EMAIL INTERVIEW – Ken Sinclair and Nicholas Heydon

Nicholas Heydon Optergy Australasian Channel Manager

Employment for Nicholas started as an apprentice electrician. After completing a trade and working in the commercial construction industry for almost 10 years he shifted gears into an engineering role with a leading Building Automation and Energy Management Company. Nicholas is an expert in automation and tuning of high performing buildings in the commercial office, retail and education sectors and was involved in delivering one of the first 6 Star NABERS rated buildings.

Studying a Bachelor of Business part time at Macquarie University, Nicholas progressed from engineering towards business and sales orientated roles where he received multiple awards for Sales and Estimating.

Nicholas is now the Australasian Channel Manager for Optergy, responsible for business development, sales, marketing and channel partner management across the Australasia region. Nicholas’s goal is to provide the tools that help reduce the built environments energy intensity. Over the span of his working career he wishes to see the world turn a corner, and global energy consumption decline (wishfully thinking).

https://www.linkedin.com/in/nicholas-heydon-0a16b563

Changes in the Building Automation Market

Controls contractors will need to evolve into systems integration to stay relevant.

Sinclair:  What changes have you seen in the building automation market over the past 10 years?

Heydon:  Controls contracting is increasingly a tough game. If we go back to the year 2000 there was 20 BACnet players. Fast forward 10 years to 2010 and this number had grown to over 500 with contractors having the luxury of product choice. In 2010 controls made up approximately 15% of a commercial office construction project. Not only was there margin to be made from project delivery, but also from an almost guaranteed maintenance agreement.

Today the number of BACnet players is over a 1000. This has brought many new contractors into the space making a much more competitive market. Controls now makes up only 8% of a commercial construction project. In some markets controls contractors are now taking orders between 0 and +5% margin. There is now little to no margin with no guarantee of a maintenance agreement at the end of a project.

The traditional contracting approach is no longer yielding the same returns for contractors.
 
Sinclair:  Where are these changes being driven from?

Heydon:  There are a number of reasons for this market shift. Mainly;

• Controls is a maturing market, with many product and contractor choices for the end user
• The increased number of VRF systems being specified and installed, reducing the number of controls related jobs for contractors to bid
• Demand for TCP/IP connected devices and “smart” integrated buildings tying into;
• The emergence of factory fitted controls, in its infancy now but threatens the existence of the control contractor all together

All these market trends make controls contractors very nervous about the stability of their businesses into the future.

Sinclair:  Where is the building automation market heading?

Heydon:  All predictions are that the building automation market is set to grow aggressively at predicted figures between 9-12% CAGR. In emerging markets, the traditional contracting model may prevail for some time. However, in mature markets like Australia, US, UK and Germany this market growth won’t be from the traditional contacting approach taken today.

In my opinion the growth expected in mature markets is going to come from factory fitted controls and the subsequent integration of all building systems. This not only includes HVAC but also lighting, metering, access control, CCTV, fire systems and tenant billing systems.

Sinclair:  What’s this mean for the controls contractor?

Heydon:  This means less and less project scope. It means the controls contractors of today will lose most of their labor content, no longer supply controller hardware or install cabling on projects.

Controls contractors will need to evolve into systems integration to stay relevant. There will still be a need to tie together buildings with factory fitted controls. The individual pieces of equipment still need to work together so the building operates cohesively.

Other building equipment like lighting, metering, access control, CCTV, fire systems and tenant billing systems will all need to be integrated and operated from one integrated systems platform. This will be done in an effort to optimize all buildings systems and operations.

[an error occurred while processing this directive] This change brings other challenges. Systems integration requires skills in IT, particularly in the areas of networking and security. In 2016 a major search engine provider headlined as a BMS system in a building they occupied in Australia got hacked. This came about because of a lack of understanding of networking and security from the installing contractor.

Typically controls contractors have backgrounds and skills that spawn from electrical, HVAC and refrigeration and may have a shortage of skills in the area of IT. Headlines like this can quickly harm the reputation of a contracting business, so upskill in the area of IT is necessary.

Sinclair:  What would be your advice to controls contractors today?

Heydon:  Tomorrow is a very different place to what we are used to. I would suggest;

• Upskill with networking and security knowledge and experience
• Upskill with systems integration experience
• Upskill with knowledge of other systems like lighting, metering, access control, CCTV, fire systems and tenant billing systems;
• Align yourself with products that can help you deliver these solutions
• Build your brand around systems integration
• Expect to take on performance guarantees as clients drive to ensure buildings work as intended

Start driving change today. Contracting with the same approach at best means taking more share of a declining market. This would be much like selling the best horse drawn buggy in the world, while a major car manufacturer starts production of the motor car.