Boom and Bust Ahead for Building IT

Rapid adoption, healthy returns, and a rich crop of building IT firms will fuel a frenzy of acquisitions, followed by a shakeout in 2015, says Lux Research.

BOSTON--()--From software start-ups to network components to Internet companies, investment in information technology (IT) has driven more than one boom and bust cycle. In its newest report, Lux Research surveys the expanding field of companies riding the latest wave of IT investment – intelligent buildings – and assesses which firms are ripe for acquisition by building-control companies, electricity producers, demand response companies, IT firms, and appliance manufacturers.

Titled “Sifting Winners from Losers in the Building IT Acquisition Frenzy,” the report finds that conventional buildings unnecessarily consume a lot of energy as lighting, climate control, and ventilation are all powered with little or no regard for the changing number of occupants, or the surrounding environmental or ambient conditions. New and established IT technologies all introduce a level of intelligence that can potentially reduce overall building energy consumption by 20% while reducing some energy consumption activities, like lighting, by up to 60%. Moreover, unlike renewable energy technologies, building IT offers a comparatively low risk, fast-to-market, and capital-efficient alternative for cleantech investors. However, the report also warns that with these opportunities come risks.

“It’s the Internet story all over again,” said Michael LoCascio, a Lux Research Senior Analyst and the report’s lead author. “We’re already seeing dozens of companies cropping up, and expect a wave of high-profile acquisitions to follow. Building IT will transform the landscape – but you’ll also see a lot of companies go bust in the process.”

To identify companies best positioned for acquisition, Lux Research scored firms by their value proposition and their probability of success – measured by criteria such as payback period, brand recognition, market differentiation, installation and operational challenges, distribution channels, and the building market they target. It then weighted scores by their relevance to six industry sectors: building controls firms, lighting companies, first-generation direct response, power producers, appliance manufacturers, and IT companies. Among the report’s conclusions:

  • Large companies are entering the building IT arena from all angles. Building-control giants, like Johnson Controls, Siemens, Honeywell, and Schneider Electric are all seeking acquisitions to expand presence in demand response and building monitoring. Large lighting firms will follow suit to expand their smart-lighting portfolios. Meanwhile, name-brand appliance manufacturers, such as GE and LG Electronics, and traditional IT/Internet software and hardware firms, like IBM, Google, Cisco, and Microsoft, are all moving into smart plugs and circuit monitors, building automation systems, and energy monitoring solutions.
  • Power providers will learn to profit by selling fewer electrons and more services. The economic crisis has reduced demand for electricity even as independent power producers and utilities are under increasing pressure to promote efficiency improvements on the part of their consumers. The solution may be to pursue acquisitions in building control and monitoring in order to add lucrative energy-related services to their conventional role as energy providers.
  • Entrepreneurs and many investors will follow the bright lights and swarm into the market. Recent and impending high-visibility acquisitions have “proven” the viability of building IT to entrepreneurs and investors alike, resulting in a gold rush into the space. Despite this, there are only a few dozen potential acquirers to purchase the flood of companies starting up in the space. The lack of competitive differentiation, value proposition and IPO potential among these smaller firms spells a major shakeout by 2015.

“Sifting Winners from Losers in the Building IT Acquisition Frenzy,” is part of the Lux Green Buildings Intelligence service. Clients subscribing to this service receive ongoing research on market and technology trends, continuous technology scouting reports and proprietary data points in the weekly Lux Research Green Buildings Journal, and on-demand inquiry with Lux Research analysts.

About Lux Research

Lux Research provides strategic advice and on-going intelligence for emerging technologies. Leaders in business, finance and government rely on us to help them make informed strategic decisions. Through our unique research approach focused on primary research and our extensive global network, we deliver insight, connections and competitive advantage to our clients. Visit www.luxresearchinc.com for more information.

Contacts

Lux Research, Inc.
Carole Jacques, 617-502-5314
carole.jacques@luxresearchinc.com

Release Summary

Lux Research analyzes IT investment companies & assesses which firms are ripe for acquisition by building-control companies, electricity producers,demand response companies, IT firms, & appliance mfrs

Contacts

Lux Research, Inc.
Carole Jacques, 617-502-5314
carole.jacques@luxresearchinc.com