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.

 

Industrial Control Security – What’s Missing?

— November 30, 2011

Earlier this month I spoke at the European Smart Grid Cyber Security and Privacy conference in Amsterdam.  My theme was, “What are people telling me in my research?” and the focus was industrial control systems.  I suspected that this would be well-received because that’s what people always ask me:  What are people telling you?  And I was right.

The answer, though, was “Many different things.”  I reviewed results from about 30 research interviews where I had asked the question, “What is the #1 worst problem facing Industrial Control System Security?”  My research subjects included utilities, systems integrators, cyber security vendors, industry specialists, and device manufacturers.  From those 30 interviews I received 23 distinct answers, ranging from “Too much Linux!” to, not surprisingly, “There’s no consensus.”

On the positive side, quite a good mix of well-tested and new breed technology has been installed into ICS networks, including ruggedized devices, identity management, role-based access control (RBAC), ICS-aware network security, unified threat management (UTM) systems, data diodes, set-and-forget technologies, application whitelisting, antivirus, lots of encryption, hardened operating systems, security event management, and hardware security modules.  That’s a long list.  In fact, when I ask the question, “What technologies for control system security are missing?” the answer is often: none at all.

Unfortunately, some really important things are missing.  In control systems it’s extremely rare to find a cyber security architecture.  For that matter, many control networks are not even mapped accurately, as they may have evolved over several decades.  Other than within defense agencies, I have not encountered any control systems with a true asset-based risk analysis – nor have the research contacts that I’ve asked.  Change management and patch management remain incredibly challenging.  And there is nothing yet like a NOC or SOC for a control network, though that cannot be too far away, since enterprise networks already do them frequently and well.

So if we combine the positives and the negatives, our present situation is about like this art installation of a deconstructed Honda Formula 1 car.  We’ve got great components, but we’re missing the glue.  There’s no way, yet, to make all those great components work together to achieve the desired result.

A recent special report in the Financial Times characterized cyber security as “a war marked by fatalism and denial.”  That’s unfair given the amount of hard work being done by so many talented and committed professionals in control systems cyber security.  But yet – we present the impression of having very little in place.  This month’s hacks against water utilities are yet another stain on our record.  And it is our record we’re talking about here – not some government agency, not some control system vendor.  The public only discerns that cyber security isn’t protecting the infrastructure – they are not interested in the details.  We succeed or fail together.

Until we can (a) glue together these great components into solutions that really are end-to-end, and (b) stop viewing the problems as someone else’s, we should resign ourselves to more gloomy headlines.  And executives continuing to ask what exactly they are getting for their security dollar.

 

Rio de Janeiro’s System of Systems

— November 17, 2011

At the IBM Smarter Cities forum in Rio de Janeiro last week, I had the chance to go behind the scenes and take a first-hand look at Rio’s smart city project. My main impression is that the project represents one of the purest emerging examples of a smart city project that is simultaneously developing smart solutions on multiple fronts – natural disaster management, public safety, health, utilities, to mention a few – and is starting to achieve a true “system of systems” – nirvana in smart city terms. This level of integration and interoperability across city agencies – and the successes Rio has had so far – bodes well for the smart city opportunity not only in emerging markets but worldwide.

The City of Rio de Janeiro has accomplished this by deploying smart technologies ranging from broad, continental-scale weather tracking down to mobile device-enabled notification systems for potholes and burnt-out streetlights. The centerpiece, of course, is the Rio Operations Center, which features Latin America’s largest screen and dozens of stations that provide visualizations of real-time data feeds. Within the center, 35 city agencies work together to synergize their responses to city events. (One interesting detail is that the operators wear uniforms modeled after NASA that create a sense of camaraderie and homogeneity across the historically separate city agencies, which creates something of a spectacle.)

To provide an example of how this works: If heavy rains cause flooding in a specific portion of the city, the operations center coordinates teams that notify citizens ahead of time via text message, close down the streets, mobilize ambulances, and shut down electricity distribution systems in the neighborhood to prevent electrocution. These processes are all pre-determined via standard operating procedures (SOPs). On the city side, bringing all these agencies under one roof helps break the silos that perennially plague the smooth delivery of city services. And, on the citizen side, it certainly helps that Brazil’s mobile device and networks are exploding, providing the platform for vigorous smart city app development and citizen involvement.

But technology is only one part of the winning recipe for a smart city. One persistent barrier echoed many times at the event is that smart city projects often rely heavily on the vision and initiative of specific mayors and administrations, which typically face four-year election cycles. The timetables required for certain types of infrastructure – particularly those involving high-tech and high initial capital expenditures – don’t always fit neatly into mayoral terms. Indeed, Rio’s mayor, Eduardo Paes, who spoke at the event, described the challenges of making progress on the project despite his uncertain future as mayor. Selecting smart city technology measures that optimize in terms of high net-present value, ease of deployment within a tight timeframe, and high PR benefits for the mayoral office seem to be emerging as the most pragmatic smart city solutions that address this challenge.

What differentiates Rio from other smart cities is the added challenge of managing its favelas – shantytowns perched on steep hillsides throughout the city that have historically received little in the way of city services or regulation – and integrating them with Rio’s urban fabric. These areas are among the most vulnerable to disasters such as mudslides as well as important symbolic testing grounds for Rio’s ability to serve even its poorest citizens as scrutiny of the city mounts in the lead-up to the 2014 World Cup and 2016 Olympics. From the perspective of a smart city, the favelas also provide opportunities for infrastructural “leapfrogging,” installing smart systems that could catapult these portions of the city to levels found in the rest of the city using state-of-the-art technology.

All in all, though, the event provided a clear picture of the concrete progress that’s being made on the smart city front and, in particular, the unique opportunities afforded by cities in emerging markets.

 

IT and Operations Meet in Smart Grid Projects

— November 1, 2011

The evolving relationship between information technology and operations technology in utilities is a hot topic in current smart grid discussions.  The worlds of IT and OT teams have historically been distinct within utilities.  IT has been primarily focused on business process and customer management systems, while operational systems for managing and monitoring power networks have been the domain of operational teams, with only limited input from the IT department.  That situation is changing for a number of reasons.  

The role of IT in the rollout of smart meters, including the deployment of MDM and new customer management and billing applications, has enhanced its standing within the business.  It’s also becoming evident that realizing the benefits of smart meter deployments – such as flexible pricing, improved customer understanding, and the deployment of new services – requires a significant investment in IT.  These developments are driving organizational and cultural changes as IT and OT teams learn to work together to meet common goals.  The need to define and deploy new IT systems to support the smart grid is driving greater collaboration between IT and OT and is also providing a set of common objectives that can bring diverse teams together. 

I had a chance to explore these issues at the recent Distribution Automation Europe conference in London.  At the conference, several distribution network operators – including ESB Networks in Ireland, Helsingin Energia in Finland and Stedin in the Netherland – presented on the work they have been doing on network self-healing systems to reduce the impact of network failures.  There were also overviews of automation programs for MV and LV networks from SP Energy Networks in the UK, Vattenfall Finland, Alliander (the Netherlands) and Endesa and Gas Natural Fenosa and in Spain. 

I was keen to understand how an audience largely made up of distribution power engineers saw the role of IT.  As I listened to the speakers, it became evident that IT is having an impact on distribution network management at three different levels.

The first, and most obvious, impact is via the deployment of new IT systems to support increased levels of automation and intelligence in the network.  Many of the projects described at the conference covered engineering solutions requiring little or limited IT support.  However, as these trials move into larger scale deployments, IT will have a vital role in monitoring and managing a more automated network.  Deploying distribution automation and other smart grid technologies requires consistent, accurate and accessible data on the state of the network.  Several speakers alluded to the fact that this is driving investment in new or upgraded distribution management systems (DMS), as well as new outage management and asset management systems. 

The second and less tangible influence that IT is having is on the way engineering solutions are designed and deployed.  Utilities and grid operators must move away from a traditional project-by-project view of network engineering improvements to a platform perspective more familiar to IT projects.  The smart grid requires an architectural approach in terms of standardization and the use of common communication and integration platforms.  The increased adaptability required of distribution networks also means that “loosely-coupled” integration will become more important at the network data level, allowing new applications and projects to share data in a rapid, cost effective and yet secure manner.

The third level of impact is organizational.  The importance of improving cooperation across IT and operational technology (OT) functions within utilities was evident in the discussion following my own presentation on smart grid IT.  How will IT and OT work together in future, I asked, and how can the historic barriers between departments be overcome?  Even in the smallish group of utilities present, several paths were being explored for IT/OT collaboration, including bringing IT innovators into the operations team and giving the CIO a greater role in helping define a smart grid strategy. 

These discussions about IT/OT relationships in Europe echoed similar conversations we have had with North American utilities during the research for the new Pike Research report on Smart Grid Enterprise Architecture.  This is an area that is gaining growing attention in utilities around the world as they adapt to the requirements for successful smart grid deployments.  How the relationship between IT and OT evolves will be one of the shaping factors for the utility business of the future.

 

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