Vimal Kapur leads the Honeywell International unit that manages commercial buildings. He met with Barron’s in a Manhattan high rise, of course, to explain how the company’s industrial Internet of Things, or IioT, platform called Honeywell Forge is transforming his division.
Honeywell (ticker: HON) believes its long-term expertise in control technologies—such as the building systems Kapur is responsible for—gives it a leg up in developing software applications that not only control, but optimize, industrial assets around the globe.
Barron’s: Can you explain your role as CEO of the Honeywell Building Technologies unit?
Vimal Kapur: In a commercial building, we basically do three things, energy efficiency, safety and security. Those are the [value] propositions which we evolved with. [Honeywell] has been doing this since 1975. This [time frame] is telling about the business’s success, because it has survived after 45 years, and still is a market leader.
What is the business breakdown between equipment and services?
We make controls by which buildings become efficient, safer and secure. We don’t make a lot of the [heavy] equipment. All the equipment is linked with our systems. We are the nerve center of the building. Last year revenue was $5.4 billion.
You are integrating others’ technologies?
Suppose you want to put a fire system in this building. There will be an integrator somewhere in the New York area and they will be Honeywell certified integrators. They’ll buy Honeywell detectors, the panels, everything they need. They’ll come to this building. They will take everything else which is required from our system or can install it. So we sell a product, while our partner will make a solution of it. That’s about 60% of the business.
Say you are expanding LaGuardia Airport. It’s too big. It’s unlikely they will [want] to have a small integrator. They will have Honeywell integrate. We [also] have a projects business which would be us taking the lead.
We also [do] the aftermarket service business for the installed base we have created over the last 30 or 40 years. We continue to expand that. Our business is basically three parts. We ship products. We do projects. Then we support our install base through aftermarket services.
How are competitors stacking up on the latest technology?
Everybody’s trying to reinvent themselves. The reason being technology’s changing very fast. And you have to do something different. That’s very evident. The inflection is driven by technology. The disruption is massive. We have more computing power. We have more sensing power. We have to rethink about how we re-architect our offering in that creative approach.
What is Honeywell doing to reinvent itself?
The [Honeywell Forge] platform. So far we supplied systems. Forge is a system of systems. A building has a management system, but it also has an elevator system. It also has a boiler. It also has a chiller. All these have come from different suppliers. In the new world of connected, where every [equipment manufacturer] is offering connected services, they are saying that I can connect systems remotely, and I can provide you better uptime, better services. This is the new normal.
Everybody has their version of connected offerings in some shape and form. But if you wear a customer hat, you have now 25 connected [systems] in your facilities. You have “connected from Honeywell.” You’re “connected from [ United Technologies (UTX)] Otis.” You’re “connected from Carrier.” You’re connected from this, connected from that. So now, what do I do? You need a platform which can assimilate all the data from different sources and build a business purpose solution for that, and that’s what Forge is.
A good analogy I give to our customers is, what we used to do [with industrial technology] was like a Nokia phone. It was a phone. Supposed to talk. Or you can do text. That’s all our systems are. They’re supposed to do energy management. They do it. They’re supposed to protect against fire. They do it. Right? Now our systems are more like Apple. It’s a platform. You can load any app. It works. But you can also talk, and you can also text. But you can also listen to the music. Possibilities emerge based upon what you want.
The new applications are enabled by having everything connected to the cloud?
If you can’t connect your equipment, your value proposition as equipment provider has already come down. Every equipment is connectable today and serviceable remotely and diagnosable remotely. That’s become the new standard. However, what do you do with that new paradigm? That’s why Forge exists. It takes the data from our different sources of data and gives customers what they want. Customers want to run their buildings better, more efficient, lower cost, better user experience, that’s what they need.
Where is customer adoption these day? Honeywell controls 100,000+ buildings. Forge solutions are on about 4,000, so it’s still relatively low penetration, correct?
Yeah, it is.
Is Forge more than just data collection in the cloud?
Honeywell is not building a platform for data gathering. We provide, that’s a given, you need the ability to collect data. We are building what’s giving you an application that solves a problem. That’s a subtle difference. That’s where we start differentiating ourselves from wider competition because if you’re a generic software company, you do not understand what is required inside a building or inside a warehouse or inside an oil and gas facility.
Forge is a platform for optimization applications. How does Honeywell Connected Enterprise, or HCE, the division that oversees the software efforts, connect to all this?
We [at HBT] have an unfair advantage compared to other divisions. I and [HCE head Que Dallara] are in the same office. We’re both in Atlanta. We’re one floor away from each other. We have this massive amount of engagement. I think the organizational alignment is really strong.
How do customers feel about HCE and IioT?
Some customers feel this is something different and new and they need to learn about it. They need to understand its application use cases in their organization because, in my view, this is not about new technology. This is a new way of working. You have to change your old structure to adapt for Forge. But it’s happening.
Thanks, Vimal.
Write to Al Root at allen.root@dowjones.com
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November 11, 2019 at 02:00AM
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