Contractors take control

Malcolm Gribble of Trend Control Systems looks at the inexorable rise of the specialist controls contractor.

Twenty years ago almost all building management systems installed in the UK were supplied and engineered by manufacturers. Today, it is specialist controls contractors – also commonly known as value added resellers (VARs) or systems integrators (SIs) – that are responsible for the majority of installations.

Figures from the Building Controls Industry Association (BCIA) show that in 2007/8 controls contractors were responsible for system sales worth £250million, roughly double the total attributable to manufacturers (£127million). Back in 2000 the volume of business they did was more or less equivalent.

Significantly, manufacturers have been deliberately moving away from direct system sales. Most have followed the lead set by Trend Control Systems in the early nineteen-nineties, when it became the first to embrace the third-party route to market.

Greater choice
The growth of the controls contractor sector has benefited end users in several ways. Most obviously it has opened up the BMS market to greater competition, which has inevitably led to keener pricing. Whereas once there was just one source of supply – the manufacturer – now there are many. This continues to be an advantage when end users are looking to develop or expand their systems, as they are no longer locked in with a single supplier.

Moreover, VARs tend to enjoy a competitive advantage over manufacturers, in part because they handle more aspects of a project themselves (for instance, control panels – which represent a fairly large slice of total system costs). Also, almost all are independent businesses and as such they are usually better able to tailor systems to meet specific customer demands. The majority are approved suppliers of more than one manufacturer’s system.

Driven partly by the recent boom in BMS installation work, the number of VARs operating in the UK has increased to over 350 – an all-time high (whereas the number of manufacturers of intelligent building controls is less than 20). There has also been a tendency for these companies to get bigger, enabling them to handle larger and more complex projects – sometimes involving the integration of BMS and other building systems. Interestingly, several have been acquired by larger organisations wishing to gain a foothold in the building controls industry.

Though the largest VARs have turnovers ranging from £5 to £10 million p.a, the sector still has its fair share of small businesses, many with just a few employees. But, whatever their size, they all justifiably demand a high level of support from the manufacturers whose products they supply.

Not a commodity
In the world of BMS, the VAR model is no conventional producer/distributor arrangement. The product involved is not a simple commodity and seems no closer to becoming one. Building controls are hi-tech and evolving, so it is vital that manufacturers provide their VARs with regular, high-quality training and keep them fully apprised of the latest developments. In this connection it helps enormously if a new system is ‘backward compatible’ with older generations of equipment. Manufacturers also need to make their system engineering tools as easy to use as possible – as this translates into project cost and time savings and helps to ensure that the BMS is set up to control the building services plant in an energy efficient manner.

Not surprisingly, VARs place a particularly high value on product reliability, build quality and value for money. Given the tight project timescales that controls contractors usually have to work to, the ability to deliver product on time is also judged highly important, which underlines the need for a manufacturing operation geared to rapid order turnaround.

What VARs do not want is to have to compete for business with the manufacturers who supply them – which is still a common occurrence. It is really impossible for a manufacturer to be fully committed to the VAR model while still energetically pursuing the direct sales route.

The standard of work done by VARs is generally very high. However, end users are well advised to only place contracts with those that are manufacturer-accredited, since this provides a level of assurance regarding their expertise and professionalism. This applies not only to BMS installation projects, but also to system maintenance work – where again it is VARs that are now the principal providers. In 2008, they did nearly £100 million of service and maintenance business, the figure for manufacturers being just over £50 million. Yet up until 2005, their share of this market had always been less than that of manufacturers.

In recent years a greater range of service and support offerings have become available, and at the same time some traditional maintenance routines that are perceived to have little value have been withdrawn. While scheduled system checks involving regular site visits are still essential, they can now be augmented by automatic monitoring and remote response services. Some are specifically designed to identify sources of energy waste and increase the energy savings made by the BMS. However, the more sophisticated services are currently offered by very few manufacturers and are as yet not available directly from VARs.

Continued presence
Though there is every possibility that VARs will continue to grow their share of BMS supply and maintenance work, it is highly unlikely that manufacturers will withdraw from these markets entirely. There will still be a requirement for direct supply on the really large projects and there will always be some end-users – particularly first-time system purchasers – who will want to work directly with the manufacturer. Also, a few of the bigger manufacturers have invested heavily in developing their post-installation services and are committed to keep offering them – possibly in partnership with their VARs.

In the rest of Europe, controls contractors do not enjoy the same dominance as in the UK. However, as the benefits they offer have become better appreciated their market share has increased here too. This is now estimated to be 25% across the principal EU markets and is set to grow further.