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An unsexy merger could make your building more cool

Stephen Lawson | Jan. 27, 2016
Tyco and Johnson Controls look to a slick future for smart buildings through IoT.

20160125 johnson controls
The headquarters of Johnson Controls, in Milwaukee, is shown in this stock image. Credit: Johnson Controls

The names Johnson Controls and Tyco International don't generate the kind of excitement buzzing around some companies in the Internet of Things, but the merger they announced Monday might have a big impact on that market.

Both are far older than the army of startups that has formed around IoT, and they make equipment that until recently faded into the background. Tyco supplies security, fire and surveillance systems, while Johnson is big in HVAC (heating, ventilation and air conditioning) and platforms for managing all the systems in a building.

Those humble systems, which the tech industry has never paid much mind, are now at the heart of new efforts to make buildings more connected, efficient and comfortable.

The products Johnson and Tyco sell fit together naturally, and the combined company could choose to link them closely in a proprietary way. However, in the long run, building management systems are evolving into multivendor IoT platforms, which almost by definition require openness.

If Johnson and Tyco choose a path of openness, the sheer R&D scale of the combined company could be a powerful force to advance IoT building technology.

IoT promises new, more open ways for machines to talk to each other and work in harmony. This can lead to greater energy efficiency and buildings better suited to users' needs. Smart and connected buildings are likely to generate more connections than any other form of industrial IoT, according to Machina Research.

Both Johnson and Tyco are now moving in that direction, though they're still invested in older technologies, analysts say. Combining the two companies could bring their technologies together in useful ways.

It's a big merger. Johnson has a market capitalization of about $23 billion and Tyco is valued at more than $14 billion. The deal is partly intended to save on taxes and the terms are complex, but the combined company will be called Johnson Controls and based in Tyco's home country of Ireland. The merger should close by September.

Part of the strategy is to combine new-product pipelines for areas including smart buildings, smart cities and advanced data and analytics.

Building automation platforms like the ones Johnson sells provide controls for all of a facilty's HVAC equipment in one place and can also coordinate things like window shades and lighting for greater energy efficiency.

The traditional way Johnson and others have done this is to sell both the infrastructure and the overarching software, Forrester analyst Frank Gillett said. "You can accomplish quite a bit as long as you're in their universe," he said.

 

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