February 2006
  
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A Return To Growth

In this overview of the market for environmental intelligent building controls over the next five years, the author looks at the current potential in the North American market, and whether this continent differs from Europe in terms of embracing convergence.

A Return To Growth
James McHale i&i limited

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Paul Ehrlich, P.E. Building Intelligence Group

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Ken Sinclair, AutomatedBuildings.com

Content provided for February issue
 

Trading conditions have been difficult in the last four years. Intelligent building controls – environmental (IBC(e)) manufacturers have had to cope with a declining market and increased competition from third-party suppliers. Together these factors have increased price pressures and driven down cost per point. This has escalated the relentless process of consolidation on the supply side and widened the gap between the major global companies and the smaller specialist suppliers.

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The North American market for IBC(e) systems stands at some $3.3 billion in 2005 making it the world’s largest single market. The market has been cyclical between 1995 and 2004, with rapid and consistent growth from 1995 to the middle of 2001 and then falling away to 2003. The last two years have seen a return to growth and our forecast is for continued growth over the next three years.

This growth is riding on the back of strong activity in the construction of new buildings, participation in a rapidly growing market for IT convergence (the convergence of BAS with IT networks), rising energy prices, and an increased demand for sustainable buildings with improved energy efficiency and air quality.

There has been strong growth in integration and remote control of building services, which will add further momentum to the market and sustain demand into the future. This is where IT convergence is starting to play a major role. However, it will ultimately be up to the IBC(e) manufacturers and third-party suppliers to ensure that they make the most of this opportunity and don’t miss out.

The North American market continues to offer the best opportunity in the developed world for sustained growth over the next five years, and it must be a priority for all aspiring suppliers as the full potential of this market is simply not being realized.

In comparison to any other developed economy, North America:

  • Has a larger building stock

  • Has higher spending on building construction per capita

  • Installs much more air conditioning and refrigeration equipment

  • Consumes more energy per square foot

  • Has a higher number of heating and cooling degree days

That said, North America spends no more on DDC per dollar of construction or per square meter of floor space than the average across Europe. However, it is clear that the propensity to fully engage with IT convergence is higher in North America than Europe at this time, and this will rapidly bring about changes right across the board as holistic solutions prove the benefits of installing more comprehensive building controls.

THE FUTURE: EXCITING TIMES AHEAD
A revolution is now under way in this business, shaped by the convergence of building services with IT networks and enabled by Web services and XML. We estimate that by 2010 around $1.7 billion (40%) of IBC(e) system sales will be fully IP-based.

Control Solutions, Inc Within the last two years there has been a significant move to converge building controls with IT networks. The business is gradually widening its focus from controls to encompass a commitment to delivering information and value-added services, thereby improving the value and performance of their clients’ buildings.

There are few global suppliers that have the skills and financial muscle to meet the new challenges and to independently grow this business. Most will have to form partnerships led by “super integrators” who have the capability and credibility to convince buyers that there is a business case for the investment and that they can deliver a no-risk, robust solution.

Partnerships have already been formed that are bringing together IBC(e) system suppliers with IT companies to develop software based integration tools and deliver holistic solutions. These have been targeted at the new construction and major refurbishment markets. However, the biggest expenditure is in the retrofit market where some $150 million (North America, 2005) was spent on Web-enabling existing systems so that information from different manufacturers’ systems can be brought together on a common platform and at some future date be directly connected to the business enterprise network.

Standard communication protocols, particularly BACnet® and LonWorks®, have significantly increased their share of the controller market over the last four years and now take some 63% of the business. These two standards will continue to dominate, but whether they will continue to increase their penetration of the market remains to be seen, now that Web-embedded products operating on established IT standards can deliver the “openness” that end users want.

There can be no doubt that IT convergence will increase the performance and value of buildings. It is already playing an important role in the retrofit market and, aided by wireless mesh networks, has grown at 50% per annum over the last four years. It is therefore inevitable that it will form the foundation on which intelligence in buildings is delivered in the future.


About the Author

James McHale  James joined i&i Ltd as a Business Analyst after graduating from Southampton University with a BSc in Computer Science.  He has carried out numerous projects on the subject of environmental controls and fire detection systems in Europe and Asia on both client specific and multi-client studies and has managed extensive fieldwork projects in the USA and Europe.  E-mail him at james.mchale@iandi.ltd.uk.

i&i is a specialist consultancy that focuses on analyzing the market for intelligent controls in buildings. Please visit our website http://www.iandi.ltd.uk/  for more information on this study and many others. The study into the North American environmental control systems market was published by i&i in November 2005, covering the period 2005 to 2010. It is our third edition on the environmental control systems business in this region and is based on data from manufacturers representing more than 80% of sales to the market. It is the most detailed and accurate current report published on this subject.

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