One of the things I love about the HVAC industry is its capacity to change. Whether it’s wholesale leadership changes at major manufacturing organizations, code changes, the adoption of new rules governing refrigerant use, energy efficiency, carbon footprints, surviving consolidation, and so on — the HVAC industry seems able to really pick up the ball and run to make things work.

It wasn’t that long ago the sea change washing over this country was the green movement. And while that movement is still going strong, it doesn’t eat up as much digital and physical ink as it did not too long ago. Now, the item grabbing headlines across the world is the Internet of Things (IoT). Briefly, for those of you who may not have felt the spray from this sea change, this is like smart-home, smart-grid, and smart-city concepts on steroids.

The term “Internet of Things” was coined in 1999 by a guy named Kevin Ashton, who, at the time, worked as a brand manager trying to find a better way to track product inventory. His big idea was to put a microchip on product packaging to let stores know what was on the shelves.

Today, the IoT has evolved to include machinery and products communicating information based on sensors that are installed in everything from concrete to windows. And, it impacts the HVAC industry in a pretty big way because manufacturers have been onboarding sensors into their equipment and their control systems for decades. Utilities are moving toward smart meters to monitor and possibly control the use of gas and electricity in our homes and buildings. Thermostats are smarter, too, now controlling much more than mechanical systems’ control schedules.

Just Google the phrase, “Internet of Things” and you’ll find thousands of hits that cover everything from predictions that we’re on the verge of creating a real-time SkyNet, like the one featured in the “Terminator” movie series, to how everything we know and understand about manufacturing, controlling environments, communicating, and traveling will change.

I love this stuff. But it can be mind-boggling.


In a January 2016 blog post, Daniel Burrus, founder and CEO of Burrus Research and author of six books on future tech, said, when it comes to the IoT, no one ever thinks big enough.

“This is a huge, fundamental shift,” Burrus wrote. “When we start making things intelligent, it’s going to be a major engine for creating new products and services. Of all the technology trends that are taking place right now, perhaps the biggest one is the Internet of Things; it’s the one that’s going to give us the most disruption, as well as the most opportunity, over the next five years.”

That’s heavy stuff. But, it’s gotten me thinking about something that is very near and dear to my heart: The HVAC industry is moving toward performance-based contracting. How does the IoT impact the way contractors and consumers (residential as well as commercial) interact with mechanical systems, the building structure, energy use, safety, and comfort? Possibly quite a bit.

For example, besides sensors in the mechanical equipment collecting and sharing data on the performance of that equipment, what if the ductwork itself had embedded sensors that collect static pressure readings, temperatures, and airflow measurements, then sent that data to a performance-based contractor who knew what to do with it? Would that make it easier to find problems and affect repairs?

In case you are not up to speed on the IoT, here are some basic facts. The sensors themselves are just data-gathering devices. They are easily added to, and already exist on, most major components of HVAC equipment. Information from those sensors is sent to an intelligent device like a thermostat, utility meter, or something else, which connects the device to the building’s Wi-Fi router. Data are then sent to a cloud-based application and database. Smartphone and tablet apps grab those data and put them into useful formats making it easier to interpret and take action on.

Now, that information can be monitored by a homeowner, building manager, HVAC equipment manufacturer, wholesale distributor, and HVAC service contractor — essentially by every perspective in the HVAC value chain. Some of the features of these apps could include remote access, trend information, energy monitoring, and diagnostics. Consumers will be able to save money on their heating and air conditioning bills as the intelligent systems monitor the HVAC and optimize operation and temperature.

Like I said before — it’s really mind-boggling, and it’s real.


I believe this all started making serious headway back in 2011, when a little upstart company created a smart thermostat that looked and acted like an iPhone. That company, Nest Labs Inc., and its learning thermostat was among a few high-end products to hit the market that not only collected and used data from sensors, but called out to consumers because of how they looked and worked.

Don’t think for a minute that Nest was the first device to do these things. It wasn’t by a long shot. Honeywell has been in the development of smart thermostats that appealed to contractors as higher-end add-on sales items for years. Other manufacturers also have been way ahead of the curve when it comes to the development of smart technologies. But, Nest put out an Apple-computer-like, consumer-focused, modern thermostat.

Of course, on the commercial side of the fence, let’s not forget that inter-device communication has been going on for a very long time, though many of these protocols were proprietary and closed and didn’t necessarily play nice with each other. Development of commercial communications protocols, such as BACnet and Lonmark, were born with the advent of direct-digital controls and subsequent building management systems. They’ve been partially successful in opening up communications as part of a smart-systems approach to building control for decades. With the IoT, communications is being blown wide open.

Having IoT devices located throughout the HVAC industry means that companies can collect real-time data about their products and services. Then, by understanding and organizing this information, companies can take a fresh look at their current practices, generate business changes, and create productive efficiencies.

For HVAC contractors, this means the ability to truly provide real-time preventive maintenance to residential and commercial consumers. It also creates an opportunity for real, planned maintenance based on data rather than season. In addition, it can lead to achieving higher energy efficiencies. And, this is the foundation upon which performance-based contracting is built.


From National Comfort Institute’s (NCI’s) perspective, performance-based contracting is based on service to the equipment and ductwork and getting them to work together with the building structure as a system. To deliver promised comfort, as well as safety, health, and energy efficiency, not only does the equipment need to be maintained properly, but so does the duct system. This requires contractors to actually measure static pressure, airflow, entering and leaving temperatures, and more.

“Static pressure allows you to ‘see’ the system in an entirely new light. Airflow becomes visible,” said Rob Falke, president, NCI. “The result of measuring static pressure is the ability to prescribe duct renovation work. You begin to see that the duct system is what controls comfort and efficiency. Only by getting the ducts operating properly can you assure the system as a whole is operating properly.”

To do this responsibly and reliably requires training and practice. The number of HVAC contractors walking down this path is growing, but the majority of contractors in the HVAC industry still shy away; they say that taking the measurements, doing the math, finding the causes of airflow issues, and solving these problems take too much time and cost the customer too much.

They don’t see how this approach separates the men from the boys when it comes to differentiation in the marketplace

Now, with IoT technology, much of this tedium of measuring and doing math can be automated. A number of scenarios are being studied already to do this very thing. If you had all of this information readily available via a smartphone or tablet, could you use it in your marketing and sales?

You betcha.

Could customers get more involved in the sale by being active participants in determining the causes of problems in their homes? Many performance-based contractors already do this using equipment like flow hoods. But, with smartphone tech, customers can be even more active participants.

The secret remains being able to price these services so customers not only can afford them, but so that you can provide them a better array of options to make their homes and buildings safer, more environmentally friendly, healthier, and efficient. And, that means more profits for you.

Of course, as simple as this sounds, the IoT is a lot more complicated than that. There are questions when it comes to security issues and who actually owns the customer. These are sticky wickets that are also being looked into. For now, it’s my opinion that it behooves contractors to keep their eyes on this trend and look for ways to make it work for them in their businesses.

In a blog post from, author Joy Ayles stated the following: “The Internet of Things is changing the business model for the HVAC industry. What was once an install-and-repair service can become an entire end-to-end solution. If all these devices were not only linked together, but also sharing data — well, that could change a typical HVAC offering from a heating and cooling system to more of a smart building management solution. By operating within the customers’ lifestyles or businesses, HVAC contractors can now offer a service and financial model that’s directly aligned to those customers’ lifestyles and businesses.”

Performance-based contracting is also changing the business model for the HVAC industry. Combined, they can be an unstoppable force. Don’t you want to be part of that?

Publication date: 3/14/2016

Want more HVAC industry news and information? Join The NEWS on Facebook, Twitter, and LinkedIn today!