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CommentaryUtility Pitfalls: The Disturbing New Face of Smart Grid Vendor Lock-In
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Apr 20, 2010
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For years, I've felt most utilities were too cautious about new technology. Or, to be fair, that their regulators were too cautious and that the utilities should have pushed harder to allow modernization.
So it feels odd to write an editorial advocating caution. Even so, I am concerned that some utilities are escaping the old form of vendor lock-in, but falling prey to a new one.
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The old version locked in customers with proprietary formats and protocols. That danger is receding as vendors make their way to the open standards era. The new form of Smart Grid vendor lock-in comes not from products but from promises.
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If you sign on to a vendor's promises and the reality doesn't show up in time, you can find yourself trapped. You are too far down the road to start over, so you are stuck in the twilight zone, waiting for the vendor's products to show up. (Or to scale up, which is often the real problem.)
The greatest danger comes from the venture-funded startups now swarming the sector like sharks chasing chum. They come from a long tradition of "if they come, we will build it." They aren't charlatans...that's just how their world works. Microsoft is the company that made this tactic famous, starting with the day Bill Gates sold an operating system he did not own to IBM. The high-tech industry has been “pre-announcing” its products ever since.
But most utilities grew up in the world of "if we build it and then we test it and then we pilot it and then we market it… then they will come." This old-school attitude is epitomized by companies such as S&C Electric, Schweitzer Engineering Laboratories, and parts of Cooper Power.
Put simply, many utilities don't understand the new rules and fall prey to style instead of substance. As far as I can tell, GridPoint is the biggest offender. (Please use the Talk Back comment form below to correct me if I'm wrong.) I infer this from the way the firm’s strategy seems to change each year. And from the revolving door of respected executives who join GridPoint only to slink away after seeing what is really under the hood. (Or should I say what is not under the hood?) And the recent layoff rumors aren’t helping either.
Is anyone else concerned about this vendor lock-in problem? Am I overreacting? Are there other offenders? The comment form and Quick Poll await your thoughts.
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| Vendor Lock-in |
| Jesse, not sure why you singled out GridPoint. The most obvious to me is Silver Spring Networks - the most popular kid in the block. You get locked into their network and meters. I would follow this with Trilliant. Same deal. |
| Lisa Ludwig - 04/21/2010 - 07:55 |
| Building to Grid |
| It's not like you to overreact, but you might be. Customers have been betting on vaporware on the demand side, too. Building automation vendors have sold the sizzle before the steer was born. First it was industry standards for sensors and controls, now convergence with information technology. A big differene is that facilities managers don't have regulators to act as a drag brake on innovation. And thank goodness they don't. Without risk-takers, buildings would forever run on proprietary technologies that prohibit grid connectivity. Without utilities willing to place some bets, the grid would never enable B2G. DR and DSM would be stuck in manual, unscalable processes, and the real Smart Grid would remain a dream. |
| Denis Du Bois - 04/21/2010 - 07:58 |
| Vendor Lock-in |
| Hi Jesse - I think this is a very observant thread and I think it points out why my company, Convergys, makes so much sense for CIS. We have been billing in real-time at massive scale for telco's for decades. We bring the innovation required in a next generation CIS without the risk of what's may not be under the hood. |
| Ann Knecht - 04/21/2010 - 08:01 |
| Scaling problems |
| Hi Jesse, Interesting insight and one I could definitely believe. Could you explain why you think the products scaling is the real problem utilities face? What scaling factors are the main bottlenecks? |
| Oli Carter - 04/21/2010 - 08:05 |
| Vendor Lock In |
| Jesse-I wouldn't single out Gridpoint--they've focused on deploying smart grid solutions since their inception. Many of the start ups you quite rightly reference as long on "style" and short on "substance" are trying to hire people with utility experience because they're opportunistically jumping into the market. They may talk about smart grid open standards, but ask them how many production installations of anything they can reference and they dissemble. |
| Andy Bane - 04/21/2010 - 08:21 |
| Scale |
| I agree that scaling up is the most basic challenge. Every new utility system that I have been involved with for the last 15 years has always had challenges scaling up. Whether it be data base size, transaction flow through, network traffic, or number of users the growth pains have been significant. We are really diving deep with our smart grid vendors on their proven ability to handle scale. |
| Michael J. Meehan - 04/21/2010 - 08:26 |
| Smart Grid Vendor Lock In |
| I basically agree with your observations, but it does not surprise me in any fast moving energized market; too many vendors jump in without the execution credentials. The utilities are eager to embrace Smart Grid, but it is generally new territory for them. They have not done this before on this scale. They would be wise to depend on the vendors/SIs that are leading edge, and not the bleeding edge. This is a mission critical area, not the place to take a bet. Most new vendors will collapse and the utilities that went that way will be farther behind. |
| Ted Williams - 04/21/2010 - 09:22 |
| Vaporware |
| Very good observation. Utilities should be very wary of vendors in this space. They are asking their regulators for return of and on the largest investment since the days of new nuclear plants. Failure of the systems technically or philosophically to produce at least some benefit will reinstate the prudency hearings of the late nuclear plant construction period. |
| Jeff Williams - 04/21/2010 - 10:26 |
| let's not be manichean |
| Hi Jesse, I find your post a bit manichean. It's true that there is an influx of IT people in the new energy economy that's developing. It's true that the IT industry has a history of selling "vaporware". But in this changing energy landscape, I would agree that everyone is somewhat involved in the "vapor" selling tactics. Some of your sponsors are well known for it. So whose side is SmartGridNews on? Utilities, vendors, customers? Or hopefully just trying to promote stability and growth for everyone in your readership? I would argue that many of the traditional utility players are simply encouraging the VC-funded vendors to forge ahead in their risky ventures while defending fiercely their positions as gate keepers of the grid. This is perfect for transferring the risk out of the utility coffers while keeping the upside profit potential. In other words, utilities are fine with forcing VC-funded startups in never-ending cycles of pilot projects but they make sure that the same vendors will have no choice but to make a deal with them once they really want full access to the market. Many smart grid energy products and services just can't fly without the endorsement of utilities in their distribution to final users. I would also like to point out that many smart meters rollouts, efficiency programs, renewable portfolio offerings and other utility initiatives are not any less "vaporware-like". At least in terms of the real benefits they bring to end users. What do you think? The same thing happened somewhat in the telecommunications industry before and during the deregulation and the Internet bubble. I advise utilities who think that retail and commercial consumers will accept to be the passive participant in this clash of tactics to reconsider. VC-funded vendors and regulated monopolistic utilities will have to work together or they will end up fighting and there is no telling who will win. Dan http://www.origoterra.com +1 503 484 5192 |
| Dan Nicollet - 04/21/2010 - 10:54 |
| Solid & Steady Vs. Sexy & Slick |
Jesse: As utilities consider new technologies your caveat emptor message seems appropriate. I would suggest that all start ups entering the utility smart grid technology space recognize that relationships and a history of delivering on your word with integrity is the real coin of the realm for vendors in this space. That doesn't mean absolute perfection is required, but the Silicon Valley internet-hype marketing model of software and dot.bomb startups should be left on Sand Hill Road as it is a long term loser here. Solid and steady will beat sexy and slick over the long term every time. |
| Don McDonnell - 04/21/2010 - 13:37 |
| eMeter's Perspective on Vendor Lock In |
| I completely agree that vendor lock-in of any type can be detrimental. Utilities should demand a flexible platform from their vendors to adapt to new regulatory concerns, technological innovation and lower cost hardware options as they become available. For this reason, utilities should carefully consider Smart Grid software from trusted partners so they can work with any meter or AMI system, as well as utility back office software (e.g. workforce management, CIS, etc.). Those utilities that seamlessly make the transition to the Smart Grid while also delivering benefits to customers will be the heroes of the market. The ones that have proven success so far have followed a solid blueprint which includes choosing best-in-class solutions (avoiding the urge to pick a single vendor to solve both hardware and software concerns), engaging customers early on, and planning for the future. Sam |
| Sam Klepper - 04/21/2010 - 15:47 |
| Every One is in it Together |
| The Smart Grid Band Wagon, as it picked up steam during overall slowdown was a welcome move for all who could take shelter in it. I consider Smart Grid itself a promise in which we are together. As it happens, all the players will not survive and those who go down will leave bad taste and some good learning for remaining players/partner. While we will get a Smart Grid as long we move to funding the promises from promised savings and not additional burden on rate payers san Green Energy and Renewables. I consider your observation as overreaction on individual choices but a welcome warning post on overall Smart Grid strategies. Arun Mishra |
| Arun Mishra - 04/22/2010 - 03:07 |
| Smart Grid Standard |
| A major University is now working to solve this problem. They are making the largest commitment in the world to green vehicle technology, i.e., electric vehicles. Along with this work is solving the electric vehicle charging problems from the end user to the power plant. Complete Smart Grid solutions are being developed that include not only the "REAL 60 CYCLE WORLD," hardware requirements, but also the software that goes with multi-point operations. They are considering offering Certification of all smart grid equipment, and software applications alla: UL, IEEE, Apple, etc. This approach, using real world, full scale models is the only true way to separate the wheat from the BS. |
| Bill - 04/22/2010 - 07:46 |
| Optisense Network Experience |
| Jesse, The utilities we are working with still follow the old school attitude. To introduce our products and software, we have successfully completed eight lab test, five years of field trials and yet to recieve a large production order. Don't worry I think the utilities will be alright. Best, David |
| David Welch - 04/22/2010 - 08:08 |
| I agree with the lock-in concern |
| I agree with Jesse on his concerns over vaporware as well as with the reply from Ted williams. I place most of the blame on the traditional distribution channels such as distribututors and manufacturers representative companies. If the guys who have been selling to utilities for decades are happy selling wire, poles and tools then the companies interested in the market have to spread the word somehow and they will use any warm body they can find to travel the country. The utilites are interested in the technology and the manufacturers are focused on the space. Is the middleman ready to step up and learn the technology or must all smart grid companies hire a direct sales force? Latter may be good for the economy. |
| Steve Sendele - 04/22/2010 - 13:35 |
| Lock in of concern but avoidable |
| Jesse, I think your concerns are quite valid – utilities will need to do more than evaluate vendors based on their marketing materials (note this statement coming from a marketer - ouch!). As pointed out, utilities need to carefully consider their product selection – compatibility with existing industry standards isn’t enough. For many products (Tropos included), scalability can’t be “proven” in a lab – you just need to take it out and install it in the real world – that’s the only real proof (hence, I expect for utilities to continue field trials and small project deployments for proof of concept – it’s a good thing). Utilities should also consider a vendors’ installed base of customers – not only do they have them, but who they are, how the products are used, and the level of customer satisfaction with a vendor’s products and support. Do they/will they continue to buy from that vendor? For vendors, for potential customers, real customer endorsements are priceless references. Denise Barton |
| Denise Barton - 04/22/2010 - 16:59 |
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