The Software Solution to Enterprise Efficiency: Don’t Overlook Midsize Buildings

The brain of the intelligent building, or the building energy management system (BEMS), gives customers the software analytics that translate more data into better information. Navigant Research is bullish on the BEMS outlook, as this market is flexible and scalable to meet the needs of a diverse customer base. First, BEMS applications can identify energy efficiency opportunities, prioritize operations and maintenance demands, maximize space utilization, and even engage employees. (In other words, BEMS can address pain points across an organization.) Second, BEMS are effective in not only managing individual facilities, but also heterogeneous portfolios, with the important capability of addressing inefficiency in midsize buildings. The ability of a BEMS to aggregate, analyze, and communicate data gives building owners and managers comprehensive and holistic insights across their businesses, which leads to data-driven decision-making for bottom line improvements.

More Data, Better Information

The Internet of Things (IoT) continues to grab headlines and can seem a bit overblown in some regards, but the concept is important in the intelligent buildings market. The IoT is focused around the connectivity of devices and data and the personalization of technology. It is an influential concept when considering energy management and operational efficiency in smaller facilities because it provides a pathway to cost-effective technology deployment. The IoT is a platform approach to technology deployment, and wireless sensors and communications gateways are the hardware foundation. These devices are the avenues through which the BEMS attains new data streams for better insights and action.    

BEMS and Broad Business Benefits

The IoT-enabled BEMS has the necessary data to support the needs of a broad set of business stakeholders and creates a stronger business case for potential customers. The IoT approach provides granularity that the BEMS uses to communicate the most valuable data, but what is most valuable is oftentimes a matter of perspective. Think of the 3:30:300 rule of thumb—for every $3 spent on energy, $30 goes to rent and $300 goes to payroll. This economic reality puts some perspective on the importance of delivering non-energy benefits with intelligent building investment. 

The intelligent buildings market was launched off the opportunity to use data, information technology, and software to deliver energy savings. This story was straightforward and compelling for addressing the challenges of optimizing the very largest commercial buildings. Better insight into building operations led to changes in control settings and behavior to reduce monthly energy bills—one clear-cut path to track investment payback. 

As the market continues to mature, however, the energy story is only part of the power of intelligent buildings. The data that the IoT delivers and a BEMS analyzes can start to address operational efficiencies that influence the other two big buckets of business costs—rent and staff. Two quick examples:

  • Space utilization: Workplace trends of hoteling, open offices, and working from home enable employers to lease less floor space if they have a clear idea of workforce needs. BEMSs can track space utilization to help employers make the right leasing decisions.
  • Productivity, engagement, and satisfaction: Turnover is a huge cost to businesses; happy employees stay. BEMSs can be an effective tool to help amplify employee satisfaction by creating comfortable workspaces, engaging employees on sustainability initiatives, and even helping employees find collaborative spaces through reservation tools for huddle or conference rooms. 

The Importance of the Midmarket

The share of buildings that fall into the 10,000 to 100,000 square feet range is significant, representing anywhere from 26% of healthcare facilities to 54% of schools (based on Navigant Research’s Global Building Stock Database report). There is big opportunity for investment in energy and operational efficiency in these smaller facilities, but as the low-hanging fruit—such as lighting replacements and programmable thermostats—is picked, organizations can further optimize their smaller buildings with BEMSs.

According to a new Navigant Research report, Building Energy Management Systems for the Midmarket, investment in BEMSs by midmarket customers is expected to grow from $235.6 million in 2016 to $1,640.3 million in 2025 at a 24.1% compound annual growth rate. The BEMS offerings include software, services, and hardware segments, which account for 43%, 39%, and 17% of market share in 2016, respectively.

Chart 1.1 BEMSs for the Midmarket Revenue by Offering Type, World Markets: 2016-2025

Navigant Chart

(Source: Navigant Research)

While the midmarket has been long overlooked by technology providers, customers are ready to invest in technology, and the market is responding. BEMSs are particularly well-positioned to optimize these smaller facilities because of the energy efficiency and non-energy benefits they can deliver—a compelling business case for the midmarket.

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