This article was written by Daphne Tomlinson of Tomlinson Business Research
Honeywell has been enhancing its portfolio of software tools to improve the performance and energy efficiency of facilities for several years. The various brands, channels and independent entities, which together comprise Honeywell’s Automation & Control Solutions (ACS) division, are focused on software as a driver of growth in the commercial and institutional buildings sector.
Through its direct channel, Honeywell Building Solutions launched Attune Advisory Services in March 2012, which is offered as a cloud-based service that analyzes facility performance data and turns it into actionable recommendations. The service suite combines cloud-based tools and analytics with insight and advice from a global team of Honeywell consultants, and customized support provided by onsite technicians.
A recent case study described the deployment of the software in Toronto’s Telus Tower (09 June 2015) to optimize performance and operational efficiency and its integration with the US Green Building Council (USGBC)’s LEED Dynamic Plaque a near-real-time monitoring tool to measure and provide performance feedback to help optimize operations.
Honeywell’s ACS division has been an active acquirer of over 30 businesses over the last 9 years, focused on entering adjacent product areas, in order to expand their addressable markets and to enhance their core businesses. In the latter category, acquisitions with a software focus include:
- Akuacom Automated Demand Response (ADR) software was acquired by Honeywell in 2010 and is now part of the Honeywell Smart Grid offering to grid operators and commercial and industrial customers to help reduce peak loads. It has recently been deployed at the Indian grid operator, Tata Power Delhi Distribution (TPDD) in more than 160 buildings of their high-end commercial and industrial consumers.
- INNCOM, a manufacturer of advanced software-based energy management solutions and in-room controls for lodging, healthcare and educational institutions, acquired in June 2012 by Honeywell Environmental & Combustion Controls (ECC).
- DataEye, an energy analytics application in Nov 2014 so that it could be incorporated into Tridium’s Niagara framework as a cloud-based analytics module.
Honeywell’s Annual investor Conference, 04 Mar 2015 highlighted the increasing importance of software in the Automation & Control Solutions (ACS) division. The Tridium Niagara open software platform for IoT was identified as a key area for growth. Currently, Tridium is applied in 500,000 buildings in over 50 countries. Honeywell plans to expand its use beyond commercial and institutional buildings into data centers and manufacturing plants, an addressable market the company estimates at $2 billion.
The 2015 Annual Investor Conference also enumerated the areas in which strategic acquisitions were being targeted, one of which was increasing capability in complementary software and data analytics.
The recent Elster Group acquisition looks set to further this objective, with opportunities to leverage the Honeywell software expertise. Elster is the largest acquisition undertaken by Honeywell to date. Honeywell announced the acquisition of Elster Division of Melrose Industries plc on 28 Jul 2015 for $5.1B / £3.3B. With $1.6B revenues in 2014, a premium price was paid for Elster, implying multiples of 3.1 x sales and 12.6 x estimated 2015 core earnings.
Elster’s metering data and analytics technologies combined with its presence in smart meters and gas heating mesh well with Honeywell’s current offerings. Specifically, Elster EnergyICT, acquired by Elster in 2009 and based in Belgium with about 160 employees, is a niche player in meter data communications software and a leading vendor of building energy management systems.
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In the Smart Grid sector, its flagship products are EIServer and Connexo and in the Energy Management and Efficiency sector, it offers the Enacto platform. Enacto is focused on clients in the world’s largest ESCOs and retailers and has around 500 customers. A recent contract awarded by Asda in Nov 2014 was for Enacto 9.3, delivered as Software-as-a-Service to manage more than 10,000 meters in over 660 sites across the UK.
Elster already had a previous relationship with Walmart, Asda’s parent company, for over 2,000 of its stores in Mexico. Tesco has also recently awarded a contract for Enacto across its retail and distribution facilities worldwide.
As the Elster transaction is not expected to be completed before Q1 2016, it will be sometime before we see how the various businesses will be integrated into Honeywell’s diverse and complex business organization and how successful its latest investment in software based solutions and services will be, given the already overcrowded energy management marketplace of established players and new entrants.