a business and technology strategy approach for the
TRANSCRIPT
A Business and Technology Strategy Approach for theBuilding Equipment Service Industry
by
Bruce E. Hoopes
B.S., Electrical Engineering (1985)Pennsylvania State University
Submitted to the System Design and Management Program in Partial Fulfillmentof the Requirements for the Degree of
Master of Science in Engineering and Management
at the
Massachusetts Institute of Technology
February 2000
© 2000 Bruce E. Hoopes. All rights reserved.
MASSACHUSES INSTITUTEOF TECHNOLOGY
JAN 20 U
LIBRARIES
The author hereby grants to MIT permission to reproduce and to distributepublicly paper and electronic copies of this thesis document in whole or in part.
Signature of Author........ ............................System Design and Management Program
February, 2000
Certified by...................... . . . . . D. Eleanor Westney
Sloan Fellows Professor Of International Management1-1 Thesis Supervisor
Acceptedby.....................................................Thomas A. Kochan
LFM/SDM Co-Director--- orge M. Bunkerprofessor of Management
Accepted by .................Paul 'A.* Lagace
LFM/SDM Co-DirectorProfessor of Aeronautics & Astronautics and Engineering Systems
A Business and Technology Strategy Approach for theBuilding Equipment Service Industry
by
Bruce E. Hoopes
Submitted to the System Design and Management Programin Partial Fulfillment of the Requirements for the Degree of
Master of Science in Engineering and Management
Abstract
The building equipment service industry has traditionally been characterized byfragmentation and the lack of dominant players. For each different type of buildingequipment, the building owner interacts with specialist service personnel and proprietarymonitoring equipment and technology. Attempts to standardize the interactions betweenbuilding equipment products, and thus to build a common interface to building owners,have largely failed.
The advent of internet standards and related information technologies provides a newbusiness opportunity in this industry. This entails the creation of a service layer betweenthe building owner and the specialist service companies, in which a single providermonitors all building equipment and is the sole interface to the building owner. The pre-requisite for this business is the establishment of a technical architecture that interfaceswith existing building equipment technologies, as well as adopting readily to newtechnologies. In this thesis, I develop key elements of the business and technologystrategy for this building equipment service opportunity. I then analyze and propose atechnical architecture that enables the strategy.
Thesis Supervisor: D. Eleanor Westney
Title: Sloan Fellows Professor of International Management
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Dedicated to my father,
Walter Ronald Hoopes.
Love and many thanks to my wife, Karen, and son, Andrew,
for their endless support and sacrifice.
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Table of Contents
1. INTRO DU CTIO N ............................................................................................................................... 9
2. INDU STRY BA CK G RO UND .......................................................................................................... 12
2.1. BUILDING EQUIPMENT ..................................................................................................................... 13
2.2. BUILDING AUTOMATION SYSTEMS ................................................................................................. 15
2.3. SERVICE M ODELS ............................................................................................................................ Is
2.4. TRENDS IN SERVICE ........................................................................................................................ 20
3. BUSIN ESS STRATEGY ................................................................................................................... 22
3.1. OPPORTUNITY DESCRIPTION ........................................................................................................... 22
3.2. PRODUCT OFFERING AND VALUE PROPOSITION .............................................................................. 24
3.3. STRATEGIC ELEMENTS .................................................................................................................... 26
3.4. INTERMEDIATION ............................................................................................................................ 28
3.5. SERVICE M ODELS ............................................................................................................................ 29
3,6. ENTRANT OR INCUMBENT? .............................................................................................................. 33
4. TECH N O LO G Y STRATEG Y ......................................................................................................... 36
4. 1. CREATING A STANDARD .................................................................................................................. 37
4.2. CAPTURING V ALUE ......................................................................................................................... 41
4.3. ARCHITECTURAL STRATEGY ........................................................................................................... 42
4.4. IMPLICATIONS ................................................................................................................................. 43
5. PRO DU CT ARCH ITECTURE ........................................................................................................ 45
5.1. DEFINING ARCHITECTURE ............................................................................................................... 46
5.2. THE ARCHITECTING PROCESS ......................................................................................................... 48
5.3. UPSTREAM INFLUENCES .................................................................................................................. 52
5 .4 . F U N C T IO N ....................................................................................................................................... 5 2
5.5. ATTRIBUTES .................................................................................................................................... 56
5 .6 . C O N C E PT ......................................................................................................................................... 5 7
5 .7 . F O R M .............................................................................................................................................. 5 8
5.8. CONNECTIVITY ................................................................................................................................ 63
6. CO N CLUSIO N .................................................................................................................................. 65
BIBLIO G RAPH Y ....................................................................................................................................... 68
List of Figures
Figure 1: Building Automation System Architectures ............................................................................... 15
Figure 2: BACnet and LonW orks Summary ............................................................................................. 18
Fig ure 3: Trends in Serviceability ................................................................................................................ 19
Figure 4: Interaction with Service Providers ........................................................................................... 20
Figure 5: Integrated Service Provider.......................................................................................................... 22
Figure 6: Sum mary of On- and Off-Site Equipment ................................................................................. 25
Figure 7: Transaction Oriented Service ................................................................................................ 31
Figure 8: Application of Agents.................................................................................................................... 32
Figure 9: Summary of Incum bent vs. Entrant........................................................................................... 35
Figure 10: Consumer Benefits and Installed Base ................................................................................... 38
Figure 11: Reference Architecting Process.................................................................................................. 49
Figure 12: Logical Architecture ................................................................................................................... 59
Figure 13: Physical Architecture - Basic Application............................................................................... 61
Figure 14: Physical Architecture - Large Scale Application..................................................................... 62
Figure 15: Architectural Connectivity.......................................................................................................... 64
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1. Introduction
This thesis examines an opportunity in the building equipment service industry. Building
equipment systems provide the functions necessary for the operation of modern
buildings; examples are heating, air conditioning, and alarming systems. The servicing
of these systems involves monitoring, maintenance, and repair, and is typically performed
under contract by firms specializing in particular equipment types. As a result of this
specialization, a building owner or facility manager is forced to interact with many
different service providers. The consequence is building management inefficiency, and
inconsistency in process and information reporting. However, the forces of information
technology, internetworking, and intelligent machinery have converged to provide a new
model for building equipment service. This model involves the creation of a service
layer between the consumers of building equipment service and the specialist service
providers.
For the enterprising firm, this new service model represents a business opportunity. An
examination of this opportunity could lead in many different directions: a market
analysis, exploring revenue potential and pricing options; a competitive analysis,
examining existing firms and their capabilities; or perhaps a net present value analysis
intended to quantify the opportunity's value. Although each of these are important
elements in an overall approach, my intention in undertaking this thesis was not to
develop a traditional business plan. Rather, I sought to explore certain strategic elements
that are key to the venture's viability, and to establish a practical foundation for a firm
pursuing the building equipment service opportunity.
My approach in this regard is to apply the tools of business strategy, technology strategy,
and systems architecture. The business strategy is focused on the key elements of the
opportunity; namely, the proposed value to the customer, alternative models for
providing service, and an examination of the types of firms best suited to the opportunity.
However, as technology is the prime enabler for the opportunity, the main thrust of the
thesis is the development of the technology strategy and product architecture. The
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technology strategy proposes specific actions the firm can take in order to gain advantage
through technology. These actions are focused on developing the product as a standard,
and on ensuring that ultimately value is captured by the firm and not by imitators. The
technology strategy is subsequently used as driver for the product architecture, which is
described in both logical and physical form. By developing the product architecture to
this level of detail, I provide a practical foundation on which the new service venture can
be based. In the end, the business strategy, technology strategy, and product architecture
suggestions are meant to form a cohesive approach for a potential building equipment
service provider.
After this first introductory chapter, the thesis includes four more chapters. The second
chapter provides an evaluation of the current state of the building equipment service
industry. This includes an overview of building equipment types, and a description of
previous attempts to network building systems together. Models for providing building
equipment service are examined, with a particular emphasis on the relationships between
service providers and consumers. Enabling trends in the service industry are also
covered. Chapter Three introduces the business opportunity in detail, including an
evaluation of alternative strategic approaches. The product offering is described, noting
the particular benefits to the customer. As the basic proposition involves the introduction
of a new layer in the service value chain, a section is devoted to discussing the merits of
brokering arrangements. Different models for providing service within the new approach
are evaluated, and finally a determination of the advantages of entering via an incumbent
firm or an entrant firm are discussed.
In Chapter Four, the basis for a technology strategy is laid out. Specifically, this covers
elements of standards creation, means of capturing value for the first mover, and
strategies for the product architecture. The final chapter develops the product
architecture. The architecting process is established, then each step is defined and tied
back to the technology strategy. The resultant architecture is described in two forms: the
logical form, and the physical form. Examples of typical applications are provided in
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order to establish the architecture's scalability. The final step evaluates the connectivity
of the architecture against strategic goals and upstream influences.
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2. Industry Background
The modern building requires a multitude of functions for successful operation, ranging
from heating and air-conditioning to vertical transportation. The interrelated mechanical,electrical, and computer systems that provide these functions are known as building
equipment systems. The specific equipment requirements of each building are unique
due to varying uses, designs, materials, climates, and construction techniques. Building
requirements are satisfied by custom designed building systems, even though most
components are 'off-the-shelf' - it is the combination of the components that makes each
solution unique.
This work addresses building equipment that is controlled or has the potential to be
controlled by automated (electronic or computer) means, as opposed to purely
mechanical systems (noting that as technology progresses more systems fall into the
former rather than the latter category). These are large, complex systems, with product
life-cycles that are typically measured in decades rather than years. The high purchase
and installation cost of this equipment creates an incentive for the building owner to
maximize the equipment lifetime. As a result, an important element of ownership is
service and maintenance.
The complexity of building equipment systems means specialized skills are necessary for
service and maintenance. As most building owners or facility managers lack this skill,
they turn to service providers who specialize in a particular type or brand of equipment.
The service provider market is split between two general types of firms. The first, the
equipment manufacturers, clearly possess the equipment knowledge required to provide
the specialized service. The manufacturers are supplemented by the second type of firm -
smaller independents that have developed expertise servicing particular brands of
equipment. Although independents initially started in order to fill market voids where the
manufacturers did not compete, the two often now compete side-by-side. The natural
growth inherent in the service provider market provides abundant opportunities - every
sale of new equipment translates to an increase in the potential market. In fact, a review
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of the industry shows that service revenues approach new equipment revenues in terms of
volume. For example, in the U.S. elevator industry, service sales volume is typically
80% of new equipment sales volume, with a total industry volume of $7 billion
(Strakosch 1999).
2.1. Building equipment
Eyke provides the following breakdown of building equipment systems: heating,
ventilation, and air conditioning (HVAC) systems, transportation systems, lighting
systems, fire systems, security systems, and electrical (energy) systems (Eyke 1988).
Industrial sites may require further services such as compressed air or steam. Each type
of system is briefly described below.
HVAC Systems: An HVAC system provides a building with a consistent, controllable
environment. Stein (1997) lists services such as heating, cooling, humidity control, air
re-circulation and filtering, and exhausting odor-laden air as functions provided by
HVAC systems. These systems are built from many different component types,
including chillers, boilers, pumps, fans, air handlers, valves, circulators, and blowers;
within a total system, components are often provided by different manufacturers.
Because of the distributed nature of HVAC systems, and the requirement for consistent
control, manufacturers were early adopters of embedded computer and networking
technology. However, cost pressures and competitive issues resulted in the propagation
of proprietary solutions. Over time, HVAC manufacturers have capitalized on
technology advances and decreasing computing costs to achieve ever greater control and
monitoring capabilities.
Transportation Systems: Building transportation equipment is used to move people and
goods efficiently throughout a building. Elevators and escalators provide vertical
transportation, while automated walkways provide horizontal movement. Since the early
1980's, elevator and escalator manufacturers have incorporated computing technology in
their systems. Initially, microprocessors were used to replicate the relay based logic
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traditionally used for system control. Over time, however, computing and software
technology was employed for competitive advantage in areas such as position control,
traffic optimization, and operational features. More recently, manufacturers have turned
to networking and telecommunications technologies to enhance their ability to remotely
monitor systems.
Lighting Systems: These systems provide illumination using a combination of
equipment types, technology, and diffusion patterns. Typically lighting systems can be
controlled via computer from central locations, and cost savings resulting from reduced
energy use is a primary motivator behind control innovation. However, relatively simple
control algorithms and cost considerations have precluded the necessity for advanced
computing capabilities in this industry.
Fire Systems: This category of building equipment includes smoke, heat, and fire
detection and alarming, extinguishing systems, and fire and smoke control systems.
These systems are governed by strict local and national regulations - in some locations
integration with other building systems is not permitted. Normally designers of these
systems are cautious about using unproven new technology due to reliability concerns,
but modern computing and electronics are employed, primarily for improved sensing
capability and for remote communications.
Security Systems: Functions provided by security systems include intruder detection and
alarming, access control, and use monitoring. Innovation in this industry is centered
around detector and sensor technology, and networking capabilities. Remote
communication to central monitoring sites is also a key driver of computing technology.
Energy Systems: Although the scope of this work does not include power generating
equipment, energy usage monitoring and control is an important component of modern
building technology. In many cases, these controls are built directly into the energy
consuming equipment, and therefore central monitoring is a reporting rather than active
function.
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2.2. Building Automation Systems
Each type of building equipment described above has evolved significantly over the past
decades in terms of integration with electronics and computer technology. The primary
motivations for this evolution were better control, higher reliability, and increased
monitoring capability to detect and diagnose faults in the equipment. As micro-
computers and communication capabilities propagated throughout building equipment
systems, a new class of integration arose which linked the systems together. The
intention was to coordinate control between devices that had a functional relationship, for
example, to optimize the HVAC systems in a building and to provide a central control
capability. These integrative systems are known as building automation systems.
A. Centralized BAS B. Distributed BAS
CPUPC
FPU - ~- ~~ F PU
SC SC SC
FPU ~- E-~ ~-- FP
FPU FPU
expansion modules
Figure 1: Building Automation System Architectures
The figure above shows two common building automation system architectures. In the
centralized system, the CPU, or central processing unit, is the main controller for all
building equipment devices. FPUs, or field processing units, act as the interfaces to the
building equipment. In the distributed architecture, the PC only performs non-real time
functions such as report generation. The control of the building equipment is contained
within the standalone controllers (SC), which in turn control individual devices through
expansion modules. Eyke (1988) describes the main benefits of building automation
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systems as increased reliability, reduced operating costs, easier building management,
and intangible benefits such as greater personnel efficiency and morale. The primary
customer for these systems is the building owner or facility manager. The focus of the
building automation industry has been to ease the job of the facility managers by
providing inter-operation between the devices.
As Goldschmidt (1998) notes, the first generations of computerized building equipment
systems relied on proprietary communication methods. That is, within a single
manufacturer's equipment offerings communication techniques were used that were not
known nor readily available to outside vendors. As a result, it was difficult if not
impossible to mix equipment from different vendors, and building owners became
frustrated by their inability to competitively bid additions to their systems.
Manufacturers mistakenly assumed that they could achieve a form of lock-in with their
proprietary systems, when in fact building owners refused to be held hostage. As Fisher
(1996) asserts, the ultimate effect of this proprietary thinking was to drastically slow the
diffusion of building automation systems (and the resultant benefits to building owners).
In the late 1980's two separate efforts began with the goal of developing solutions that
would create a standard for integration in the building equipment and automation
industry. Their main intent was to develop a communication and control standard that
would allow building developers to seamlessly integrate components from different
suppliers to create optimal building solutions. Both parties claimed 'interoperability' as
their holy grail. Brown (1998) defines interoperability as the ability to integrate products
from multiple vendors into flexible, functional systems without the need to develop
custom hardware, software, or tools. Fisher offers a slightly more technical definition:
two or more computer systems that share the same communications system, and ask each
other to perform various functions on a peer-to-peer basis. Clearly the adoption of such
standards would be a boon to building owners and contractors. Dabholkar (1997) claims
that these further benefits would be realized by the adoption of building automation
standards:
1. Standards increase flexibility in system design and expansion.
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2. Standards are the key to cost savings from installation through maintenance.
3. Standards allow creativity among system specifiers and end-users.
4. Standards accelerate the evolution of technology.
The first of these standards efforts, named BACnet, was the product of the American
Society for Heating, Refrigeration, and Air Conditioning Engineers (ASHRAE). As a
committee based effort requiring the input and approval from a large member body,
BACnet took many years to evolve. Ultimately, in 1995, it was approved as an American
National Standard by ANSI. As such, it is the 'formal' building control standard.
BACnet is essentially a paper-based standard, describing in great detail the rules used to
allow building equipment inter-operability.
The competing standard, LonWorks, was developed and deployed by a single firm, the
Echelon Corporation. In contrast to BACnet, LonWorks is supported by a family of
products. These products contain the proprietary protocols that define LonWorks. By
integrating these specialized chips into their products, manufacturers inherently meet the
LonWorks standard. Echelon, of course, stands to gain as the market adopts LonWorks.
As the merits of BACnet and LonWorks are debated, however, it is clear that neither can
claim victory in the standards race. Goldschmidt (1998) maintains that the building
management industry is not willing to participate in the learning curve of any new
technology, and therefore any standard will take some time to penetrate. This argument
hardly seems compelling in light of rapidly diffusing standards such as TCP-IP or
Windows technology. More likely, the appearance of two competing and roughly
equivalent technologies has confused the marketplace and slowed down both.
Furthermore, it appears that even though a standard backbone exists for building
equipment, no 'killer application' offering the building owner great advantage has yet
been introduced. Each installation of BACnet or LonWorks does not necessarily increase
the value for the next one, and therefore purchase decisions are not affected by the
diffusion rate. The table below summarizes the BACnet and LonWorks standards race.
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BACnet LonWorksSponsor ASHRAE committee Echelon CorporationAffiliated Vendors 50 published vendor id's 200 - LonMark Interoperability
(wwwBac 1999) Association (Brown 1998)Installations 4000 sites (Newman 1997) Over 4 million devices (Frezza
1999)Shipping Products not available Over 1500 (Tonn 1997)
Figure 2: BACnet and LonWorks Summary
2.3. Service Models
Building equipment service is typically performed under contract, and at a minimum
includes equipment maintenance and repair. Specifically, most service contracts include
provisions for the following items (Romano 1999):
- Scheduled Maintenance: routine, scheduled service activities intended to prevent
breakdown of the equipment. The schedule interval is based on elapsed time or on
usage - for example, the number of runs an elevator makes. In some cases these
activities are required by local regulation.
- Diagnosis and Repair: determination of the cause of a malfunction, and replacement
or adjustment of faulty parts. This is also known as unscheduled maintenance.
- Safety Test or Audit: verification that the equipment is performing to code, as
required by regulation or contract.
As most building equipment systems are essential to the use of the facility, owners are
advised to be judicious in their selection of service providers. Corcoran (1999) suggests
that an effective service program has to provide the following basic benefits: it must be
proactive, responsive, capable, and in touch. In practice, the primary factors upon which
service providers are judged are cost and equipment availability (which measures
performance of the equipment as well as performance of the service provider).
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Originally, building equipment service was provided exclusively by equipment
manufacturers. As the new equipment industry grew, however, an opportunity came into
existence for third-party providers of equipment service. Although they had an inherent
disadvantage relative to the original equipment manufacturers, the basic electro-
mechanical nature of the equipment enabled anyone with initiative and a basic technical
ability to take part in the service business. The advent of advanced electronics and
miniaturization changed the service business for a period. Similar to the automobile
industry, it became difficult for the average mechanic who did not have access to design
secrets to maintain complex building equipment. Too many of the critical product
elements were not visible, and therefore were only diagnosable with specialized
equipment. As building owners were confronted with the prospect of single sources for
service contracts, however, they demanded that proprietary diagnostic information be
made available regardless of the service provider. Manufacturers complied, providing
basic diagnostic information but reserving advanced capabilities for their own service
personnel. These three phases of the building equipment service industry are
summarized in the chart below.
1. Basic 2. Electronic 3. Electronicelectro- w ith w ith
mechanical proprietary accessibletools diagnostics
CZ
C')
Time
Figure 3: Trends in Serviceability
The capability to service building equipment is not necessarily transferable between
different types of equipment, though. In other words, service companies may be able to
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tend to equipment of one type from many different manufacturers, but rarely to different
types of equipment. Largely this is due to the complexity of the equipment as well as to
the homogeneity of basic design within one type. This has led to an industry structure
that is vertically aligned along equipment types. The effect on the building owner or
facility manager is that they have to interact with service providers for each type of
equipment. There is, as a result, an abundance of providers, terminology, tools, and
technology that the facility manger must be aware of. This interaction is simplified in the
diagram below.
Building Owner/Manager
HVAC Fire/AlarmService Service
Transportation SecurityService Service
Figure 4: Interaction with Service Providers
2.4. Trends in Service
Although the nature of these interactions with service providers has remained steady,
several other trends in the building equipment service industry are worth noting. These
trends provide the underpinning for the emerging opportunity described in this thesis. As
with most other industries, the building equipment service industry has been greatly
affected by the integration of computers and communication technology. Clearly there
has been an impact on the equipment itself, especially in terms of customization of
controls and in advanced diagnostic capabilities. However, computing technology has
also enhanced the ability of service providers to understand how equipment is being used
in a particular customer's environment. Furthermore, the ability to collect and
disseminate information about this usage has expanded.
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The first important trend is that the focus of building equipment service is changing from
'nuts and bolts' to information. Obviously, the proper functioning of the equipment is
still the main priority, but increasingly customers are distinguishing service providers by
the amount and quality of information they provide. In a discussion of service
productivity, van Biema (1997) argues that service activities are not transportable, that
competition is predominantly local. For the 'wrench turning' aspect of building
equipment service, this is true, but the focus on information technology and data is
transforming the industry into a 'virtual' one, where value added becomes a function of
best ideas and processing power.
The second trend impacting the service business is the increasing reliability of building
equipment systems. Manufacturers compete for new equipment sales on many different
virtues, one being equipment reliability. As the equipment becomes more reliable, and
maintenance intervals are decreased, the value of service goes down. The service
contract is no longer a given - at the extreme, a customer purchasing maintenance-free
equipment questions the value of service at all. Therefore, in order to maintain the
revenues associated with service, providers must shift the focus from the physical
equipment to complementary services associated with that equipment. Instead of
maintaining the machines, providers need to service the customers.
The third trend, at this point more a potential than a reality, is a consequence of the first
two - that maintenance and repair are becoming commodities. Information about
machines, their operation, diagnosis, and repair, is captured in databases and expert
systems instead of in employee's heads. Often this information is embedded in the
device itself (automobiles, for example, capture diagnostic codes which are readily
available via inexpensive software packages). As this knowledge is made available
(through the demands of customers), diagnosis becomes less of a concern and repairs
become part-swapping activities led by a computer. The act of repairing the equipment
will have less value than information and knowledge about that equipment.
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3. Business Strategy
3.1. Opportunity Description
The previous chapter described several emerging trends in the building equipment service
industry. One aspect of the industry, however, has remained static - building owners and
facility managers maintain service relationships with many different kinds of equipment
specialists. Advances in information technology, and a general acceptance of
information-based services, provide an opportunity to create a new kind of layer between
the building owners and the specialist service companies. This concept is represented in
the diagram below:
Building Owner/Manager
Integrated Service Provider
HVAC Fire/AlarmService Service
Transportation SecurityService Service
Figure 5: Integrated Service Provider
Instead of interacting with many different service providers, the building owner or
facility manager interacts with a single provider - the integrated service provider. The
integrated service provider concept could be based on three different overall strategies:
1. Provide the equipment: This strategy involves supplying and installing the
information technology equipment that integrates information from the existing
building equipment. This equipment is akin to a building automation system, with a
focus on monitoring and data collection instead of control. The building owners or
facility managers would be responsible for managing the use of the data that the
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equipment provides, for example by developing (or contracting for) custom
information services or reports.
2. Provide the equipment and information: This option adds the creation and delivery
of information services to the installation of the integrated monitoring equipment.
Service of the building equipment would not be provided in this case - only the
information to enable the service.
3. Provide the equipment, information, and service: This option represents the entire
integrated building equipment service package. In addition to providing the
equipment and information services, the business would act as the sole service
provider across the range of building equipment. It would provide a single interface
to the building owner, ranging from 24 hour monitoring to contractual issues to
emergency repair of the building equipment.
When establishing what the basic offering of a business will be, one must consider a wide
range of inputs, including market, competition, regulation, capabilities of the firm, and
many others. Fundamentally, however, there must be a customer with a compelling need
for the product or service. When considering the three options listed above for the
building equipment service industry, one can draw an analogy with the building
construction industry. The prospective owners of a building use the services of a general
contractor to manage the various trades involved with the actual construction. Although
it may be cheaper to manage those interactions themselves, it takes an enormous amount
of skill and effort to do so. Similarly, in the service industry, an offering that provides a
single service interface to the building owners for all the installed equipment creates
customer value (provided, of course, that the cost of doing so is commensurate with the
recognized benefits).
Furthermore, one must consider the potential for the good or service to be adopted by the
marketplace. In option one above, the result is that the purchaser has to do more work
once the equipment is installed - understand needs, develop services, maintain the
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equipment - while still managing the interfaces to the service providers. In option two,
multiple service interfaces still exist. Option three provides an integrated service to the
customer, with a focus on delivering value and making the facility manager's job easier.
For these reasons I propose that the offering consists mainly of information delivery and
an integrated service interface, and therefore the equipment becomes an enabler for the
product.
3.2. Product Offering and Value Proposition
Xerox identifies potential market opportunities in part by describing them in terms of a
product offering and a value proposition (Gabel 1998). The product offering includes the
product (hardware, software, systems) and the other supporting value chain capabilities
associated with that product, such as support and customer service. Davis and Meyer
(1998) add the notion that products and services are no longer distinguished, that firms
must learn instead to think in terms of offers that combine the two. The value
proposition is a brief statement of the customer benefits delivered by the product offering
to its target market segments. Through these two definitions we can establish the
foundation of the venture.
The product offering consists of physical equipment and services. Specifically, the
offering includes:
1. On-site systems that connect to and collect information from the relevant building
equipment. The range of building equipment depends on the particular contract, but
ideally includes any equipment that has the capacity to communicate electronically
and the capability to provide information about its status and operational condition.
The on-site systems will consist of computers, other electronic devices, software, and
associated wiring. The on-site systems connect to off-site systems that constitute the
enterprise systems of the integrated service provider. A summary picture of the total
system is given in the picture below.
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Off-Site Systems
Integrated ServiceProvider - Enterprise
Systems
Communications
On-Site Systems
Integrated ServiceProvider Equipment
Existing Building Equipment
Figure 6: Summary of On- and Off-Site Equipment
2. The delivery of building equipment service activities such as monitoring, periodic
maintenance, repair, applicable safety audits, and inspection of the relevant
equipment. Again, the range of equipment and specific activities covered under the
contract depend on the installation.
3. The delivery of information services related to the building equipment. This
information would be provided in an integrated, consistent format, regardless of the
type or manufacturer of the equipment. Specific items include:
- Reports on equipment usage, for example the number of operations of elevators or
escalators, or the hours of operation for HVAC equipment.
- Reports on maintenance activities and results of safety audits.
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- Reports on levels of service provided by the equipment - examples are energy
efficiency, or waiting times for elevators. This is useful for building owners
attempting to attract new tenants.
- Reports on equipment reliability and downtime.
- Historical patterns for the equipment.
- Comparisons of equipment to industry standards or other manufacturers. This
information is useful when planning upgrades or replacements.
- The ability to view equipment status, performance, and operating condition in
real-time via existing building network equipment and computers.
- Custom reports as requested by the building owner or facility manager.
The integrated service provider value proposition follows from the product offering, and
includes the following benefits for the customer:
1. A consistent, single interface to all building equipment service issues. When
reporting problems, tracking service activities, billing, scheduling maintenance, or
requesting information, there is only one point of contact. This saves time, personnel,
and eases the facility manager's job.
2. Injormation about building equipment presented in a consistent, integrated format.
3. Faster response from the service provider owing to the use of electronic data and
communication systems.
4. A cross-functional view of all building equipment information.
5. Scheduling for periodic maintenance and inspections coordinated between all
building equipment types, resulting in less disruption to building activities.
6. Faster information access due to the use of standard information technologies such as
the internet.
3.3. Strategic Elements
In summary, the business proposal involves the integration of information technology and
building equipment, with the goal of buffering building owners and managers from the
multitude of different types of building equipment and service providers they typically
26
deal with. Successfully creating such a venture demands that a number of strategic
elements need to be developed. These fall into two main thrusts: business strategy and
technology strategy. Business strategy covers elements such as organization, marketing,
and sales (some elements of the business strategy have already been covered, including
the basic offering and value proposition). Technology strategy considers how to create
advantage through the use of technology and product architecture. Although both these
categories contain numerous elements, in the remainder of the thesis I concentrate on
those that I believe to be the critical keys to success. These key strategic elements are:
- Value of intermediation: how does the addition of a layer between building owners
and service providers add value for the customer?
- Service delivery model: how will the firm provide on-site equipment maintenance
and repair given the potentially enormous installed base and geographic area?
- Incumbent or entrant firm: what type of organization is best-suited to establish the
integrated service provider venture, an incumbent building equipment service firm, or
a new entrant?
- Creating a standard: what strategies can be developed to drive diffusion of the
product and to promote it as a standard?
- Capturing value: how can the integrated service provider ensure that competitors can
not extract value from the on-site equipment? What strategies will ensure the firm's
exclusive retention of this value?
- Product architecture: what on-site product architecture best embodies the integrated
service provider goals? What are the key characteristics of this architecture?
In addition to these key strategic elements, there are certain assumptions that I make that
are key to the viability of the proposal. Although the risk associated with any of these
assumptions is low (I believe the approach is straightforward), they are listed here
explicitly for completeness.
- Qfftsite IT infrastructure: clearly there is a large IT development associated with the
integrated service provider approach. This part of the architecture is not covered here
27
due to the ubiquity of the necessary architectures and technologies (for example,
database and web architecture and development).
- Local staff: the firm would require local staff to perform sales, marketing, and
technical activities, primarily to establish and maintain relationships with the building
owners and managers.
- Pricing and cost models: A key assumption is that the service could be provided at a
rate competitive with current building equipment service providers. Although a
detailed analysis is beyond the scope of this thesis, the use of information technology
as a backbone is a key enabler to this assumption.
- Building equipment capabilities: As discussed previously, the trend in building
equipment is towards better diagnostics and more built-in capabilities. In some ways,
the integrated service provider venture is predicated on this assumption - that building
equipment will provide accurate and reliable information relating to malfunctions and
degraded performance.
3.4. Intermediation
The first key strategic issue addresses the idea of creating a layer between the producers
of a service and the consumers of a service. Fundamentally, this appears to be at odds
with current business strategy, and therefore is important to address. Tapscott (1996)
argues that the digital economy is eliminating the middle-men between producers and
consumers - a process he calls disintermediation. This effect is due to the direct linkage
enabled by information systems and the internet in particular. Examples he cites include
the elimination of recording companies and retail outlets in the music distribution value
chain, and the elimination of travel agents as brokers. He further suggests that those
currently in this role need to move up the 'food chain' to create new value and to provide
new types of services.
Although this dynamic is certainly true, one must draw a distinction between
intermediate functions that rely on 'humans-in-the-loop' to achieve communication
efficiency, and those that rely on information technology to optimize the pairing of
consumers and producers. For example, internet companies like E-bay integrate and
28
intermediate. That is, they provide a more efficient means of linking producers with
consumers, effectively automating the broker function (in fact, Tapscott lists integration
as another theme of the digital economy). The end result is that consumers have the
ability to find producers that otherwise would be unavailable to them. If there is a benefit
for the customer, than an intermediary is both necessary and beneficial, provided neither
producer nor consumer can provide the function. The integrated service provider actually
provides two intermediary functions: one between the building equipment and the
building manager (provided mainly by information technology), and one between the
building manager and service provider (options for this function are provided in the next
section). In any case, the integrated service provider relies on instant access to extensive
information, an attribute Tapscott deems critical for a broker to possess.
3.5. Service Models
The next key strategic issue for the integrated service provider is how to deliver the
actual repair and maintenance of building equipment. Customers in this market demand
quick response time and rapid resolution of issues. Equipment down-time is a key metric
used to assess the quality of service providers. For the integrated service provider, there
are three potential strategies: provide the service directly, sub-contract the service on
contract basis, or sub-contract the service on a transaction basis.
1. Direct Service: This model of providing service represents the 'traditional' approach.
It involves building a service infrastructure within the firm, consisting of offices,
personnel, equipment, and material in all venues where the firm does business.
Clearly this would be a significant undertaking requiring substantial investments in
time and money. Of course, one approach to building this infrastructure is
acquisition. However, there is not a clear target for such an acquisition, that is, one
firm that can provide the service capability across a broad range of building
equipment types. As building equipment service firms are typically specialized, an
acquisition strategy would involve the merging of a number of different companies.
The advantages to the direct service approach include clear control over the service
29
resources, and the ability to develop lasting relationships with customers due to the
consistency of contacts.
2. Contract with Service Providers: This option involves developing contracts with
existing providers of building equipment service. These contracts would be
analogous with those that already exist between building owners and service
providers, with the exception that all customer interaction would be via the integrated
service provider. One potential problem with this arrangement would be an inherent
conflict by the contracted firms doing the actual service. Because they would
compete directly for the same service contracts, their incentives may not be aligned
with an integrated service provider sub-contract arrangement. Provisions would have
to be built into the contract to provide these incentives; clearly a successful integrated
service provider venture would give the motivation as it may provide the only vehicle
for service business. A primary advantage of this option is the availability of
specialist service providers in most every location. Of course, the integrated provider
would still need local presence to initiate, negotiate, and maintain relationships with
the specialist providers (as well as the customers).
3. Transaction: The third, and most intriguing, option for providing service is to do so
by contracting on a per transaction basis. Each building equipment service need,
scheduled or unscheduled, could be viewed as an individual transaction that the
integrated service provider would put out for bid to the general service community.
In this scenario, the integrated provider would have longer term contracts with
building managers, leading to a relationship oriented strategy. But there would be no
contracts with the firms providing the actual service - that relationship would be
transaction oriented.
30
Building Owner/Manager
Relationship oriented
Transaction oriented |ZZc>
Potential HVAC 0 0j 0 Potential Fire/Alarm
0000 0Service Pro idders o0 oService Prowders
SO 0Potential Transportation 0 0 0 0 Potential Security
Service Proiders Service Provders
Figure 7: Transaction Oriented Service
The figure above identifies the relationships in this scheme. Clearly the burden
associated with this proposal is to manage each of the transactions in real-time. As every
service need is identified, a provider would have to be found and negotiated with. Some
building service needs are emergency conditions - for example, a passenger is trapped in
an elevator. The brokering scheme, therefore, would have to have to be fast and accurate.
A bank of service operators, contacting potential service providers on each occasion,
would not be sufficient to meet the real-time requirements. Any system with a human-in-
the-loop may in fact make this approach untenable because of the large overhead and
time consuming nature of give-and-take in the negotiation. Given that the heart of the
integrated service provider is an information system, an alternative approach would be to
conduct these transaction negotiations on-line. A service need would be posted
electronically, and capable service providers would bid on providing that service. The
entire transaction would be conducted on-line, except of course for the actual servicing of
the equipment (although this type of repair is becoming feasible, it is not the focus of this
thesis).
This type of electronic transaction is becoming commonplace on the internet, both within
consumer-to-business and business-to-business relationships. Brokering transactions for
31
service would be an ideal application of electronic agent technology. Agents are software
applications that perform as mediators in electronic commerce transactions. They are
different from traditional applications in that they are "personalized, autonomous,
proactive, and adaptive" (Moukas 1998). As such, they can be 'tuned' to particular user
preferences or situations. Maes (1998) describes the six fundamental stages of a buying
process, and goes on to suggest where agents are most likely to be used for automation.
The applicability of agents to the integrated service provider business application is
outlined in the table below.
Buying Stage Applicability of Agents1. Need Identification Low - the need is dictated by equipment condition or
periodic requirements2. Product Brokering Medium - retrieval of information to determine the
specific service to buy from provider3. Merchant Brokering High - this stage involves the evaluation of potential
service providers based on availability, location,expertise, price, reputation, and previous experience
4. Negotiation Medium - most elements of the transaction would befixed, although some, such as price, could benegotiated by agents
5. Purchase/Delivery Low - purchase could be conducted through agents,but delivery of service in most cases requires thephysical presence of service providers
6. Product Service and Medium - post-service evaluation could beEvaluation conducted electronically through agents, and could
feed consideration set for future transactions
Figure 8: Application of Agents
Proposed Service Model: Of the three potential service approaches, the transaction
oriented approach is the most compelling for its ability to eliminate time-consuming
manual search and negotiation. However, it also presumes that all potential players in the
transaction would have the technical capability (and desire) to conduct business in this
manner. It is likely that this will not be the case for some time, and therefore a fall-back
option needs to be considered. The first option, developing an in-house service
capability, is the least desirable because it involves the creation of a massive and widely
distributed organization. The purpose of the integrated service provider approach is to
32
leverage technology to reduce the manual overhead, not to increase or replicate it.
Therefore the most likely way to achieve the building equipment service component is to
develop longer-term contracts with local service providers, and to gradually phase in an
agent-based transaction approach as the technology becomes more widely accepted.
3.6. Entrant or Incumbent?
The third major strategic issue considers the type of firm that is best suited to enter the
integrated service provider business - an incumbent specialist service firm, or an entrant
into the industry. An incumbent firm, for example Carrier Corp. in HVAC equipment, or
Simplex in alarm systems, has an established base of knowledge and customer
relationships upon which to draw if attempting to become an integrated service provider.
An entrant firm, however, has advantages in terms of their ability to adopt a new business
model, as this opportunity requires. The following discussion examines the key points
regarding incumbents and entrants.
The ability of an incumbent service firm to successfully become an integrated service
provider would depend on many things. The first would be their ability to recognize the
potential of the opportunity, and to divert resources from their core business in order to
pursue it. Christenson (1997) discusses the theory of resource dependence, which states
that it is not managers who determine the flow of resources within a company, but rather
it is customers and investors. For innovations that do not have an immediately positive
impact on a firm's major customers, it will be difficult for that firm to reallocate
resources to develop the innovation. Instead the firm will concentrate on satisfying their
customers. In the building equipment service industry, an incumbent firm is typically
associated with a single type of building equipment. For example, Otis Elevator provides
service for elevators and escalators but not for other building equipment. Therefore, the
customers of Otis will push for innovations that improve Otis' capability to quickly and
effectively service elevators. Allocating resources to develop products that allow Otis to
provide service to all types of building equipment, while a prudent long-term objective,
33
would not help Otis' short-term objectives (i.e. current service-contract customers). Thus
it would be met with resistance by those internal forces tuned to satisfying customers.
Notwithstanding the desire to allocate resources to the integrated service provider idea,
one must consider the ability of an incumbent firm to develop this idea even if they chose
to. Prahalad and Hamel (1990) describe the core competency of the organization as the
collective learning, the glue that binds the organization together. The core competencies
of an incumbent service organization revolve around knowledge related to a particular
type of equipment. Carrier's service division, for example, has a clear competency in the
technology associated with HVAC equipment. It has also developed competencies in
other aspects of the service business, such as route scheduling and dispatch optimization.
In the end, however, it is an organization tuned to the problem of delivering service to
HVAC equipment.
The competencies required for the integrated service provider are substantially different.
Because it is an opportunity based on information, and not on physical service and repair,
the successful firm will need to develop competencies in software technology,
networking and databases. Although specialist service providers are integrating
information technology into their products and processes, inherently they have a different
focus and thus a different set of core competencies than an integrated service provider
would. The notion that one firm could do all these things is debated in Feeny (1998); the
authors note that successful businesses focus on creating advantage through a limited set
of competencies, while outsourcing other activities to complementary providers. As
discussed in an earlier section, the actual service and repair would be realized as an
outsourced activity.
Additionally, the biases of an incumbent firm may be a liability in the pursuit of the
integrated service provider business. I have already mentioned the competency bias
towards a particular type of equipment; for example, security systems versus HVAC or
lighting. Within one type of equipment, there are also biases to specific manufacturers or
technologies. An example is support for the building automation standards BACnet and
34
LonWorks. Certain manufacturers (and providers) have pledged support for, and
developed expertise in, one of these standards. To develop expertise in the other standard
may be difficult due to the established cultural bias - frequently personnel of such firms
are on standard setting bodies associated with one of the technologies, and therefore have
developed a personal stake in it.
The preceding discussion clearly leads to the conclusion that an incumbent is at a
disadvantage relative to an entrant in the integrated service industry (the table below
summarizes the entrant vs. incumbent issue). An incumbent faces hurdles related to
resource allocation, core competencies, and biases. An entrant, on the other hand, needs
to address start-up issues such as funding, resourcing, and customer development. An
entrant would also need to establish the relationships on the supply-side necessary to
provide service and repair (as discussed in a previous section). Perhaps the best option
for a first-mover as an integrated service provider would be for an incumbent firm to set
up an autonomous organization. As Christenson (1997) suggests, such an organization
would be free to develop those customers and relationships that positively affect the
development of the firm's technology and processes. Issues associated with funding
would be at least partially alleviated, and access to the incumbent firm's customers could
be provided. Ideally, an incumbent firm could provide the best of its resources to an
autonomous organization focused on the integrated service provider business.
Entrant IncumbentAdvantages - focus on critical core - funding
competencies - established customers- clean slate - tangible assets (offices,- no bias equipment)
Disadvantages - have to raise capital - inability to allocate resources- no tangible assets away from customer concerns- no customer base - established biases
- mismatched competencies
Figure 9: Summary of Incumbent vs. Entrant
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4. Technology Strategy
The business strategies outlined in the previous section are critical parts of the integrated
service provider concept. Each is a pillar of the overall strategy - if one is weak, the
venture on the whole will be weakened, but will remain viable. Perhaps the most
important determinant of the success of the venture, however, will be the strategic
application of technology. What exactly is technology strategy? Wheelwright and Clark
(1992) offer that "the objective of technology strategy is to guide the firm in acquiring,
developing, and applying technology for competitive advantage". A broader definition
asks the following three questions as a way to define technology strategy (Stern 1999a):
1. What technologies can affect overall customer value?
2. Can the value be captured in the face of competition?
3. Does the firm have the organizational capabilities to deliver the value?
Both definitions agree that technology is a key determinant in the value proposition, and
that competitive advantage can be an outcome of a properly planned and executed
technology strategy. The integrated service provider concept described in this thesis is
fundamentally enabled by technology - to connect the various types of building
equipment together, to notify remote sites when building equipment has a problem, and
to give customers electronic access to both the equipment and information about the
equipment. As described earlier, the offering consists of both a product and a service.
The technology strategy, therefore, must consider both: the equipment that is installed at
the customer site, and the information and activities that are enabled by the product.
The remainder of the thesis explores elements of the technology strategy for the
integrated service provider concept. This chapter lays out the strategy; that is, what are
the guidelines the firm should adopt when making the detailed technology decisions.
Determining this decision making framework early will provide a context for the
technology decisions. Without it, the decisions made each day by developers and base
technology staff will result in an emergent strategy, one which may not be in the best
36
interest of the firm. The strategy therefore must answer a number of questions
concerning the firm's technical direction: what are the actions that will increase the
adoption rate of the offering? How can the technology decisions promote the
development of a product (and service) standard? What can be done to prevent easy
imitation by competitors?
Once the strategic technology direction is set, the technology framework can be laid out.
Primarily, this consists of the product architecture, and the specific technology choices to
populate the architecture. Again, some basic questions must be considered: How does
the strategy drive the architectural choices? What architectural decomposition will
ensure that the product will be adaptable to the widest range of uses and customers? How
do existing technologies drive the architecture choices? The integrated service provider
architecture is covered in the next chapter; the remainder of this chapter is dedicated to
the general technology strategy.
4.1. Creating a Standard
Although the business proposition described in this thesis is essentially a service, it relies
on an underlying technology (product) backbone. The product consists of the equipment
installed at the customer site that ties together the various types of building equipment,
and as such represents the 'integrated' in the integrated service provider concept. The
success of the business on the whole depends in large part on the success of creating a
technical architecture that has the ability to satisfy a wide range of customers.
Furthermore, this success will depend on the diffusion of the product into the
marketplace, and ultimately its acceptance as a standard.
From a technology strategy perspective, the notion of creating a standard architecture
versus creating a great product has important implications for the integrated service
provider. The distinction between the two strategies is rooted in the customer's buying
decision: if the decision is based solely on the intrinsic value of the product to the
customer, then developing a 'great' product is sufficient (Stern 1999b). If the buying
decision depends on the extent to which others have purchased the product, then creating
37
a great product may not be enough - an architecture to sustain that product must be
established. Specifically, the technology strategy must be focused on establishing the
product as a standard, as opposed to focusing solely on attributes like performance,
features, and price (although obviously these cannot be discounted). The rapid pace of
technology forces many great products into early obsolescence, while architectures can
transcend technological changes. As Morris and Ferguson (1993) describe it:
While any single product is apt to become quickly outdated, a well-
designed and open-ended architecture can evolve along with critical
technologies, providing a fixed point of stability for customers and serving
as the platform for a radiating and long-lived product family.
Architectural benefit
Value toconsumer
Great product benefit
Size of installed base
Figure 10: Consumer Benefits and Installed Base
The chart above demonstrates how consumer benefits increase with the size of the
installed base. This effect has many drivers. Economy of scale is perhaps the best
known: as the volume of the product increases, the marginal cost decreases, and these
savings are passed on to the consumer. The concept of network externalities refers to the
increase in value as the total number of users increase. For example, the value of a
telephone expands with the number of other telephone users. Product complementarities
describe the increase in value as additional products and services become available -
again this is a circular relationship as the base product must diffuse to a threshold level
38
before other parties will be interested in creating complementary effects. A modular
architecture also provides benefits, as consumers can anticipate that new technologies
will be easily integrated. And finally, the fears of adopting a new technology, and its
accompanying learning curve and growing pains, can be forestalled by the existence of an
installed base.
It is important to distinguish the development of a standard for the integrated service
provider concept versus the standards battle in building automation system protocols
(BACnet vs. LonWorks, as discussed earlier). As a system that integrates information
from building equipment, and provides it to off-site information systems, or directly to
local systems, the integrated service provider equipment is not competing for the building
automation protocol standard. In fact, the integrated service provider must be neutral
between BACnet and Echelon (and proprietary protocols) in order to provide the greatest
customer value. Of course, the adoption of a single protocol standard would make the
technology development easier for the integrated service provider, but at the same time
would open up the field to imitation.
There are a number of specific strategies that should be adopted by the integrated service
provider in order to establish technology standard. These strategies, which are used later
as inputs to the architecture development, are described below.
Low switching and adoption costs: As one component of the overall pricing strategy,
keeping the cost of integrated service low is an obvious strategic approach to ensuring
adoption. However, specific requirements will ensure that the product is architected in a
manner to facilitate low adoption (or switching) costs. As mentioned previously, the
ability to integrate seamlessly with existing protocol standards is key. This allows
building owners to keep all their existing building equipment, and gives them the
flexibility to choose suppliers and equipment optimally for the specific situation. This
also places a scalability requirement on the product. The architecture must be able to
accommodate a wide range of customer situations, ranging from high-rise,
39
technologically advanced new construction, to older, low-tech existing installations. If
the equipment is optimized around the high-end, the cost will be prohibitive for the
low-end. Therefore, the architecture (hardware and software) must consider both
extremes and the spectrum in-between.
Give away rents: The temptation for a firm creating a new market offering is to attempt
to capture the entire potential value associated with that offering. However, in order to
establish the product as a standard, it is usually necessary to give away some of that value
to other parties. The development of product complementaries by these other firms will
ultimately enhance the value of the product and increase the installed base. Examples of
this strategy are abundant: Nintendo allows third-party developers to develop and profit
from games for the Nintendo system, while 3-Com actively promotes the independent
development of software for the PalmPilot platform. For the integrated service provider,
the strategy is the same: allow others to gain profit from the invention in order to
maximize diffusion, which will then increase the profit pool for all involved.
For the product architecture, the implication of this strategy is that certain interfaces will
have to be 'open' in order to allow value-added services. For example, if a customer was
looking for a specific report concerning their building equipment, they could have the
option of contracting a third-party to develop it. Clearly there is a limit to how much of
this capability should be open to external firms - if the architecture is completely open it
is difficult to prevent low-cost imitation (as IBM discovered with the personal computer).
In any case, the integrated service provider product architecture must enable outside
parties to develop complementary products and services. This strategy has an additional
market effect: it reduces fear that the firm is heading towards a monopoly position, an
approach that typically is met with resistance by the marketplace (not to mention
regulators).
Focus on early adopters: Research by von Hippel (1988) shows that product innovation
often comes from users instead of manufacturers. Understanding the 'lead' users benefits
the firm not only in this regard, but also in promoting product diffusion via the 'word-of-
40
mouth' phenomena. Von Hippel's lead users map to a category of adopters that Rogers
and Shoemaker (1971) call innovators, or those who readily adopt a new technology even
in very early stages of its lifecycle. Lead users tend to have enormous influence over the
next wave of potential adopters, with the ability to make or break ultimate adoption. For
the integrated service provider, these users can be found where building equipment is
employed at its highest level of technology, or where funding is available for exploration
in this area. For example, the idea for BACnet came from Cornell University, where
facility managers became frustrated with the limitations in vendor's proprietary solutions.
As lead users, they developed their own inter-operability protocol that eventually became
one of the leading standards. Similarly, the integrated service provider firm will seek out
such installations as the first adopters of the integrated service concept, even to the point
where the service is subsidized. The inroads into the user community will offset the
temporary lost rents.
4.2. Capturing Value
The previous section described strategies to ensure that the integrated service offering has
a high degree of adoption and leads to a standard. Of course, the main goal in the long-
term is to capture value from the offering, and ensuring penetration is the first part of the
strategy. Once there is a large installed base, the strategy must also include provisions
for extracting rents. If too much control was mortgaged in establishing the installed base,
then others will ultimately inherit the spoils from the idea.
The strategies for creating this standard hint towards open-systems, particularly in
allowing others to extract rents in the form of complementaries. Vital to the success of
the integrated service provider, however, will be the notion that a critical piece of the
architecture must be controlled by the firm. This leads in part to a proprietary solution - a
trend that the building equipment industry is attempting to overcome. However, as
Morris and Ferguson (1993) point out, proprietary architectures are indispensable to
competitive success, and in fact benefit the consumer more than purely open
architectures. Rechtin and Maier (1997) second this notion by including the following in
41
their survey of systems architecting principles: "successful architectures are proprietary
but open". For one, open architectures are typically set by committees, and as such
represent compromise solutions. Second, as suggested by Goldschmidt (1998) in
reference to the development of BACnet, committee solutions take much longer to
complete. Furthermore, open architectures are not subject to the competitive pressures
that proprietary architectures are, and therefore do not keep generally keep pace with
technological improvements.
The technology strategy for the integrated service provider therefore must include both an
open component and a proprietary component in the architecture. The open interfaces
allow others to develop complementary products; the proprietary elements ensure that the
inventing firm will profit in the long run. Morris suggests that correctly choosing the
degree of openness is one of the most subtle and difficult decisions in the architecting
process, but goes on to point out that the common thread among successful information
technology firms is this coupling of an open interface to a proprietary architecture. Intel,
for example, publishes the specifications to control the signals to its microprocessors, but
tightly controls the internal designs.
4.3. Architectural Strategy
The previous sections develop the case for an architecture that is both open (to promote
complementarities) and proprietary (for competitive advantage). This section considers
additional architectural goals. The first is driven by the notion that specialized solutions
will be taken over by general purpose architectures. Morris cites examples such as the
Wang system for word processing - the general purpose PC eventually supplanted it. The
proposed integrated service architecture, therefore, must employ general purpose
technologies. The flip-side to this idea is that the architecture, if initially specialized,
must be able to grow to accommodate other uses - it should have "massive option value"
(Stern 1999c). This strategy not only protects against an incursion by another general
purpose technology, but also increases the saturation point by extending the potential
applications. For the integrated service provider, possible applications extend to almost
any information technology use envisioned in a modern building, such as:
42
- Office productivity applications
- General information serving (i.e., web) required by tenants or occupants
- Telephone and telecommunication services
- Entertainment hub serving audio and video on demand
Clearly the integrated service platform could become a central computing hub for almost
any building service. Therefore a key architectural goal is the ability to expand into new
uses. A second goal is that the architecture must provide for rapid change in technology.
As hardware and communications standards evolve, the architecture must adopt readily
while maintaining compatibility with legacy versions. For example, the key interfaces
must not be tied to specific types of computing hardware. As the hardware evolves, the
interfaces should remain stable. Customer's investments are protected, and expensive
field retrofits are avoided.
4.4. Implications
The technology strategy outlined above has important implications for the integrated
service provider. To summarize, these implications fall into three categories: creating a
product standard, ensuring that value is captured in the face of competition, and creating
a sustainable architecture. In order to establish the product as a standard, the integrated
service provider must first focus on low switching costs for the customer, which leads to
requirements for compatibility with existing protocols and for equipment scalability.
Providing open interfaces will also promote adoption, by allowing third parties to
develop complementary products. Lastly, establishing a standard will depend on the
integrated service provider's ability to develop acceptance within the lead user
community.
Once the product has sufficiently penetrated the market, the integrated service provider
must have a means of capturing the resulting value. Primarily this will be achieved by
integrating proprietary elements into the architecture. Doing so will ensure that the
integrated service provider ultimately has control over the architecture, and therefore has
the capability to introduce new features before the competition. And finally, the
43
development of a sustainable architecture is a key element of the technology strategy.
The implication on the architecture is twofold. First, the architecture must be generalized
instead of specialized - this leads the architect away from optimization and towards
flexibility. Second, the architecture must be adaptable to the rapid pace of technology
change. This implies that interfaces are established in order to isolate the elements of the
product that are most likely to change. In the next chapter, the strategy implications
described here become key influences on the development of the product architecture.
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5. Product Architecture
The integrated service provider concept proposed thus far is based on the premise that
technology is a key enabler. It is conceivable, though, that the concept could be achieved
without a reliance on technology. A facility manager with a building equipment problem
could contact the integrated service firm by phone, who would then arrange a service call
using pre-existing contractual arrangements with service companies. This is the way most
specialized service companies currently operate. As described previously in this thesis,
however, the building equipment service business is undergoing fundamental change.
Customers are expecting more than maintenance and repair of their building equipment.
They demand information about the equipment, presented in the same manner and with
the same timeliness that they receive information from other services like news, banking,
and investing.
From a practical standpoint, therefore, the integrated service provider concept does rely
on technology. Information technology is the only means by which the integrated
provider can monitor, assess, and provide information about the multitude of customer
building sites necessary for a feasible operation. To attempt such an undertaking
manually, although certainly possible, would require extensive staff to gather, collate,
and deliver the information. Perhaps a larger impediment is the quality of data collection
as it passes through layers of manual intervention. Each person in the loop interprets data
differently, and information is lost via the subsequent filtering. For example, a facility
manager making a service call to an operator uses terminology that is unfamiliar to the
operator. The operator makes their best interpretation and enters that into a data
collection system. A mechanic who receives the call now has to make sense out of two
layers of filtering. If the equipment is directly connected to the enterprise system, the
exact nature of the problem is relayed to the mechanic, and the accuracy of reports for the
facility manager are commensurately higher.
This section of the thesis describes a technical architecture that provides the foundation
for the integrated service provider business. The architectural question is how to
integrate information from a myriad of existing building equipment types while providing
45
a platform that can grow with changing technology and customer demands. Furthermore,
the architecture must accommodate a wide scale of customer sites, ranging from new
construction high-rise buildings to smaller legacy sites with outdated equipment. The
focus of this section is the architecture that integrates the disparate type of building
equipment and enables the customer information services. The enterprise information
systems that connect the entire firm together, and that handle services like customer calls,
finances, service scheduling, and so forth, are not covered here as they tend to be solved
with industry standard technologies and architectures (Figure 6 diagrams the global
system consisting of on- and off-site equipment). The firm's differentiation will depend
mainly on the value of the on-site architecture described here, and less on the
'commodity' enterprise systems. Finally, this on-site architecture must embody and
enable the relevant aspects of the business and technology strategies articulated earlier.
5.1. Defining Architecture
Before describing the proposed integrated service provider architecture, I will examine
the nature of product architecture. In common usage, the word 'architecture' is
associated with civil architecture, and is identified with the design or aesthetic of building
structures. Product architecture has a similar, yet different meaning. A review of the
literature reveals the following definitions of architecture when used in the product
domain:
- The scheme by which the functional elements of the product are arranged and by
which the chunks interact (Ulrich 1995).
- The embodiment of concept, and the allocation of functionality and definition of
interfaces among the elements (Crawley 1998a).
- The structure - in terms of components, connections, and constraints - of a product,
process, or element (Rechtin 1997).
- The logical and physical structure of a system, forged by all the strategic and tactical
design decisions applied during development (Booch 1994).
46
As evidenced by these definitions and many others encountered in the literature, product
architecture consists of the elements that form the system and the interfaces between
these elements. The decisions that create these elements and interfaces, therefore, are the
essence of architecting. These decisions are driven by a number of sources, often
conflicting: business strategy, market environment, changing technology landscape,
personal attitudes, organizational structure, and regulation, just to name a few. It is the
architect's job to formulate all these influences into a cohesive technical architecture.
Why, though, is the architecture so important? As Plato said, the beginning is the most
important part of the work. For a more pessimistic view of the same premise, consider
Spinrad: "In architecting a new program, all the serious mistakes are made in the first
day" (Rechtin 1997). In either case, the message is that the decisions made during the
architecting phase will determine the success or failure of the product. The architecture
provides a framework for all the detailed decisions that will occur during the course of
product development. As such, a poorly designed architecture will constrain those
downstream choices and force sub-optimal decisions. Furthermore, the selection of key
interfaces will determine the flexibility of the architecture. As technology changes and
new opportunities for component integration become available, the ability to react
quickly will be determined by the existing architecture.
The architecture also embodies the firm's strategies for the product. The assessment of
where the market is going and how technology can be utilized are implicit in the
elemental decomposition and interface choices. Also, organizational philosophies are
embedded in the architecture. Research on the Gas Turbine Engine industry concludes
that organization often supersedes other considerations such as performance and cost in
driving architecture (Frey 1998). A globally dispersed product development
organization, for example, is often the basis for a product architecture as it minimizes the
communication requirements across interfaces (in this case, geographical).
In summary, architecture is the structure of a product, including the breakdown of the
elements and the interfaces between those elements. But more importantly, architecture
47
embodies characteristics such as strategy, organization, and flexibility, and therefore is a
key determinant of success or failure.
5.2. The Architecting Process
The notion that a process can be applied to the act of product architecting is far from
universally accepted. Typically, those approaching architecture from engineering
disciplines believe it to be true (for example, Ulrich and Eppinger). Others maintain that
architecting is more an art that a science. Rechtin and Maier (1997), for example, assert
that architecting is "non-analytic, inductive, difficult to certify... and is a process of
insights, vision, intuition, judgement calls, and even 'taste"'. To the extent Rechtin and
Maier advocate a framework for architecting, they base it on heuristics instead of process.
To develop the integrated service provider architecture, I propose a method that is based
on both process and heuristic. In fact, I believe that is the manner in which architecting is
performed. Rarely is a product architected by heuristic alone - there is always an element
of process, whether that is a corporate product development process or the less explicit
process of an entrepreneur. Likewise, elements of heuristic, embodied in the experience
of designers, are always present in architecting.
Process
The architecting process employed in this thesis is based on work by Crawley (1998b).
This process, shown in the diagram below, integrates functional decomposition with
drivers based on upstream influences. The architecture is composed of three main
elements: the function, the concept, and the form. Upstream influences drive the
architecture in many ways, sometimes directly, and other times through intermediate
steps such as need statements or goals (omitted from the diagram for clarity). In the
following paragraphs each element of the process is explained, with departures from the
reference process noted.
48
Architecture
Form
Upstream - FunctionInfluences - Attributes Concept
Figure 11: Reference Architecting Process
Upstream Influences: The product architecture must ultimately reflect the upstream
influences. These influences in fact contain the very reason for the architecture, as they
embody the firm's intentions and direction. Upstream influences include the corporate
strategy, market strategy, technology, and regulation. Crawley considers purpose as
separate from the upstream influences; I chose to include it in the same category, as it is
just another upstream driver. Purpose defines why the product is needed, a consolidation
of customer's needs.
Function: Function describes what the product must do without describing how it will
be achieved. Functions describe operational and performance characteristics of the
product, and should be stated as outwardly visible and testable activities of the system.
Crawley describes goals as a separate product attribute, and defines them as the desired
emergent properties of the system, or the required performance. I include them as one
element of function because they are externally observable and measurable, as are
operational characteristics.
System Attributes: In contrast to functions, attributes describe characteristics of the
system that are not directly measurable or verifiable. Attributes are often a reflection of
the long-term goals of the product, and thus are closely related to upstream influences.
Some examples of attributes are maintainability, flexibility, and usability (for example,
49
'the product must be easy to use'). Attributes are not explicitly called out in the reference
architecting process; I chose to increase their visibility because they usually describe the
underlying philosophy of the system, and as such are often more important than
functions, which can be changed more easily (provided the architecture has flexibility as
an attribute!).
Concept: The architectural concept is the vision of how the function will be mapped to
the form. It conveys the essence of the architectural idea, and is usually captured in a few
words or phrases. Examples of concepts are 'tilt-rotor helicopter' or 'split-level ranch'.
Concept implies how the function will be achieved, without explicitly stating any details.
Form: The actual elements or components that comprise the system, and the interfaces
between them, constitute form (Ulrich and Eppinger (1995) call the elements 'chunks').
The form is the solution, and therefore embodies all the upstream influences as well as
enabling the functions. The connections between the elements of form are the interfaces.
Form can be, and typically is, hierarchical - there is a first level decomposition comprised
of elements, then each of the first level elements can be decomposed into second level
elements, and so forth.
In information system architecture, there are two types of form (or architecture). Logical
architecture refers to an abstract decomposition, in which elements are identified without
regard to the physical computing elements upon which they will run. For example, a
distributed software application consists of software elements that exist regardless of the
actual hardware they run on. Physical architecture refers to the breakdown of the
system's physical computing elements. In an information system, the physical
architecture consists of the computers and networking. The act of architecting an
information system normally comprises two stages: first the logical architecture is
created, and then the logical elements are allocated to elements of the physical
architecture.
50
To complete the discussion of architectural form, the notion of a modular architecture
versus an integral architecture is considered. The modularity of an architecture is
measured by how the functions map to the elements of the form - the extreme of
modularity occurs when each function is satisfied by an individual element. The
advantages of a modular approach include independence of elements - as one element
changes, other elements don't need to change as long as the interface is stable. An
integral architecture represents the other extreme of modularity, in which all the functions
are satisfied by a single element. Advantages of an integral approach may include higher
performance and optimization for a specific application. As Ulrich and Eppinger (1995)
point out, though, architectures are rarely completely modular or integral.
Heuristics
Webster defines heuristic as "a method of education or computer programming in which
the pupil or machine proceeds along empirical lines, using rules of thumb, to find
solutions or answers." Rechtin (1997) adds that a heuristic methodology is one based on
common sense, and likens it to a form of piloting. Heuristics capture experience and
mistakes, and as such are powerful tools to apply during an architecting exercise.
Mainly, heuristics provide guidelines in the process of decomposition, when the elements
of form are determined. The combination of heuristics at this stage, along with the up-
front process to drive the determination of product function, is the proposed architecting
method. From the volumes of heuristics available to the system architects, there are a
few that seem to appear repeatedly, and that capture the most important lessons. These
are listed below for reference in the integrated service provider architecture:
- Choose the elements so that they are as independent as possible.
- Minimize the interaction or communication between the elements.
- Design for change: group the elements that are likely to change together.
51
5.3. Upstream Influences
For the integrated service provider, the upstream influences are defined by the key
elements of the business and technology strategy as described in previous sections. The
upstream influences are summarized here as inputs into the architecting process:
- Enable servicing of a large variety of building equipment
- Establish on-site equipment architecture as industry standard
- Remain neutral to existing building protocol standards
- Use an open architecture to promote adoption and third party development
- Include at least one proprietary architectural element in order to retain control and
discourage imitation
- Provide for low customer switching costs
- Adapt to other building applications
5.4. Function
This section describes the functions required by the on-site architecture. The functions
represent what the equipment must do in order to enable the integrated service provider
concept. Each primary function is highlighted in bold, and then broken down into a
number of second-level functions, which are described in more detail.
A. Communicate with building equipment
Al. Collect informationfrom building equipment: As the basis of the integrated service
provider, this function involves monitoring the building equipment and collecting the
relevant types of information for the service business. This includes diagnostics and
prognostics messages, performance information, usage data, status, and any other
available information that assists in service.
A2. Support existing building equipment protocols: This function satisfies the upstream
requirement to remain neutral of existing building protocols. The integrated service
provider is vendor-neutral, and therefore the on-site equipment must support existing
52
'standard' protocols such as BACnet and LonWorks as well as proprietary protocols from
major players.
A3. Detect if equipment shut down: Primarily the building equipment is responsible for
determining shutdown or reduced performance conditions. However, in some cases the
equipment shuts down completely and is no longer capable of self-diagnosis (for
example, in the event of power outage). In this case, the service provider must be
capable of determining and reporting this condition independent of the equipment's
capabilities or operational status.
A4. Store information persistently: Once collected, the information must be stored in a
non-volatile manner until it is explicitly determined to delete it. At a minimum, the
information must be maintained until it is communicated to an external user (at which
point it may be stored at the user's location). The maximum storage period is flexible
and will be determined by specific user requirements which in turn will influence the
memory requirements of the equipment.
A5. Allow control of building equipment: Although the service business is mainly based
on the collection of the equipment data, the capability to control that equipment is
required in certain instances. For example, performing operational tests remotely is often
accepted in lieu of an on-site service visit. This function requires that the architecture
support two-way interaction with the building devices, and that control functions
provided by the equipment are understood and available to the applications. Supporting
this functionality also allows the architecture to replace building automation system
applications.
A6. Allow configuration of building equipment: This function also utilizes two-way
interaction with the building equipment. It further states the need for interpretation and
storage of those parameters that determine the configuration of the equipment. Examples
are allowable modes of operation or thresholds for alarm conditions.
53
B. Provide information to external users
B 1. Provide information to users in a consistentformat: One of the aims of the
integrated service provider is to 'normalize' information from disparate building
equipment. Therefore, the presentation of this information to human users must be in a
consistent and familiar format. For example, usage information should be formatted
identically whether it emanates from elevators or air conditioners. Similarly, information
should not be partitioned based on manufacturer. Ideally, the presentation style will
require no special tools or applications on the user side other than commercially available
tools such a web browser. Similarly, the protocols used to communicate the information
to external information systems should be based on existing communications standards
(e.g., internet protocols). The format of these messages must also be consistent across
equipment type and manufacturer.
B2. Support multi-user connections: The integrated service provider equipment must be
able to support multiple concurrent users, whether they are local connections or remote
connections. The precise number will be dependent on the particular installation,
therefore the architecture must scale to meet varying conditions.
B3. Provide redundancyfor critical data: Certain conditions must be notified regardless
of the connection status to the external enterprise information systems. A redundant
means of making these conditions must be provided. These means could include
notification of local building personnel.
B4. Must prevent unauthorized access: The on-site service equipment must be secure
for two reasons. First, it is the gateway into building equipment. Not only is information
about this equipment proprietary, but also access to the control functions of this
equipment could present a safety hazard. Second, the information is the key to the
integrated service provider business. Exposure would enable easy imitation. For these
reasons, access must be allowed only to those with prior authorization.
54
B5. Provide flexibility in external communications: Although the protocols used to
communicate with information systems must be standardized, the architecture must
support many types of physical carrier. The integrated service provider must be able to
utilize existing building communication infrastructure, because adding special carriers is
cost prohibitive. The communication type must be switched easily as new technologies
come on-line, but at a minimum the architecture must support analog telephone
connections, Ethernet based local area networks, cable modems, wireless LAN
technology, digital subscriber lines, and ISDN.
C. Provide service application environment
C 1. Allow access to all equipment from single application: This requirement describes
the need for interoperability between the supported equipment types. For example, a
single application that collects performance data on a periodic basis could do so for all
the equipment in a building. This is a prime function for enabling the ability of
customers to create custom service applications for the integrated service provider
platform.
C2. Provide common interface to building equipment protocols: A previously stated
function described the need to support many different types of building equipment
protocols. This function considers the need to provide a common interface to those
equipment types. Therefore, applications that run on the integrated service provider
platform will have a common method of interacting with all the building equipment.
C3. Provide real-time capabilities: A real-time system is one that guarantees the
timeliness of certain actions. Building equipment protocols include specifications on
timing of messages, thus the architecture must be capable of real-time performance.
Many commercial operating systems do not guarantee real-time capabilities, and thus
may not be suitable for this application unless modified .
C4. Allow addition and deletion of applications: The service platform must be able to
evolve as new user requirements change. The platform must have the ability to accept
55
new applications and to remove old ones, whether this activity is performed on- or off-
site.
5.5. Attributes
This section describes the attributes required of the architecture. Inherently, attributes are
difficult to test, but will determine the difference between a good point-solution and an
architecture that will stand the test of time. In some cases an attribute is directly linked to
an upstream influence - this is one method for guaranteeing that the upstream influences
are accounted for in the architecting process. The critical attributes for the integrated
service provider architecture are listed below.
- Extensible - the architecture must be able to adapt to new building equipment or user
applications.
- Scalable - the architecture must be able to be used in many different types of building
installations. A smaller scale application cannot be burdened with the cost of a large
scale application - the capacities of the system must be variable in order to account
for this range.
- Portable - as computing technologies change, the architecture must be able to
conform to new platforms. It must be able to be ported to a variety of computing
platforms with a minimal effort.
- Open architecture with proprietary elements - as described in the upstream influences
section, the architecture must primarily be 'open', with at least one proprietary
element to retain long-term control.
- Stable - the system needs a high degree of availability to perform the necessary life
and safety functions (for example, the integrated service provider will be responsible
for detecting and reporting trapped passengers in shutdown elevators).
56
5.6. Concept
The proposed concept for the integrated service provider architecture combines
information systems architecture with embedded system (real-time) capability. The
concept can best be described as:
A real-time capable multi-tier architecture
A multi-tier architecture decomposes the system into logical partitions called tiers.
Physically all the tiers can run on one computing platform, or can be hosted on separate
platforms. This enables the system to scale to meet varying installation requirements.
Also, maintenance of the system is enhanced as a clear division between tiers allows
independent changes and upgrades. The basic tiers provided in the system are the user
services tier, the business services tier, and the data services tier.
The user services tier provides the interface to the user. It presents data to the user and
provides for input from the user into the application. The user services tier interacts with
the business services tier. Elements of the business services tier encapsulate rules and
processes that together comprise a desired system behavior. For example, an application
that provides the status of all building equipment in real-time would be a business
services tier component. The data services tier provides an interface level to the stored
data. Its services are used by the business services tier or directly by the user services
tier.
Additionally, the proposed architecture adds a building device tier and a communication
services tier. The building device tier contains components for each supported type of
building equipment. Each component provides an interface corresponding to the
capabilities of the equipment. Applications in the business services tier interact with
these components as proxies for the actual equipment. In order to communicate with the
building equipment, building device tier components utilize the communication services
tier. This tier handles the different communication protocols, and provides a common
interface for the higher level tiers.
57
5.7. Form
Logical Form
The proposed on-site product architecture is shown in logical form in Figure 12. Each
tier is represented as a primary block. Within each tier are examples of the second-level
decomposition elements. For example, the business services tier contains elements
corresponding to integrated service provider activities. The building devices tier includes
elements that represent manufacture-specific building equipment. The critical interfaces
contained in the systems are shown as arrows between logical elements.
Communications between the tiers is limited to these interfaces. In the subsequent
diagrams, the logical elements are allocated to physical arrangements. These
arrangements demonstrate the scaling that will be required of the architecture as it is
applied to common building installations.
58
Business Services Tier
------ ------- -------------- ------- ------
User Collect Fault GetAuthentication Usage Data Monitoring | Status
--------- - -......------------
Control Connect VerfyEquipment Communciation Configuration
----------
~c~zzzz~
Communication Services Tierr- - r------I --- I r ------ r-----------
Bacnet Echelon Discrete ProprietarySerial
- - - -
Figure 12: Logical Architecture
59
User Services Tierrr----------- r-------------------r ------------ r-----------
Monitor Equipment | Initiate and | CreateHealth ' Status Monitor Service Call
- - -I
Building Device Tier-- ~------': r--------- 1
Manuf X Manuf YHVAC | Elevator
i r
Manuf Z Manuf WSecurity Elevator
Data Services Tier----- I ---------
Status PerformanceData Data
-- -r-I-- - - ------
Diagnostic ConfigurationData Data
-------- ---------
Physical Form
This section contains a description of the physical form of the integrated service provider
architecture. In the physical architecture, the logical elements are allocated to physical
computing elements. This allocation, and the number and sizing of the required
computing elements, will be determined by the actual building installation. Factors that
affect the allocation include the variety and type of building equipment, the number of
expected concurrent users, the physical layout of the building, and different protocols
used by the existing equipment. In determining the physical arrangements, one approach
for the integrated service provider would be to handle each site as a custom configuration
- that is, the allocation would be determined specifically for that building. This approach,
however, would require excessive resources, and would result in a maintenance problem
as the number of variations of field configurations grew. A better approach is to establish
a standard set of physical arrangements that correspond to common site conditions.
The diagrams below illustrate two potential applications for the integrated service
provider. The first, Figure 13, is a basic application, corresponding to a small apartment
or office building. All the logical elements reside on a single computing element in the
building. Although there are three different building system protocols, each only has one
or two devices, lowering the burden on the communication tier. There is only one
expected on-site user, most likely a building supervisor or facility manager. The
connection to external users is via a dial-up modem.
Figure 14 demonstrates a large-scale, distributed application of the architecture. This
example corresponds to a high-rise multi-tenant office building. There are multiple
computing elements supporting the logical tiers, connected by an Ethernet backbone.
The communication tiers are replicated on 'gateway' devices for each different building
protocol. Two factors drive this allocation: the real-time communications burden from
supporting multiple pieces of equipment on each bus, and the physical distances between
the equipment. These 'gateways', however, support the same interface between the
building device and communication tiers, so logically the architecture is the same as in
the previous example. This is a key tenet to the scalability attribute - as the logical
60
elements are replicated and distributed, the interfaces remain identical. Finally, this
example shows multiple concurrent users both on- and off-site. The user services tier,
therefore, is replicated per each user interface device.
Off-Site Systems
Integrated Service Off-SiteProvider - Enterprise User
Systems Interf ace
Direct iRedundant: InternetConection
On-Site Systems
Mode m
On-Site Computing Platform
~ ~ ~--- - -~- - ' On-SiteUser Servces Tier User
~ ~ -InterfaceBusiness Servbes Tier
----------------------------I----- ------- ------
Building Device Data-ServicesTier | Tier
-----------------------------------------Communication Services Tier
--------------------------------------
Proprietary BACnet LonWorksSerialProtocd
Elevator HVAC SecurityController
FireSystems
Figure 13: Physical Architecture - Basic Application
61
Off-Site Systems
Integrated ServiceProvider - Enterprise Off -Site Off -Site Off -Site
Systems User User UserInterf ace _~Interf ace .~Interf ace .
Internet
Off-Site Systems
On-Site On-Site Router On-Site On-SiteUser User User User
Interf ace Interf ace Interf ace Interf ace
ethernet
I I
On-Ste Comp.Platform
r -------
BusinessServ. Tier--------
_-Building
Device Tier__|------- I
|Comm.Tier
ProprietarySerial
Protocd
Elevator HVACController (Chiller)
Elevator HVACController (Blower)
Elevator HVACController (Pump)
|Comm.Tier
3ACnet Lon Works
Security _
LightingControl
Escalator _Monitor
Gat~e ayComm.
Tier
Figure 14: Physical Architecture - Large Scale Application
62
DB ServerPlatform
r -------Data-Services
Tier
i e
5.8. Connectivity
The connectivity of an architecture defines the mapping between the desired functionality
and the decomposed elements. In Figure 15, the connectivity of the integrated service
provider architecture is shown. The specified functions and the attributes are mapped to
the logical elements and the interfaces between the elements. For clarity, only the
primary interactions are shown - secondary interactions often occur but have a
diminished effect on system behavior. In general, the functions map to a single or few
tiers. This demonstrates two of the desired heuristics - choosing independent elements,
and minimizing interaction. The third heuristic, design for change, is mainly embodied in
the choice of a multi-tier architecture and the resulting interfaces. This architecture
allows the user interface to change independently of the application logic, and both to
change relative to the data structure.
In most cases, the attributes map to either all of the interfaces, or all of the elements.
This is expected, as attributes, by definition, apply to the system and not to parts of the
system. To allocate attributes to individual elements (or interfaces) would indicate that
the attribute is sub-system specific and that the decomposition had already taken place.
The exception to this mapping is for the attributes of open architecture and proprietary
elements. Clearly these can not be satisfied by the same elements as they are inherently
in conflict. The tiers that are designed to be open include the presentation, application,
and data services tier. The proprietary elements are building device and communication
services tier. By controlling the interfaces to these tiers, the integrated service provider
can maintain architectural control.
63
Elements Interfaces
C)
C)
I
U-
U
cC
cC
Cn
S0U
0
.5
U
Functions
Collect information from building equipment X
Support existing building equipment protocols X
Detect if equipment shut down X
Store information persistently X
Allow control of building equipment X
Provide information to users in a consistent format X
Support multi-user connections X X X
Provide redundancy for critical data X X
Prevent unauthorized access X
Provide flexibility in external communications X
Allow access to all equipment from single X X X
application
Provide common interface to building equipment X
protocols
Provide real-time capabilities X X
Allow addition and deletion of applications X X
Attributes
Extensible X X X X X
Scalable X X X X X
Portable X X X X X
Open architecture X X X
Proprietary Elements X X
Stable X X X X X
Figure 15: Architectural Connectivity
64
6. Conclusion
This thesis began with the statement of an opportunity in the building equipment service
industry. This opportunity stems from parallel changes in the service industry, in
building equipment capabilities, and in the use and acceptance of information technology.
From the outset, my goal was to propose key strategic actions that an entrant would need
to make in order to capitalize on the opportunity. By evaluating these actions from the
viewpoint of business strategy, technology strategy, and systems architecture, an
approach has been identified that provides this strategic foundation.
The proposed business strategy replaces a multitude of specialist service providers with a
single integrated service provider. Ideally, the integrated service provider would be
established through an autonomous unit of an incumbent specialized provider. The
product offering consists of delivery of information about the customer's building
equipment as well as the actual servicing of the equipment. The suggestion for providing
equipment service is to first develop contracts with specialized service providers, and
later to develop an agent-based transactional approach whereby each service call is
handled as a negotiated transaction. The delivery of information is fundamentally enabled
by the on-site equipment offering, and therefore the technology strategy takes on a
critical role. This strategy is characterized by actions needed to develop a product
standard, follow-on actions to ensure that value is captured, and specific tactics to ensure
that a sustainable architecture is created. The influences of the business strategy and the
technology strategy lead into the product architecture. In combination with specific
functions required of the architecture, the upstream influences result in a suggestion for a
multi-tiered on-site architecture. This architecture is developed first in logical form, and
then demonstrated in alternative physical embodiments. The connectivity of the
architecture is provided in order to trace back to the upstream influences and the required
functions.
The strategy recommendations contained in this thesis are a foundation for the integrated
service provider. Many elements of the total approach, however, have yet to be analyzed.
65
Clearly, standard components of the business plan must be developed. These include
marketing plans, sales strategies, financial analyses, and organizational approaches.
More interesting, however, are additional research initiatives that could be undertaken
related to the integrated service provider concept. For example, there are elements of this
thesis that could be further developed. The use of agents and brokering technology as a
means to provide transaction-based building equipment service is both topical and
compelling - there are many precedents in use today for commercial goods. In general, a
study of situations where intermediation is warranted, and valuable to the consumer,
would prove interesting. The integrated service provider concept also yields research
topics not explicitly identified in this work. For example, integrating the scheduling and
dispatching of personnel from multiple specialized service providers provides research
opportunities in the fields of logistics and optimization theory. Furthermore, systems
dynamics models could be applied to understand the tension between better equipment
reliability and the importance of service revenue at many building equipment firms. The
strategic foundation provided in this work is an important first step for the integrated
service provider concept, but ultimately is only one element of a comprehensive
approach.
66
67
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