IoT and Smart-building opportunities

What are the important industry dynamics in the smart buildings sector and is there a role for the IoT? Last week, I attended the 6th Building Energy Summit [1] to hear from building owners, building operators, real-estate portfolio managers and corporate-sector tenants.

As in all other industrial sectors, much of the discussion highlighted the established processes and the conservative nature of this sector. Most notably, procurement and architectural design processes make it difficult to introduce truly innovative construction ideas into the sector. In existing buildings, the challenge is to introduce new technologies and working practices in a highly cost conscious environment. The sector is however becoming more technology-friendly and data driven in its decision making.

There is growing acceptance of the idea that IoT is the way to improve decision making and deliver innovative services. Among the IoT use cases discussed, successful projects typically received approval, after considerable financial scrutiny, and realized a return on investment within a period of 1-2 years.

A surprising aspect of the Summit was the level of sophistication in discussing data-driven, building management solutions. Specifically, the topic of IoT featured in 4 of 16 conference sessions. As these were implementation and operationally oriented sessions, this is a signal that the industry is ripe for IoT adoption. Other noteworthy observations relating to strategy and commercial operations included the following themes.

• There are competing customer segments for IoT solutions. In multi-tenant buildings, customers may be the building manager (focusing on improved asset management and customer retention) or the tenant (e.g. financial service firms want to control the apps that their employees use to manage building services tailored for their working environment). Competition to capture a control point in the value chain is driving the pace of innovation.

• From a financial perspective, it seems relatively straightforward to show an immediate return on investment. Among the case studies discussed, solution providers delivered an immediate impact through the following steps. Firstly, visualization tools improve the understanding of asset use and tenant behaviors resulting in better customer care from building owners to tenants. Next, access to granular data enables better control over energy consumption expenditures through the introduction of energy audits and modulation of environmental working conditions (e.g. lighting, ventilation, heating/cooling) driven off measured occupancy patterns.

• Businesses are looking for cost-effective ways to add connectivity to their assets. A deployment for the Royal Bank of Canada (RBC) showed rapid payback with just 4 sensor types after experimenting with a larger number i.e. it’s not necessary to instrument everything.

• The IT/OT interface is problematic. IT departments are reluctant to adopt IoT because of security concerns and the impact of introducing another technology provider into the corporate IT environment. The RBC team made a good case for using cellular to create a separate network that did not touch the corporate backbone (thereby preventing an HVAC hack from creating a path to customer data, for example). While cellular was expensive at the outset, it paid for itself by removing decision making from the IT department and enabling more agile development projects.

Technology providers attending and showing at the event included businesses involved in building data-acquisition platforms, analytics and visualization tools, machine learning for building diagnostics and smart lighting solution providers. Verizon was the only telecoms company with a visible presence.

A notable theme during a panel session on smart cities was the need for high speed telecoms infrastructure to support high-speed broadband services. This came across as almost a pre-requisite. My perspective is that this is misguided because cities should not wait for ubiquitous high speed infrastructure before embarking on smart city initiatives. There are several reasons for this: much can be done with existing communications networks; competing technologies can support non-time critical and low data volume communications (as one presented put it “real time for their utility customers involves one meter reading every 15 minutes”); smart cities services will expand to a wider geographic footprint which, in many cases, will acquire their own high speed infrastructure with a time lag; and, value creation is taking place today, in areas such as data exchanges and applications which function much higher up the stack.

It should be a concern to the managers of established technology companies that their innovation and product management teams are not experimenting in these areas or factoring them into their longer-term product and service roadmaps. Based on the topics discussed in the keynote panel, the future direction for smart building services (and hence the associated commercialization prospects) includes:

• tools to enable user control of the work environment;

• the application of machine learning to find patterns building managers are not looking for;

• building management strategies based on a central nervous system for all workplace data (privacy will become less of an issue because younger and open-plan workers seem willing to accept tracking methods in exchange for a better work environment);

• change management services to help building managers and users adopt and use IoT technologies to deliver data-driven solutions.

[1] 2017 Building Energy Summit, Washington D.C., http://2017.buildingenergysummit.com/