Connected Real Estate and CAPEX

Prepared by Rick Huijbregts (30 October 2006) v1

Presentation_ID

2006 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

 Capital expenditures ("CAPEX") are

expenditures used by a company to acquire or upgrade physical assets such as equipment, property, industrial buildings.

Wikipedia, 2006

Presentation_ID

2006 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

Total Cost of Ownership (TCO)

+ve
5500 Years

REVENUE /PRODUCTIVITY

Time OPEX -ve CAPEX

Design and Construction

Presentation_ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Confidential

Operations
3

Changing the TCO

+ve
5500 Years Increase REVENUE Increase REVENUE
New business models, managed New business models, managed services, intelligent building services, intelligent building premiums premiums

Cash Flow

Reuse Maintenance Renovation Reduce OPEX Reduce OPEX

Simplified management, Simplified management, maintenance, operational maintenance, operational efficiencies, energy savings efficiencies, energy savings

Time

-ve

Reduce CAPEX Reduce CAPEX

Simplified installation, reduced Simplified installation, reduced cabling, procurement options for cabling, procurement options for building systems building systems

Decommissioning

Design and Construction

Presentation_ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Confidential

Operations
4

Saving on CAPEX
with Connected Real Estate
The Benefits of Convergence: Cabling & Cable Pathways
One cabling infrastructure versus eight or more

Labor
Reduced complexity, simplified installation

Equipment
Low-cost alternatives, non-proprietary Single device to service multiple applications (e.g multi functional sensors)

Project Management
Savings on design and implementation

Presentation_ID

2006 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

Saving on CAPEX
with Connected Real Estate
Continued Consolidation of servers for the systems
Less hardware, less space, and reductions in software licenses

Reduced training of personnel

For standardized system management tools and platforms

System configuration
Less time to configure due to shared standardized databases

Wireless PoE (Power over Ethernet)

Limited need for separate electrical cabling

Presentation_ID

2006 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

Examples
CAPEX Cost savings due to Convergence
Barbizon
New York City

1 America Plaza
San Diego

The Shires
Leicester, UK

14%
Building Mgmt System Access controls Video Surveillance A/V Intercom Telephony and wireless

8.6%:
Camera System Card access Parking w/ Validation HVAC Automation software

15%
Electronic systems Integrated Triple Play Building Integration Structure Cabling Interoperable systems

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2006 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

 First costs for integrated systems (including management hardware and software, network upgrades, web services, and reductions in devices) were 56% less than non-integrated systems.

CABA, Continental Automated Building Association, Life Cycle Costing of Automated Controls for Intelligent and Integrated Facilities, April 2004

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2006 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

What matters is the balance

total cost of ownership
Net Present Value of the lifecycle cost of an integrated building

24% less

Adapted from: National Institute of Standards and Technology, 2004.

Presentation_ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Confidential

 Is investment in CBS (Cybernetic Building Systems) products and services by individual owners and operators cost effective?

Most certainly YES: for every dollar invested approximately $4.50 is returned. This equates to an adjusted Internal Rate of Return of approximately 20% per year

Chapman, RE, February 2001. How Interoperability Saves Money, ASHREA Journal
Presentation_ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Confidential

10

Annual cost savings

of Integrated Systems
Svc Contracts, additions, remodeling Energy cost savings Improved load factor, coordinate supply Maintenance, repair and replacement Savings related to productivity Staff training, efficiency, IT support Cable and cable pathways, MAC 32% less $ 0.16 per SF 10% less $ 0.20 per SF $ 0.39 per SF 82% less 39% less

Adapted from: National Institute of Standards and Technology, 2004.

Presentation_ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Confidential

11

Examples
OPEX Cost savings due to Convergence
Energy
Fairmont Hotels

Maintenance
Pfizer UK

Operations
Cisco Systems

34%
Electricity saving Integration of: Light HVAC Access

15%
Annual maintenance Integration of: 70,000 building point Centralized ops Unified control system

30%
CCTV over IP Centralized Control Intrusion detection Temp, Leak detection Monitoring

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2006 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

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Summary: Value of Convergence

Value with integrated building systems

Value with non-integrated systems

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2006 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

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2006 Cisco Systems, Inc. All rights reserved.

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Commercial Benefits
Single network integrator Efficient project hierarchy Shorter lead times for design, deployment and testing Single point of contact for contractual issues Single point of contact for problem reporting and escalation Demonstrable cost savings of between 20% and 30% across active/passive infrastructure and control systems delivery A defined delivery model that can be replicated across projects

Adapted from: Converged Building Technologies Group, Integrated Approach for Information Communication Technology (ICT) and Control System Infrastructures within Buildings, April 2005
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15

Technical Benefits
Ability to deploy equipment more efficiently Single structured cabling infrastructure for maximum coverage, flexibility Future proofing Common infrastructure resiliency Common upgrade path Common centralized management systems Remote management capability IT Security compliance Open Systems Architecture based on IT standards

Adapted from: Converged Building Technologies Group, Integrated Approach for Information Communication Technology (ICT) and Control System Infrastructures within Buildings, April 2005
Presentation_ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Confidential

16

Cost benefit analysis

Residential Space
Building Technology System
Cabling Cable Pathways Data Network Telephone Network Video Surveillance System Access Control System Video Distribution Building Automation System Programmable Lighting Control Electric Power Management System Savings Total

Traditional Capital Cost $5,160,000 $3,600,000

iB $5,160,000 $3,600,000 $150,000 $57,600

Notes
$1.50 SF for Com.Area;$4 to $6 per SF for other

$2.50 to $3.50 per SF

Wireless in Common Areas

Common Areas $1.30 per SF $1.00 per SF $1.25 per SF $1.50 to $2.30 per SF $0.45 to $1.00 per SF $0.10 to $0.50 Per SF

$312,000 $240,000 $300,000 $456,000 $174,000 $72,000

$312,000 $240,000 $300,000 $456,000 $174,000 $72,000 ($2,190,936)

$10,314,000 $8.60

$8,330,664 $6.94

21.1%

($1.65)

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2006 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

17

Cost benefit analysis

Residential Space
Building Technology System Cabling Cable Pathways Project Management Total Capital Cost Saving $593,400 $1,350,000 $247,536 $2,190,936 Notes 7-16% savings with one cable contractor 15-60% savings on combined raceway PM is 8% of Capex, savings is 30%

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2006 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

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