Que Dallara, Honeywell Connected Enterprise CEO
Courtesy HoneywellHoneywell’s Connected Enterprise division, led by Que Dallara, announced a tie-up with enterprise resource planning software giant SAP to give building operators key data in real-time. It’s another sign for investors that Internet of Things, or IoT, technology is ready for prime time.
The partnership marries the Honeywell (ticker: HON) Forge software application with the SAP (SAP.Germany) Cloud for Real Estate platform. Forge gives you real-time operations data—so the status of all the building systems, for example. The pairing allows building operators to aggregate financial data as well as operational data into easy-to-use interfaces.
SAP believes the “smart buildings” market, which adopts the latest generation of cloud-based data capture and autonomous control software, will be around $58 billion by 2023. That is the size of the pie SAP and Honeywell are going after together.
“We’re creating a new market,” adds Dallara. Outside of smart buildings, she sees more partnerships for Honeywell in other industry verticals.
And the two companies have the scope and market position to do it, making the partnership a very big deal across both their industries.
SAP has a market capitalization approaching $170 billion. It’s one of the largest software providers in the world with annual sales topping $30 billion. Honeywell, on the other hand, is an industrial giant with a market value approaching $110 billion. Sales also top $30 billion, but those are mostly hardware sales. Honeywell software sales are closer to 44 billion annually, a fraction of what SAP generates.
Industrial investors are more familiar with the hardware made by Honeywell that control buildings’ fire, electrical, air-conditioning and security systems. But a new software partnership offering cloud-based operational technology, or OT, software solutions might sound like a foreign language.
Meanwhile, software investors, more familiar with cloud-based SAP applications such as Concur for travel expenses, might not realize that OT data isn’t readily available in the cloud. Operating data still resides on shop floors and building sites—siloed in place and under analyzed.
“It’s hard to get data from physical assets,” Dallara tells Barron’s. “It can take a lot of time to get all the data from a commercial building.”
As a result, real-estate executives, in this instance, don’t have data about real-time occupancy and other factors needed to make key decisions. The lack of data costs money. And, in absence of a cloud-based solution, efforts to get operational data is laborious.
That’s where Honeywell Forge comes into the picture. Forge is, essentially, a software-based architecture capable of gathering, analyzing and displaying operating data on a real-time basis. It’s the kind of system SAP created for managing corporate personnel and financial data a generation ago.
“We’ve researched this market and believe there is no other solution that can offer the scope of benefits and capabilities as [the partnership can],” Peter Maiden, president of SAP industries and customer advisory tells Barron’s. “We have the ability to apply a broad application of IT/OT data to deliver a different level of value.”
In other words, corporate CFOs can now have better OT data than SAP could offer on its own. And corporate COOs, familiar with Honeywell, will have better finance data available. The joint offering is a win-win for all areas of the C-suite—and for both SAP and Honeywell.
Barron’swrote positively about Honeywell shares in November partly because of Honeywell’s ability to capitalize on the OT software opportunity. Since the article appeared, however, the stock is down about 14%, compared with a 3% gain of the S&P 500 and a 2% drop of the Dow Jones Industrial Average.
Honeywell is still executing on its business goals, as the SAP partnership demonstrates. But, of course, Honeywell is also a large aerospace supplier. And aerospace supplier stocks that Barron’s tracks are down about 20% year to date on average because of the Covid-19 pandemic, which has decimated global demand for commercial air travel.
Year to date, Honeywell stock is off about 12%. SAP shares are roughly flat. The S&P 500, for comparison, is down about 1%. The Dow is off about 5% over the same span.
Write to Al Root at allen.root@dowjones.com
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June 11, 2020 at 07:00PM
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Honeywell Drops a Software Bombshell With SAP Tie-Up - Barron's
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