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Johnson Controls CEO: Smart Building Decarbonization Requires Data at Scale

December 18, 2023 by Joe Panettieri

Johnson Controls International continues to bet its business on smart building technologies that align with customers' energy efficiency, sustainability and decarbonization goals, CEO George Oliver told Wall Street analysts during a December 2023 earnings call.

The strategy leans heavily on artificial intelligence (AI), Internet of Things (IoT) and cloud computing services that save energy and reduce emissions, while improving the overall building occupant experience, the company has emphasized.

Moreover, Johnson Controls will lean heavily on distributors and systems integrator partners to recommend, deploy and manage smart building solutions.

While the long-term strategy looks promising, Johnson Controls has experienced some near-term economic headwinds. For instance:

  • Sales were $6.9 billion in Q4 of 2023, up 3% compared to Q4 of 2022.
  • GAAP net income from continuing operations was $549 million in Q4 of 2023, down from $761 million in Q4 of 2022.

The Q4 2023 financial results fell a bit short of Wall Street's expectations, according to SeekingAlpha.

Johnson Controls OpenBlue: The Smart Buildings Data Platform Leader?

Nevertheless, Johnson Controls believes it will outpace rivals through its data-gathering technologies. "There's no company that's consuming as much data as we are within the building," Oliver said during the December 2023 earnings call. "And so because of that, we can actually do upgrades and deploy new technologies and utilize our data platform, consume all of the data within the building, and in many cases, get a payback on what we do within the building."

Johnson Controls' data-gathering technology, known as OpenBlue, brings both IT and OT (operational technology) data together from across the building's ecosystem. The software can "break down silos" between third-party equipment, Oliver pointed out.

To reinforce those points, the company has published "The Smart Building of the Future," a new paper that outlines how smart buildings equipped with advanced technologies like artificial intelligence, IoT, cloud and cybersecurity will "help enterprises create a future where our buildings integrate with human and environmental ecosystems."

Smart Buildings and Decarbonization: Market Growth Forecast and Business Drivers

Demand for IT solutions that improve building energy management (BEM) and accelerate decarbonization should be strong for the next several years.

Among the business drivers: Multiple cities and countries are launching regulations that will force building owners and real estate investors to decarbonize their commercial and residential assets. Examples include the New York Local Law 97; a large buildings emissions law in Seattle, Washington; and a  Future Homes Standard in the United Kingdom.

Amid that backdrop, demand for building automation and management systems continues to climb. For instance:

  • The global building automation and control system market will reach $168.8 billion by 2031, up from $87.3 billion in 2022, Transparency Market Research forecast. That's a compound annual growth rate (CAGR) of 7.9%, the firm said.
  • Spending on building management systems is expected to reach $19.25 billion in 2023, up from $6.65 billion in 2016. That's a 16.7% compound annual growth rate (CAGR) during the forecast period, according to MarketsAndMarkets

Smart Buildings and Decarbonization: Competition

Although Johnson Controls is a massive business, the company faces smart building and decarbonization competition from entrenched rivals and numerous startups.

Example rivals include Cisco Systems, IBM, Honeywell, Siemens, Huawei, Intel, PTC, ABB, Hitachi, Schneider Electric, Telit, Legrand, Bosch, and KMC Controls, among many others. In some cases, Johnson Controls both partners and competes with those companies.

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