Information & Communication Technologies


Digital Grid –Tapping into the Next Generation of Customer Service for the Individual

by Farah Saeed 03 May 2016
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-An analyst view on the recent Opower and Oracle acquisition announcement

By Farah Saeed, Principal Consultant Frost & Sullivan

As most are aware Oracle is not new to utility space. In fact, the company specializes in a wide variety of enterprise software such as meter data management, customer and demand side management, outage management, as well as distribution and asset management solutions. Customers have included major utilities such as Xcel, Dominion, SDG&E, Georgia Power, ConEd, among many others.  

Acquiring Opower can allow Oracle to tap further into the customer engagement domain, which Frost & Sullivan research believe has the potential of reaching over $12 billion in sales worldwide by 2025[1]. According to a recent presentation by Oracle[2], the overall cloud service business for utilities to be around $2.3 trillion for utilities, indicating the $532 million investment to be rather strategic. 

Opower specializes in cloud based software as service and has spent over $2 million in enhancing its customer software platform. The base of this platform is the ability to disaggregate data coming from 3 billion end points, which consist of the meter and other sources such as housing stock and weather information, to develop energy profile by device, customer profile, and time of usage. With this data a utility can identify high bills, new candidates for usage, and other usage comparisons and as a result help strengthen customer retention and new revenue stream for utilities such as auto pay, solar portals, demand response, moving services, and market place.

Opower has demonstrated exceptional performance in a century-old, risk-adverse utility sector. Typically, utilities are not considered early adopters of technology. The company has a strong regulatory team that is committed to working with utilities on regulatory issues such as filling for approvals, getting approvals, and advocating change.

A more recent addition to this platform is NextWeb –a product that is specifically designed to reduce time for creating utility product centric web portal. Notable customers include Exelon, which also owns Baltimore Gas & Electric and National Grid. This could be considered a crucial piece towards positioning utilities as an energy advisor by having a single site that can address all energy management requirements and inquiries for a resident and or a business.

Products such as these match Oracle overall growth objective in the cloud software as service domain particularly as customer requirements become more complex and invidualized. Oracle recently released a very interesting and insightful study called “The era of the individual”[3], which claims there is an unmet need in the industry to deliver fast response time to individual request and to deliver individual offering.

The survey goes on to say that a $1 billion utility would have $220 million in lost revenue potential for not having the ability to offer individual service. In general, the customer survey calculates that organizations have the ability to earn an additional 18% in revenue by offering individual services.

Companies such as Amazon and Netflix are examples of companies that have done a great job in this field but it is a recognized trend utilities are still far behind on this front in part due to priorities for maintaining grid uptime. Therefore majority investments are for distribution grid management and related capital intense power distribution equipment. This scenario is going to slowly change as utilities continue to encounter flat revenues, particularly in the U.S.

A recent report from EIA showed total electricity sales fell in 2015 for the fifth time between 2002 and 2015, indicating a strong trend for flat and negative sales. Furthermore, utilities are experiencing increasing competition coming from cities desire to go carbon neutral along with municipal aggregation There are growing list of cities that have made such announcement threating core business of utilities such as San Diego and Colorado Springs to name a few.

Opower belongs to a growing long list of vendors that have emerged in the customer engagement space for utilities during the course of past 5 to 8 years. Companies include PlanetEco Systems, Bidgely, Simple Energy, First Fuel, and Enervee. These companies are relatively small in size but exhibit fierce ambition despite lengthy adoption rates. Will this recent acquisition be considered a good sign for where the market is headed or is this result of a business struggling to grow?  My thought is 18% in incremental sales for utilities through IOT and data disaggregation might be difficult to ignore.

 



[1] Upcoming Frost & Sullivan Study: Future of the Smart Grid Industry –The global smart grid market will reach $112.7 billion in 2025 growing at 6.2%

[2] https://www.oracle.com/us/assets/opower-general-presentation-3003202.pdf

[3] https://www.oracle.com/industries/the-age-of-the-individual.html

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