Navigant Research Blog

Dell, Others Make Bold Moves in IoT Market

— November 10, 2017

Dell made a splash in the Internet of Things (IoT) market recently, announcing a $1 billion investment over 3 years to set up a new IoT division of the company and to fund new IoT-specific products, labs, and a partner program. The goal is to prod customers into speeding up the deployment of its IoT projects. This move follows a quiet 2-year period during which Dell honed its strategy. Dell’s new IoT division will be helmed by Ray O’Farrell, executive vice president and CTO at VMware.

Dell Is Not Alone

Others are also pushing hard to drive IoT adoption across multiple sectors, including energy, mining, manufacturing, and smart cities, to name but a few. Some of the other recent IoT-related moves include:

  • Apple and General Electric (GE) announced a partnership in mid-October to produce “powerful industrial apps designed to bring predictive data and analytics from Predix, GE’s industrial IoT platform, to iPhone and iPad.” The companies also released a new Predix software development kit for iOS, which developers can use to make their own industrial IoT apps.
  • Germany’s Dialog Semiconductor announced its plans to acquire California-based Silego Technology for as much as $306 million in a move to help Dialog fortify its position in the IoT market.
  • Also in Germany, business software provider Software AG recently said it would form a new IoT cloud unit in January 2018. It also set up a new strategic alliance with a group of manufacturers that will focus on new industrial applications for IoT and Germany’s Industrie 4.0 digitization initiative.
  • In Dubai, Sheikh Mohammed bin Rashid, the vice president of the United Arab Emirates and ruler of Dubai, launched an IoT strategy aimed at preserving the emirate’s digital wealth and setting the foundation for a smart lifestyle transformation process for its people.

More of these of investments and strategic moves related to IoT are expected as competition heats up among vendors trying to seize early market momentum and as the trend moves well beyond the hype phase. This should be good news for those companies seeking to leverage IoT technologies for their business processes. Customers should derive benefits as IoT solutions vendors invest more in their products, channeling engineering horsepower into solving complex industrial problems. For a window into what the industrial IoT market could look like over the next decade, see Navigant Research’s report, Industrial Internet of Things.

 

Putting Blockchain in Its Proper Context

— November 10, 2017

Coauthored by Stuart Ravens

If blockchain evangelists are to be believed, it is going to be big. The so-called Internet of Value will disrupt and decentralize our financial system, healthcare, and electric grids. The massive, centralized powers-that-be will not make it out of this transformation intact.

The truth? There is something out there with significant potential to decentralize much, but not all, of our societal infrastructure. Is blockchain the magic ingredient used in decentralization? No, not really. As Bitcoin expert Andreas Antonopoulos notes, claiming that blockchain is the factor that creates decentralization is like claiming that wings alone are responsible for aviation … but put wings on a building and it still won’t fly.

What Guarantees Trustless, Immutable Decentralization?

Released in 2009, the Bitcoin platform revolutionized decentralization by making every transaction 100% verifiable by every participant without having to rely on anything beyond the software it runs on. It also prevents anyone from meaningfully gaming the system. Andreas Antonopoulos spells out four key pieces of Bitcoin that—only in combination—lead to a fully decentralized and immutable application:

  1. A blockchain ledger that is distributed throughout the system and can be validated by any participant.
  2. A consensus algorithm that is open and subject to precise and consistent rules.
  3. A reward of real value for properly validating the next block, (importantly) paid in bitcoin.
  4. A competition that determines who gets to validate the next block and receive the reward. Critically, each competitor must pay a significant cost in computing energy as an entry fee.

Similar levels of decentralization are critical to proving asset, identity, or land ownership. However, there are many instances when decentralization or immutability need not be so strict, including when:

  • Only partial decentralization is needed.
  • Specific actors can be trusted.
  • Access to the ledger should be closed.
  • The ledger may require (limited) editing.
  • There are no rewards for validation.

Given individual application requirements and significant practical issues with implementing Bitcoin (e.g., mining costs, limited transaction throughput, and validation latency), blockchain solutions have been developed that rely on different structures and consensus mechanisms. Their properties fall within a wide range of decentralization and immutability.

Blockchain Does Not Guarantee Bitcoin Superpowers

Although blockchain is an underlying technology of Bitcoin, it is wrong to equate all blockchain-based solutions with Bitcoin—yet, this happens frequently. There is a risk that such misinterpretation will confuse and disappoint potential customers, and wasted resources will lead to negative press.

Utilities keen to investigate blockchain must ensure they get the right qualities, and enough of these qualities, to satisfy their requirements. They must also understand that each custom combination of consensus, trust, risk, and reward remains unproven until it has been tested at scale.

As the common component of many distributed data and/or asset systems, blockchain is becoming the de facto term for trustless, immutable decentralization. However, this is often not the case. Unfortunately, there is presently no competing term that covers the range of features and characteristics of products that include blockchain.

Navigant Research believes the industry must be more circumspect about blockchain. While there are some attractive use cases for the technology within the utility industry, there are many issues that must be resolved. Potential users should add a caveat emptor to their optimism. Navigant Research will publish a series of blockchain reports in the near future that will investigate the consequences of these issues in greater detail.

 

Innovation Aplenty at the European Utility Week

— October 10, 2017

From October 3 to 5, the European energy industry converged on Amsterdam for European Utility Week, an event I have attended off and on since 2009. In a conservative, slow-moving industry, previous events have felt a little like the utility technology equivalent of Groundhog Day. This year’s event was far from it.

The 2017 exhibition is an excellent barometer for the current speed of industry change. And how things have changed. In 2009, the event was known as Metering, Billing/CRM Europe. This far from catchy title was somewhat misleading because metering and other electrical hardware companies ruled the exhibition floor, with a handful of billing vendors and nary a mention of CRM. Virtually all the exhibitors had many decades’ experience in the utilities industry.

Back to the Future

Fast forward to 2017. The exhibition is now 4 or 5 times larger and the focus has shifted from hardware to software. The hardware vendors of old have expanded their focus to offer a suite of products from the traditional metering business to communications, data, and analytics platforms into services. There is now a profusion of software vendors that would have looked out of place at the event of 2009. This reinforces the message that the energy transition is not just about a shift to smarter, cleaner generation, but a shift toward software that will manage future networks and enable new business models.

However, the most marked difference between this exhibition and those of previous years was the existence of many small booths for startups and several EU-funded Horizon 2020 demonstration projects. Nine years ago, startups in the energy industry were few and far between. Innovation was typically led by a utility that would develop solutions with a long-term partner that would, in turn, create products around these innovations and bring them to market. But how things have changed. Innovation does not have to occur with a utility’s blessing. The shift to software means entry costs are significantly lower, and startups are developing products that can just as easily compete directly with a utility as be adopted by them.

Disruption at the Edge

If this exhibition-as-bellwether idea runs true, utilities should raise their competitive threat levels a notch or two. Disruption at the edge is a key indicator of future disruption at the core, yet most companies fail to closely monitor startups chipping away at non-core parts of their business. The industry has entered the most disruptive decade in its century-long existence. Many utilities are planning for a more distributed, competitive future. Those that don’t run a real risk of becoming irrelevant in the not too distant future.

 

Utilities Must Take a Pragmatic Approach to the Energy Transformation

— July 27, 2017

Few will dispute the fact that the industry is undergoing significant change. The shift to clean and distributed energy sources and the adoption of EVs will force significant changes to the way distribution companies run their businesses. However, much of what is written on business transformation can be high level. If everything that is written on the subject is to be believed, then there are huge utility transformation projects occurring across the world. While there is certainly a lot of activity, projects are typically targeted at specific areas rather than businesswide.

Transform Business Models via Planning

As discussed in Navigant Research’s Distribution Utility Transformation Strategies report, which highlights some of the leading examples of business model transformation within distribution networks, transformation does not happen overnight. Rather, it is a decade-long process that requires careful planning and a staged approach. There are many different drivers for transformation, including increasing competition, business process efficiency improvements, a renewed focus on customer experience, new product and service development, and the incorporation of distributed energy resources (DER). These drivers will affect utilities in different ways; the most striking difference is between competitive and monopoly markets.

Create a Vision for the Future

One key takeaway is that as with any large-scale project, utilities must set out a vision for their future businesses and a roadmap detailing how to achieve this goal. Companies cannot do everything all at once, so they must place their bets wisely and invest in projects that deliver the biggest returns. In addition, organizations cannot underestimate the contribution a strong stakeholder engagement program can make to a project’s success.

Develop an Actionable Roadmap

As a result, each utility’s transformation will be different and will happen at different times—and at different rates. Digital Utility Transformation Best Practices builds on some of the recommendations provided in Navigant Consulting’s “Energy Cloud Playbook” to offer best practices for creating an actionable roadmap for transformation. Most utilities will not be able to avoid the inevitable forever. Therefore, they must plan now for their future businesses. The right strategy will help utilities navigate political uncertainty; manage market-specific regulatory policies; access project finance from skeptical and conservative shareholders; and confront legacy issues such as corporate culture, a lack of skills, and outdated technologies.

The latest reports published in Navigant Research’s Digital Utility Strategies Research Service provide specific details on different utilities’ transformation projects. They discuss and compare initiatives in California, New York, the United Kingdom, Italy, and Australia while also providing some practical advice to organizations embarking on their own transformation projects.

 

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