The market for building energy management solutions is vast. There are thousands of vendors selling software, sensors, intelligent lighting systems and other devices to help facility managers dynamically control their buildings.
In order to help customers navigate this landscape, GTM's Grid Edge Customer Network was created to streamline the technology and procurement decision-making process by providing facility managers with actionable analysis and insights into the latest technology, regulatory changes and market developments. The customer network includes an exclusive group of end-use C&I customers who are charged with making enterprise-wide technology decisions specific to energy management.
Below are key ideas to keep in mind when evaluating an investment in building energy management technologies. These are some of the questions that the Grid Edge Customer Network is designed to help answer.
What are the specific problems?
Whether investing in a system upgrade or an entirely new platform, it is important to fully understand the project scope and identify the desired capabilities and tradeoffs, as some solution combinations will be a better fit than others. For example, a customer may create a short list of vendors focused entirely on fault detection and diagnostics solutions. However, expanding the desired functionality beyond just fault detection may greatly expand the vendor selection process, thus opening up a range of competitive alternatives.
Who are the primary internal stakeholders?
An investment in building energy management may require authorization and warrant input from a number of company stakeholders, including facility management, business operations, corporate sustainability and finance teams -- often all the way up to the company’s CFO. It’s important to survey the organization and determine which teams should be involved.
What are the primary building portfolio characteristics?
Before starting the procurement process, it is important to examine the vendor's familiarity with facilities with similar characteristics. Offerings such as utility bill management are able to be extended across a variety of facilities, while more demanding applications operate best under stricter criteria.
From an end-user perspective, retail and restaurant chains often prefer enterprise-level analytic platforms that can scale across multiple geographically distributed locations -- nationally or even globally. Similarly, commercial real estate owners typically look for tenant billing capabilities, but may also desire simple task and work order management functionality.
Self-perform software or managed service?
While it's important to consider both options, hybrid solutions also exist that blend technology owned and operated by the customer with select managed services. Ultimately, the decision comes down to the facility management’s willingness to invest in both the software and personnel versus outsourcing services to a third party. Management should also recognize that vendor solutions which excel in one vertical may perform differently in others.
On-premise or cloud-based?
A similar decision on building enterprise software needs to be made for on-premise or cloud-based. Traditionally, the legacy offerings have followed the former approach. Newer applications, however, are more often hosted on cloud infrastructure, which also allows users to access the latest firmware updates and features without messy installation setup.
Customers may also benefit from economies of scale, as external servers often reside in more cost-effective data centers. That said, even cloud-based solutions will likely require some hardware (e.g., meters, gateways) for monitoring and measurement and verification.
What kind of vendor?
There are a variety of vendor types in this growing yet still fragmented market. Legacy providers that produce building automation offerings in-house and deliver services through their branches are able to leverage existing relationships, often expediting the procurement process. IT-focused vendors have strong software offerings, but usually lack services and subject-matter expertise. And while smaller, innovative firms may offer compelling solutions, they typically have fewer resources and are prone to market exits, often through acquisitions.
How much to pilot?
To better understand a solution’s true value, it’s quite common to pilot new smart building technology across a limited scope before deploying across an entire building portfolio. Facility managers may even opt to pilot competing solutions at different locations, especially as these upgrades may require a number of implementation steps. Excessive testing is costly, so finding the right balance is crucial.
How to pay for it?
There are a range of payment options available. In general, it’s a balance between upfront and periodic investments. A higher one-time implementation fee has traditionally been better suited to on-premise and hardware-centric deployments. On the other hand, cloud-based software offerings usually employ a periodic (e.g., monthly or annual) payment method, which can be more flexible and target specific customer needs.
A number of additional options are also available. On many software contracts, any minimal hardware costs may be paid for over the lifetime of the contract. For example, it's common practice to amortize the cost of metering hardware across the first years of the annual software license fee.
Solution providers such as ESCOs may also provide an option to leverage a customer’s energy savings to help pay down technology costs. Some may even include performance guarantees and leverage the resulting savings.
As the market shifts toward cloud-based deployments, larger components of overall system price are expected to employ a more periodic approach to payment. While most providers have a preferred model, solution pricing is often decided at the negotiating table.
Driven by technology improvements, interest from financiers, and a growing partnership ecosystem, the building energy management space is becoming much more dynamic. Building professionals will need to remain apprised of the relevant developments that may impact the technology procurement decision-making process.
Join GTM Research’s C&I Customer Network to stay up-to-date with the most recent market analysis and participate in both our topic-specific meetings and broader schedule of Grid Edge conferences.
Omar Saadeh is a senior analyst at GTM Research focused on producing insights for large C&I energy consumers.
Joseph Aamidor is a 12-year veteran in the building and energy management industry. He frequently speaks at industry events and contributes to industry periodicals including Greentech Media. Joe has held product management responsibilities at Johnson Controls and most recently served as Director of Product at Lucid Design Group.
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