranteeing they will be emptied just before they reach capacity. Success is rooted not just in technological innovation but in the reimagining of business models.
Dr Tim Kannegieter runs an online community of practice for Engineers Australia, the trusted voice of the engineering profession. You can find the IoT community at https://iot.engineersaustralia.org.au/. A webinar delving further into this topic was delivered on 6 March 2018. For further information and upcoming events, visit the site and its community calendar. Further information on LPWAN technologies can be found in the community wiki.