Industrial conglomerate Honeywell is hoping to sell off its Building Solutions Group in a deal that could net between $3 billion and $4 billion, and has hired Goldman Sachs to shop it around, according to the Wall Street Journal.
Honeywell has also been trying to strike a mega-merger deal with UTC, which so far hasn't been successful. Divesting the Building Solutions Group could be an attempt to make such a deal more attractive, or as a note by smart building research firm Meemori speculates, a defensive measure against business threats posed by the Internet of Things:
The UTC play is to take one bold move to become an industrial power house in Aerospace and Building Services Technology.
Divesting the Building Solutions Business does not at first appear to be in accord with this long term strategy. This business is built around a number of software packages that provide a platform to deliver an optimized building performance and improved functionality and analytics across all Building Automation (BAS) services.
This is hi-tech and high margin business and currently is a major plank in deliver[ing] Smart Buildings. So why would you want to sell that if your objective is to become the world leader in building services technology?
[I]n order to deliver a Building Internet of Things (BIoT) the level of connectivity needed to fully automate buildings will only be achieved by a massive technology input from the IT community and drastic changes to contractual procedures.
[T]he Contract for IoT Data Services will require Big Data software and skills to further automatically fine tune the buildings performance.
So if you want to be in the mix for these lucrative contracts you need to have expertise in Data Analytics. Currently the big controls conglomerates like Honeywell, Siemens, Schneider Electric and Johnson Controls do not have this capability. Could this be the reason why Honeywell would like to sell their Building Solutions Business because Big Data and IoT Data services will eventually replace it?
Analysis: IoT as an Industry Disruptor
"In a sense, companies like Honeywell are collateral damage in a market shift to 'smart services,’ where the bigger picture of operating a building is rapidly emerging to eclipse the traditional product-centric plus maintenance market," says Constellation Research VP and principal analyst Andy Mulholland. "Fueling this is that energy management within the building is now seen as an enterprise duty."
A newly constructed 40-floor office building today might contain more than 8,000 sensors producing greater than a petabyte of data annually, Mulholland adds. "This data would get directed into three distinct business and technology functional zones: Building M2M reflex reactions around energy, heating, cooling or emergencies; read and react responsive 'services' that involve human intervention; and historic data analysis reporting for improved management," he says.
This is the complex new integration environment posed by IoT and Honeywell may believe it doesn't have the core competencies necessary to compete. The other possibility, of course, is that Honeywell sells the unit and uses those billions to acquire the big data analytics know-how and technology to make the shift.
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