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IoT Implications for FM Companies: From Touch to Technology Services

By Sudhi Ranjan Sinha

In the past two years, the Internet of Things, or IoT, has captured everybody’s and every industry’s imagination. There is talk of billions of devices being connected and trillions of dollars of new economic opportunities being created. Even if part of these projections are hype, IoT is here to stay and is changing our lives in some very fundamental ways. This has happened due to the confluence of a number of technological advancements which have reached strategic inflection points for mass adoption and wide-ranging applications. The most significant ones are:

• Reduction in sensor cost. In the past 20 years the average cost of sensors has come down from about $20 to a little over $1. While this phenomenon is mostly invisible to normal human beings, this massive cost reduction in sensors has some very broad implications. Now we have the ability to sense a wide variety of human or machine actions and environmental factors. With such low cost, sensors can be instrumented into almost anything.

• Miniaturization of embedded electronics. The cost and size of embedded electronics has come down by orders of magnitude, while their performance and capabilities have gone up in proportion. Like sensors, we can now instrument almost every device and location with embedded storage and compute capabilities.

• Considerable connectivity penetration. Now we live in an era of pervasive connectivity. As per GSM Mobile Economy, by end of 2014, we had more than 7.1 billion SIM connections and more than 240 million machine-to-machine connections. Wi-Fi connectivity chipset shipments across Bluetooth, Wi-Fi, NFC, GPS, and ZigBee are expected to reach almost 9 billion annual shipments in 2019 as per ABI Research. More than 80 percent of adults in developed economies use the Internet regularly, and in developing economies, Internet penetration is increasing swiftly.

• Parallel computational and storage capabilities. With the introduction of Hadoop, Google File Storage, and other such systems in the past 8 to 9 years, we have now the ability to do parallel storage and processing of massive amounts of data using consumer grade computers and other networked devices. This allows us to use the enormous data getting generated in the world to create unique and unprecedented insights.

• Rapidly declining cost of data storage and alternate storage models. As per Deloitte research, the cost of storage has come down from about $12 per gigabyte to less than 3 cents in the last 15 years. Because storage is so cheap now, we can use all data and create new value out of it over time. With the advent of cloud technologies, storage and processing of data has also become very easy, along with being very inexpensive. We do not need advanced data management skills or complex data center capabilities to be able to store and use data. Even a three-member start-up can be set up in a cloud in less than three days, if not hours.

• Artificial intelligence and machine learning. Because now we have the ability to store and process all data, a number of advanced statistical algorithms, which can do very sophisticated predictive modeling or forecasting of complex machine or human interactions, can now be reliably run, giving us the ability to advance artificial intelligence and machine learning. 

• Virtual reality and advanced visualization. The advancements in electronics and processing capabilities have also enabled higher-order user experience to mimic human-like interactions and become more intuitive.

Now everybody is reimagining a world enabled by IoT. New business models are quickly displacing traditional ones. The world of buildings and facilities management is no different. Now every building device and system is being instrumented. Energy and operational data is being collected from each of them. Fault detection and diagnostics is being enabled for these devices and systems. Various building systems can now be optimized almost near real-time, taking into account environmental and building usage factors. Occupants can now be tracked real-time, and their preferences used as inputs to modulate a built environment. Every system in organizations — whether facility system or IT system — is getting integrated with other systems. Built environments are becoming technology rich and technology dependent.

There are several implications for facility management companies and service providers due to this growing trend of IoT adoption. Here are some of the most important ones:

1. Transformed occupant expectations. IoT has brought the consumerization of technology to its pinnacle. Occupants now expect to be able to control and interact with their environment. They want everything at their fingertips, want changes instantaneously, want the environment to adapt to their personality and preferences wherever they go, and want new modes of interaction like gaming. This necessitates facility management companies to significantly change their service delivery and engagement models.

2. Altered service delivery models. Historically, facility management companies have provided building owners and tenants with assured service-level agreements, digital maintenance-replacement-repair, asset management-tracking-cost-uptime, space management, energy management, and other such services. Now we will see increasing demands of experience management in addition to a broad range of outcome management.

3. Increased cost and efficiency expectations from building owners. Now since almost every building device and system can be instrumented and optimized, maintenance can become predictive, and every action tracked and improved; customers will expect facility management companies to become lot more aggressive in their cost and efficiency output. This will impact the construct of facilities contracts.

4. Changed engagement with building systems providers. Building systems providers are increasingly connecting their devices and systems and providing data-analytics-driven services to expand their repair-maintenance services with customers, which include facility management companies as well as key stakeholders. Facility management companies will need to recognize these evolving models and develop winning business models for all parties.

5. Differentiated buying relationships. Facility management companies can create better lock-in with building owners and tenants by leveraging more engaging and value-creating technologies. This will balance bargaining powers across all parties. Consequently, buyers will try to disaggregate the various services offered by facility management companies and commoditize many of them, especially those related to labor and material.

6. Involved participation in compliance reporting. Because facility management companies are dealing with real-time data and analytics more closely, customers are expecting them to take a more involved role in the increasing demands of compliance reporting around energy/sustainability, GHG emissions, etc.

7. Intensified encroachment by niche technology solution providers. Facility management is a very competitive business, and scale is critical to long-term success. We have seen consolidation happening in the industry and some very large players emerging. However, IoT is lowering the entry barriers for niche solution providers, which is fast encroaching in the operating space of large global facility management players, further impacting their competitiveness.

Facility management companies have traditionally focused on gaining greater effectiveness of their touch services. Technology has been leveraged extensively in the past to improve this effectiveness. With the rapid proliferation of IoT in every aspect of our lives, facility management companies will have to renew their focus on technology as the core of their business and engagement with customers/occupants of the facilities they manage, in addition to being an enabler for their operations.

Sudhi Ranjan Sinha is vice president, product development, building efficiency, for Johnson Controls. He leads the global engineering and product development for the controls business of Johnson Controls.