Market Insight

Smart building business model insights

August 06, 2019

Thomas Barquin Thomas Barquin Senior Analyst II, Smart Buildings
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IHS Markit Technology (now part of Informa Tech) have just published the ‘Smart Buildings Business Models Market Brief – 2019’ and we would like to share with you an interesting summary on the different business models currently used by smart buildings vendors.  

The transactional revenue model, selling hardware and software with a margin through different channels, remains the main source of revenues for BMS platform providers and should remain unchanged throughout the foreseeable future.

Some BMS platform manufacturers tend to go more directly to the market (“solution” providers) than others by doing the integration work on projects. The rest primarily use the VAP channel (system integrators). In recent years, the partner channel has been growing in the smart building industry thanks to the complexity of use cases, which require more and more expertise in both OT and IT. In addition, the master system integrator role, integrating systems across multiple domains, has been emerging in the market. Consequently, IHS Markit anticipates this channel to continue gaining traction during the forecast period.

The trend towards the “as-a-service” model should intensify during the projected period as BMS platform vendors attempt to introduce more software and remote service offerings to the market to ensure future revenue growth. For now, these services only represent a small share of the BMS platform providers’ revenues, as vendors work to redefine their individual strategies from a go-to-market point of view. At this stage, mostly value-added services and subordinate domains in building management systems are offered through a subscription model, and IHS Markit does not expect BMS platforms to be offered as-a-service in the near future.

Finally, the trend towards partnerships and consolidation observed in recent years should also persist, as these strategies are key for vendors intending to expand their offerings in the smart building sphere. Acquisition strategies enable acquirers to support their internal innovation efforts, while permitting the diversification of products, services, and long-term prospects. The most noticeable example of a recent investment model was Siemens, which acquired three different companies in the first part of 2018. The Siemens Building Technologies divisions acquired the smart building tech start-ups Enlighted, J2 Innovations and Building Robotic Inc. When adopting a partnership mind-set, companies aim to integrate and leverage emerging technology to create new customer experiences and offer superior software and hardware to the market. For instance, Microsoft has cultivated numerous partners that leverage its Cloud-based Azure IoT infrastructure to support many unique BMS platforms.

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