Navigant Research Blog

Siemens acquires MDM Vendor eMeter

— December 5, 2011

Siemens announced today that it is acquiring eMeter.  The purchase price is not being disclosed and, since eMeter is privately held, both parties expect to complete the transaction within the month.  Is this a good move for the companies?

You could say that the due diligence for this deal has been ongoing for the past three years.  Siemens and eMeter have been strategic partners since 2008, so both know each other well and will have been collaborating under mutual non-disclosure agreements.  As an advanced metering infrastructure (AMI) systems integrator, Siemens knows all the AMI and meter data management (MDM) players well.  As a strategic partner, Siemens most likely has a good understanding of eMeter’s internal workings.

In July 2011, Siemens sold its enterprise IT operations to IT services provider Atos.  This transaction increased the size of Atos (which dropped “Origin” from its name) by about 50%.  Atos also took over Siemens’ own in-house enterprise IT business.  The transaction was part of Siemens’ effort to focus on its core capabilities while outsourcing non-core activities such as enterprise IT. 

Combining these three data points suggests a pretty straightforward rationale for the eMeter acquisition:

  • Siemens is focusing on its core capabilities. 
  • Siemens has significant AMI systems integration business. 
  • Siemens is now acquiring an MDM vendor.  

Could Siemens next acquire an AMI vendor?  Perhaps.  But selling AMI is quite a bit different from selling MDM.  AMI deals are capital intensive, with thousands or millions of smart meter endpoints and a complex communications infrastructure.  If home energy management is included, the proposal becomes dizzyingly more complex.  MDM is a more traditional software and services play, with typical enterprise components necessary to extract and store data from head-end systems, but very few endpoints to manage.  So while Siemens could make a next move directly into AMI, this would require quite a bit more consideration, and would most likely entail acquisition of a publicly traded corporation.  So that next move, if it comes, may not happen as quickly.

This looks like a good deal for both parties. For Siemens the deal collapses part of their smart metering supply chain, so that they no longer have to pay eMeter’s margins to install the MDM software.  In the Pike Pulse Report:  Meter Data Management, we wrote that “eMeter has done the best job of any MDM vendor in terms of developing alliances with other key players in the market. It leads in MDM innovation with features like cloud-based MDM (with Verizon) and an MDM appliance (with IBM).”  We ranked eMeter solidly in our “Leaders” category.  Now Siemens has taken over that leadership position.  It is not necessary that this acquisition should affect either of those alliances with Verizon or IBM.

For eMeter the benefits are significant.  In the same report we also wrote, “Perhaps the only noticeable area for improvement for eMeter would be a stronger global presence… Although eMeter will clearly be at a disadvantage to large publicly traded companies when discussing staying power, that should not negatively impact its ability to win new business.”  eMeter has just solved both those problems with a single transaction, and gained access to significant financial and sales resources in the process.

 

U.S. Now an Oil Exporter

— December 2, 2011

I did a double take when I saw this headline on the homepage of The Wall Street Journal: “U.S. Nears Milestone: Net Fuel Exporter.”

“U.S. exports of gasoline, diesel and other oil-based fuels are soaring,” the newspaper reported, putting the nation on track to be a net exporter of petroleum products in 2011 for the first time in 62 years.”

Really? Here are a few highlights from the WSJ’s story:

  • A combination of booming demand from emerging markets and faltering domestic activity means the U.S. is exporting more fuel than it imports, upending the historical norm.
  • As an overall exporter of fuels made from crude, the U.S. now has greater influence in the global energy market.
  • The U.S. will not lose its “net exporter” tag anytime soon.

While many of us weren’t paying much attention, people at energy companies saw a challenge and found new ways to meet it, leveraging new technologies for more efficient drilling amid a shifting global energy market.

This means the energy picture may not be so gloomy after all. Clearly, this does not mean we should ignore other fuel sources, including renewables. And it hardly helps solve the looming challenge of global climate change. But it does offer hope that solving long-term energy challenges, such as national energy security, may not be as difficult as once envisioned. That’s a good thing.

 

Korea‘s Holistic View of the Smart Grid

— December 2, 2011

Korea’s vertically integrated business structure could accelerate the adoption of smart grid technologies domestically, but it creates challenges in exporting the technology to other regions.  Samsung, LG, SK Group and Hyundai and their subsidiaries participate in seemingly unrelated businesses such as electronics manufacturing, construction, gas stations, computers, batteries, energy, power distribution, automotive, and even department stores.  By operating research groups in such diverse areas and getting all of the pieces to interoperate, these companies can create overarching solutions to very complex problems.

This holistic view of identifying the interrelationships between industries was front and center at the Korea Smart Grid Week conference I attended last month in Seoul.  The exhibit area of the conference featured a smattering of smart meters and intelligent grid monitoring equipment, but these technologies were not the most visible.

Instead, most of the corporate booths were prominently displaying energy storage solutions (primarily lithium ion batteries) as well as electric bikes and cars.  Korean companies see EVs and storing excess energy in batteries as critical to the success of the smart grid to a much greater degree than companies in the U.S. do.  Even companies that we in the West consider behemoths cannot provide the overall solutions for all of the moving parts that are required to make the smart grid work.

Korea can move quickly in adopting complete smart grid solutions because fewer players who can do more of the work are involved.  This is being demonstrated on Korea’s Jeju Island, a testbed for smart grid technologies, where the nation’s largest companies are actively demonstrating the interactions between renewables, vehicles, batteries and intelligent grid equipment.  For example, we should expect that EVs will have a smooth transition onto the grid because Samsung the EV maker and Samsung the grid equipment company both have a vested interest, unlike General Motors or Ford, which have less at stake.

However, these theoretical efficiencies are counterbalanced by the reality that:

a)      Few companies can do so many things well to an equal degree

b)      Communications between research groups within large organization can actually be slower than communications between partner companies that have clearly defined roles

c)      Trying to grow an entire market that is complex as the smart grid (rather than a single segment) can lead to “analysis paralysis” in developing business models and corporate goals

While domestic projects accelerate, Korean companies are likely to face challenges when addressing foreign markets that are looking for focused, interoperable products to specific problems rather than an all-encompassing solution.  Developing products that can proficiently serve both the part and the whole is no easy feat.

 

The Rise of the Modular Data Center

— November 30, 2011

The Green Grid has produced a useful guide to what it calls Containerized Modular Data Center Facilities, which recognizes the increasing interest in modular design and how it can help improve energy efficiency in data centers.  I’ve tackled this subject in a previous blog  but chairing the recent Green Data Center conference in London, I had the chance to hear in detail about two very different approaches to modularized design. 

The first example was Verne Global’s new data center campus in Iceland.  In a project we documented in our Green Data Center report (soon to be updated), Verne Global is taking advantage of Iceland’s climate and copious hydroelectric and geothermal energy resources to create a low-emission, energy efficient data center.  The data center facilities are being supplied by Colt, which is providing pre-fabricated data center modules built in its factory in northeast England.  It’s using standardized components and production line manufacturing techniques to deliver energy efficient and adaptable data centers in less than four months from contract signing to onsite commissioning.  The modules are expected to work to a Power Usage Effectiveness (PUE) of around 1.15 in the advantageous Icelandic environment.

While Colt’s modules are able to meet the variable demands of a co-location data center, a more specialized approach to modularization is being pioneered by Taiwan’s Industrial Technology Research Institute (ITRI).  The background to this project is the investment the Taiwanese government is making to prepare the country’s businesses for the impact of cloud computing.  For example, a number of projects are looking at the cloud delivery of government services.  It is also looking at how cloud computing can drive innovation in the Taiwanese IT and services sector, which brings us to the green data center project.   ITRI has been tasked with developing an energy efficient modular data center that can support cloud computing. 

As Paul Sun from ITRI explained, building an energy-efficient data center in subtropical regions presents significant challenges; with a typical humidity level of 70%, Taiwan is a far cry from Icelandic conditions.  To achieve the target PUE of less than 1.3 they had to rethink how a data center is built and how it operates.   The radical idea behind the project is not to think of the data center as a building to house IT equipment, but as the computer itself.  This led to the development of a virtual management layer for the building facilities and an approach that seeks to unify the facilities and IT views of the data center.  ITRI has been able to come up with a data center design that optimizes both infrastructure and server capability.  The servers themselves are stripped down to the essentials including the removal of individual power supplies and fans.  A direct DC power supply was also used to increase power efficiency.  However, high density computing in a subtropical climate requires efficient cooling and this was provided by liquid cooling at the CPU level. 

Much of what ITRI did in this impressive demonstration project will be out of reach for enterprise data centers, but the project shows the way cloud computing brings opportunities for efficient data center design.  It also shares with Colt’s approach a rapid development time – 6 months from planning to operation – and provision of shippable modules than can be quickly installed onsite.

While Colt is developing modules for the mainstream data center market, ITRI is pushing the boundaries to understand how the data center can be optimized for cloud computing and energy efficiency.  However, both projects are part of an important development that will have an increasing influence on the shape of the data center. 

 

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