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Industrial giant Honeywell is leaning on its connected industrial software business to support growing organic sales — up 5% year-over-year (YoY) — and an increasing sales backlog — up over 10% YoY — which the company reported in its earnings yesterday.
The expanded software efforts could help the company grow more resilient to swings in the industrial market, though they could also require investments that are too slow to bear fruit.
Honeywell’s transformation from an industrial conglomerate to a software provider is primarily built on its Honeywell Connected Enterprise (HCE) unit. CEO Darius Adamczyk said in the earnings release that the company is becoming “a premier software-industrial company, with connected software sales continuing to grow at a double-digit rate organically.
The HCE foundation is firmly in place, supported by the launch of Honeywell Forge, a comprehensive industrial IoT (IIoT) software solution.” The conglomerate is pursuing these software solutions across industries by identifying common issues and threads that it can use to solve customers’ operational issues.
Business Insider Intelligence’s Peter Newman spoke with Que Dallara, president and CEO of HCE, last month about how the unit is developing its products and approaching the market.
- One of the key questions driving HCE’s approach to the industrial software market is where it can build on what it’s already doing. Dallara said that Honeywell helps its customers do three core things: “design things like buildings and oil refineries and manufacturing plants and airplanes, … construct these things and commission them and turn them on, make sure they work, … [and] operate and maintain them.” HCE’s strategy is to develop software that can better help both Honeywell and its customers build and use those assets.
- The Honeywell Forge platform and other HCE software products are meant to cut across the different verticals where Honeywell is active. “Our customers have very common characteristics,” Dallara said. “They spend a lot of capital on building an airplane or putting up a building. They have a lot of processes involved too. And they employ a lot of workers, and these workers don’t sit behind a desk.” The software and platforms HCE designs are aimed at capturing data from customers’ myriad processes and creating dashboards and systems to give workers and supervisors a more comprehensive view of their operations.
- HCE is mindful, though, of the ways that digital projects can be siloed and tools accumulate. “Our approach is, we don’t want to just give a customer another tool, because they’ve got lots of them already,” Dallara said. “Those tools don’t have a digital thread that cut across them, so we are building common building blocks … how they apply in different domains is different, but what we’re not doing is giving the customer another bespoke deployment, because we don’t want our customers to be left with all these stranded tools that make their technical debt a whole lot worse.” This building block approach allows HCE to implement its platforms and solutions across verticals while also allowing it to rely on the same core software.
Honeywell’s turn to software looks like it will start paying off quickly. The company raised its full-year sales and cash flow guidance in its earnings report.
But as digitization efforts grow wider and the company continues its turn to software as a key pillar, GE’s aborted attempt to pivot to digital services ought to loom large, highlighting the need to maintain a clear vision of goals and the perils that any leadership transition can pose to a transformational strategy.
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