Navigant Research Blog

Comparing the AMI Market with AMI Managed Services

Bob Lockhart — June 25, 2012

It’s not always up and to the right.  In other words, markets don’t expand forever.  At Pike Research we genuinely believe in the markets that we cover, but it’s our job to report and forecast objectively.  No market grows forever, without interruption, and our forecasts reflect that.

As a case in point, Pike Research recently published two reports on the global advanced metering infrastructure market: Smart Meters and AMI Managed Services, or simply, AMS.  The latter is a drill-down into a sub-market of AMI: selling AMI systems delivered from a repeatable, ready-made, and usually hosted (read, cloud) service.

The two charts below show our global revenue forecasts for AMI and for AMS.  Clearly the first chart is going to have larger absolute numbers.  But whereas the total AMI market looks to deliver somewhat steady revenues throughout this decade, AMS is poised for strong growth throughout.

AMI Revenue, World Markets: 2012-2020

(Source: Pike Research)

AMS Revenue, World Markets: 2012-2020

(Source: Pike Research)

Why is the chart at top relatively stable, while the other one continues to grow?  Simply put, AMS is a much newer market than AMI.  The bulk of AMI projects up to this point have come from large utilities, which have the staff to run an AMI project in-house.  Another factor in North America is the ARRA stimulus funding, which fueled a number of very large AMI deployments, all of them in-house.  Meanwhile, the sweet spot market for AMS is small to midsize utilities, which have largely chosen to sit on the sidelines and observe how the large utilities’ science projects turn out.

Our research into the AMI market shows that the science project mentality has just about run its course.  Now, AMI discussions center on traditional business topics like, “What return am I getting for this investment?”  Some very large utilities have told us that they can’t build a business case to deploy AMI – yet.  And that’s where things get interesting for AMS vendors.  When the holdout large utilities do deploy AMI, will they do it in-house or outsource to a managed service?  That is as yet unknown, but access to sufficient capital – or lack thereof – could be a major factor in that decision.  New capital often requires new rate cases, and the current political climate is not conducive to new rate cases.

None of this is to say that the market for in-house AMI deployments is dead.  The two charts show that even after a decade of steady growth, AMS will still have less than half of the AMI market.  In-house AMI systems still have a lot of business left to win.  It’s just not going to be up and to the right.

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