Johnson Controls Forms Dedicated Data Center Solutions Organization for Sustainable IT Services Push

Smart building technology provider Johnson Controls has formed a dedicated Global Data Center Solutions organization, led by Todd Grabowski (pictured above). The new organization surfaces at a key time for Johnson Controls, customers and investors.

Johnson Controls, based in Cork, Ireland, has roughly 100,000 employees worldwide. The company makes fire detection, refrigeration, security and HVAC equipment. The firm is betting its business on smart building technologies that align with customers' energy efficiency, sustainability and decarbonization goals.

Johnson Controls: Business Evolution, Customer Needs, Investor Concerns

Among the key market, customer and investor variables to note:

• AI data centers and energy consumption: Amid booming demand for AI infrastructure, some critics worry AI chip deployments will trigger exponential energy consumption from cloud service providers (CSPs) and data centers. The newly formed Johnson Controls data center organization can potentially address those concerns for partners and customers.
• Investor concerns: Amid flat revenue performance, Johnson Controls faces potential activist investor pressure from Elliott Investment Management and Soroban Capital Partners. Both of those investors have built sizable positions in Johnson Controls as of May 2024, according to Bloomberg.
• Potential asset sales: Johnson Controls may sell off certain HVAC assets, and the ADT alarms unit, Reuters reported. During a May 2024 earnings call, CEO George Oliver didn't mention those business units by name, but he said the company continues to "make good progress on the exploration of alternatives for some of these assets." Translation: Discussions with potential suitors for certain businesses continue.

Johnson Controls Global Data Center Solutions Organization: Three Priorities

Meanwhile, the newly formed data center organization will focus on these priorities, according to the company:

• Creating leading technologies around a broad range of air-cooled and water-cooled chillers to support the continued growth in cooling demand;
• Investing in R&D and world-class test laboratories to design, build, test and demonstrate performance of equipment and accelerate the pace of innovation; and
• Building leading domain expertise to provide complete package solutions that drive outcomes while providing service for the entire life cycle of the asset.

Todd Grabowski, most recently VP and general manager of HVACR, will continue to lead that portfolio while also becoming president of the Global Data Center Solutions organization. Grabowski reports to CEO George Oliver.

In a prepared statement, Oliver said: "Over the last few years, we have been investing and building momentum in the data center market to establish Johnson Controls' leading position. It is clear our offering is resonating with customers, and we are now taking further steps to capture the growth opportunity ahead of us. Todd and his team will prioritize offering our full suite of smart building technologies—coupling our unique set of energy-efficient, sustainable, and safe data center solutions with unmatched service—to meet increasing demand and drive Johnson Controls' continued growth and value creation."

Added Grabowski: "Solving customer problems today and in the future is what we do best at Johnson Controls. We have optimized our investments and solutions to ensure we are uniquely qualified to provide the differentiated outcomes data center customers need and expect from an industry leader like Johnson Controls. Our global footprint allows us to scale and deploy these solutions wherever they are needed and earn long-term connection with those customers through our unparalleled service offerings."

Business Performance, Data Center Momentum

The Johnson Controls business evolution is a work in progress. In May 2024, the company announced sales of $6.7 billion for Q2 of fiscal year 2024 -- essentially flat compared to the corresponding quarter last year.

At the time, Oliver said the company remains "confident in our ability to deliver on our financial and operational commitments as we continue our transformation into a comprehensive solutions provider for commercial buildings.”

Among the bright spots: Data center customer orders in the fiscal first half of 2024 have surpassed the $2 billion in orders for all of fiscal 2024, Oliver said during the May 2024 earnings call. Moreover, company executives mentioned the data center business segment 39 times during the May 2024 earnings call.

Fast forward to June 2024, and the newly formed data center organization will seek to further capitalize on that momentum.