Utility Landscape Change: Better or Worse?
“The deal also takes some pressure off Opower. Closing new utility customers has proven to be incredibly difficult. Consequently, the company didn’t have a strong long-term growth story — it therefore had to adjust investor expectations and focus on short-term profitability.
Finally, the acquisition raises a bigger question. Can smaller companies selling efficiency, customer care and grid analytics software to utilities scale on their own — eventually rivaling behemoths like Oracle, SAP and Accenture? Or will they need help from these legacy players? So far, there’s little evidence that newer entrants are capable of doing it completely on their own.” — Stephen Lacey, Greentech Media (Oracle acquires Opower)
Ominous words? Is the utility industry consolidating? Does this present a ceiling for growth of new entrants within the utility markets? If one looks strictly at history and the linear progression of entrants versus incumbents, then absolutely, yes.
However, partnering with incumbents may not be as bad as it appears given the scale and cost savings benefits afforded by large incumbents. A respectful and mutually beneficial relationship has the potential to offer revenue and market share advantages to both companies.
This is especially advantageous if the new entrant’s product has the 10x factor that can be leveraged heavily via the incumbents domestic and international sales force.
Other interesting changes happening within the utility sector include the entrance of non-traditional players such as Apple, Google, Microsoft, and Amazon.
“Apple Inc., which spent $850 million last year on a 130-megawatt solar farm near San Francisco, can begin selling power into wholesale markets in the latest foray by a technology company into the energy business.” (Apple Sells Power)
These large technology entrants provide a unique threat to not only incumbent utility providers but also the vendors which serve those providers; new efficiency and analytics entrants included.
However, not everything is a glass half empty scenario. If one takes the previous standpoint of leveraging business partnerships with large incumbents, then the glass may become half full; especially when considering future projections of clean energy production and responsible consumption.
If you look further into the future, you come to what is the most pressing environmental concern, water. The water industry is far more archaic than traditional gas and electric utilities given there are no substitutes for water. But, if you had to guess what synergistic problem incumbents or new technology entrants will address next, then choosing water is a safe bet.
Nothing in life is ever certain, but entrant efficiency, technology, and analytics providers within the utility sector (electric, gas, water) will be well suited to leverage tactical partnerships with industry incumbents, while keeping their eye out for their next strategic partnership with tech giant entrants.
Ultimately, these efficiency and analytics entrant + tech giant entrant strategic partnerships are what will drive the next wave of disruption within the energy and water utility sectors.
About the Author: Christopher Brookins is a Pittsburgh-born, Carnegie Mellon trained Entrepreneur looking to change the world for the positive