Part 4: Thinking in Layers (Navigating the marketplace)

Hey friends, 

For years, we’ve been trying to make the smart buildings marketplace, AKA the vendor swamp, less murky. 

To consolidate all the content we’ve produced on this, we’re publishing a newsletter series (and whitepaper) on navigating the smart buildings marketplace. If you missed previous editions, read those first:

• Part 1: The Pain for Buyers—on why buyers need a strategy for vendor engagement
• Part 2: Do Your Homework—on how engaging the marketplace depends on where you are in the buying process
• Part 3: Thinking in Categories—on why and how to do category-first buying

Today, in Part 4, we’re covering how to think more comprehensively about your smart building stack. 

If you’re a buyer, this series contains our best advice on how to make sense of the marketplace. If you’re a vendor, this doubles as a way to stand out from the competition by meeting buyers where they’re at.

Part 4: Thinking in Layers

In Part 3, we covered how to identify a technology or service category and use it to find similar vendors to compete for your business. For buyers who are just buying one technology category, that process is all they need. The selected vendor will provide the full stack (i.e. the devices, integration, networking, data infrastructure, and software application) required to fulfill the outcome they’re looking for. 

However, most buyers will want to buy multiple categories because many different technology categories can move the needle. There are technologies designed for different outcomes: reducing operating expenses, improving sustainability, enhancing occupant experience, and reducing risk. There are technologies designed for different stakeholders: engineers, operators, energy managers, network managers, service providers, technicians, and more. 

With increased ambition, scope, stakeholder engagement, and scale comes the need to think more comprehensively about the smart building stack. This means thinking of a smart building not as one technology, but as a unified stack with different technologies enabling different outcomes for different stakeholders. 

Since 2021, we (and many notable others) have been educating the marketplace on the virtues of organizing their stack in a horizontal architecture, rather than blindly buying the full vertical stack from each vendor. 

Those virtues are described in our whitepaper Nexus Lore, but it’s worth summarizing the philosophical principles behind the horizontal architecture. Why do we organize the marketplace this way?

• Principle #1: Don’t pay for things twice (or more)—Reduce costs by reusing digital infrastructure components for many different outcomes. Avoid redundant integration, data storage, and data modeling vendors that don't easily communicate outside of each vendor's stack.
• Principle #2: Reduce vendor lock-in as much as possible—Increase flexibility by making each layer interchangeable and replaceable without needing to start over.
• Principle #3: Enforce standards and control at each layer—Minimize complexity and maximize control by ensuring each layer meets the owner’s standards for how each layer is set up, how each layer is maintained, and how new technologies are introduced.
• Principle #4: Robust infrastructure enables better outcomes—As Jon Clarke says, we needed to build the smartphone before we could put applications on it. The same goes for our buildings.
• Principle #5: The right panes of glass—It’s unreasonable to have a “single” pane of glass, and it’s also unreasonable to have dozens. A consolidated application layer forces you to determine which applications are needed for which users.

With that context, let’s start from the bottom and work our way up the rungs of the horizontal architecture.

The Device Layer

HVAC, Lighting, Metering, Smart window shades, IAQ sensors, connected solar arrays, EV chargers, Peloton bikes, and even coffee makers.

At the Device Layer, we have siloed systems—each with their unique purpose, inputs & outputs, key stakeholders, and life safety functions. Each with their separate stacks, including networking, asset registers, data models, data storage, user interface, and devices.

From a smart buildings perspective, the role of the Device Layer is to provide data and controllability to the application layer. However, as covered in our whitepaper, 87% of commercial buildings don't have any digital systems. We still need to install a lot more digital devices to enable everything higher up the stack.

The Network Layer

Moving up to the network layer. The network allows users to access devices remotely, connects devices to each other, and connects devices to the cloud (which is often the catchall nickname for the data and application layers).

Buyers want a dedicated layer with its own hardware, management software, standard operating procedures, and key stakeholders who take responsibility for doing it right. Generally, they want one network, they want it to be monitored, maintained, and reliable.

The Data Layer

Next up is the data layer. A robust data layer decouples a user interface at the application layer from physical hardware at the device layer. You may also see it referred to as a data lake or middleware. Whatever you call it, it’s valuable because it provides a standard interface or API to each application AND gives each of those applications a standardized interface to each downstream device (it creates a two-way street for information).

The data layer enables the application layer by unlocking and modeling the data that are currently locked away in proprietary and siloed systems.

The Application Layer

The Application Layer sits “on top” of the data layer and provides outcomes to users through mobile apps, web apps, or process-based applications. We’re talking utility bill analytics, sustainability reporting, carbon accounting, fault detection & diagnostics or FDD, facility service tracking, advanced supervisory control, and more.

The Nexus Marketplace categorizes applications in terms of the Capabilities they provide and the Use Cases they enable. Apps in our industry have five general types of capabilities: centralize/visualize data, analyze data, control underlying systems at the device layer, optimize workflows, and engage stakeholders.

The Grid & Market Layer

These are vendors that sit at the building<>grid nexus. They provide energy and grid services but don’t necessarily have software or consulting business models, like the service provider layer does, which we’ll discuss next.

Efficiency as a service (EaaS) providers are contractors that package together hardware, software, and engineering and project management services to execute decarbonization projects, typically partnering with the local utility and financing providers to remove the upfront costs for buyers. Virtual power plant (VPP) vendors integrate their tech stack directly with the utility AND directly with their customers’ buildings in order to monetize the building’s ability to curtail demand during times when utilities will pay for that curtailment.

The Service Provider Layer

Finally, we’re at the top of the stack. These are the vendors who sell their time and expertise to augment the buyer’s staff and advise buyers on all the facets of the smart buildings journey. To go deeper on each type, check out our 5 Vital Roles whitepaper.

Buyers can choose to hire their own experts, which happens often with owners of large portfolios. They can also choose to hire independent external consultants, meaning they have no affiliation with vendors of any sort. Finally, they can often get the services from the vendors in the other layers as part of those vendors’ offerings.

—

We’ve spent years tracking vendors and their capabilities and engaging with them to learn what they do and what distinguishes them. We’re painstakingly splitting the marketplace up into the horizontal layers you see above. We’re building consensus in defining those layers according to the attributes vendors must have to qualify. With vendor participation, we’re allowing buyers to filter the vendor properties that matter to them.

The marketplace launches soon! In the meantime, we’re happy to help any buyer using our layered database of categorized vendors. Hit reply and let us know what you’re looking for.

‍

—James and the Nexus Labs team

P.S. In part 5, we’ll finally share more details on what we’re building… stay tuned!