Smart Business Blog

Although visions of “Smart Buildings” have been in abundant supply for decades now, actual implementation has lagged greatly. Buckminster Fuller, the famous creator of the geodesic dome, was writing about intelligent homes and buildings as early as the 1930s. The “automated intelligent building” has been an obsession since at least the 1960s, but in reality smart buildings have remained an elusive concept during recent decades. In the typical building of today, smart devices and equipment systems have not reached their full potential. In many respects, the value of integration today is not worth much more than it was twenty years ago.

Industry participants consequently now view the “intelligent building” as more of a marketing slogan for over promising on what technology can deliver to buildings and infra- structure. For many building owners the phrase “building automation” has become so problematic that it now provokes skepticism rather than visions of innovation. Yes, we’ve had a long history of futurism, but to date progress has been incremental at best.

It is clear that customers seeking to invest in intelligent building technology are demanding wider integration of systems within a building, particularly the integration of IT and control systems. This goal has become acute with the emergence of energy within facilities as a key cost driver and sustainability concern.

Despite the false starts and overpromises all is not lost.  One company – Pacific Controls, has introduced a fundamentally different way of approaching intelligent building technology: as a smart managed service.  The forthcoming release of Pacific Controls’ Galaxy Gbot software will literally change the way buildings are managed.  Our latest white paper - The Future of Smart Services Delivery, details the approach that Pacific Controls is bringing to the intelligent buildings market.


Galaxy Gbots are a family of system management and customer support software tools -- autonomous software agents that observe and act upon device, equipment and systems behavior. Gbots are enabled by “self-learning” software agents installed in devices and equipment and implemented as a managed service. These agents or “bots” are able to sense conditions (e.g. electrical system overload protection), understand customer/user preferences (e.g. is the temperature too high) and ultimately identify issues within a system to repair or initiate actions to optimize its performance.

Gbots act as the new “first line of response” to solving equipment and systems problems. Their primary goal is to manage and optimize assets and to make critical sensed data available to the system to auto diagnose and resolve problems without unnecessary human intervention.  The “bots” are able to:

• Sense conditions such as temperature and electrical current to enable equipment health.
• Switch system parameters automatically based on customer preferences.
• Feed analytics tools with system performance and behavior data to determine immediate and future actions.
• Identify issues within a system by doing root cause analysis and troubleshooting to resolve them.

Of all the new capabilities that Pacific Controls’ technology enables is the ability of systems to automatically learn from history; learning to detect hard-to-discern patterns from installed equipment data that supports the development of algorithms that automates equipment repair and support.

The value of this type of capability is probably best exemplified by Amazon and Google.  Amazon’s ability to recommend various books and publications to users based on profiling patterns and Google’s indexing of web and related content to drive advertising revenue underscore the new economic value of smart systems.  Amazon stopped being a “store” and started being an intelligent entity that, to some very real degree, understood who you were and what you cared about.  Google quickly transcended being a search engine and reached for an understanding of what the population found interesting and designed targeted advertising as an entirely new business model.  In Pacific Controls’ case, this translates into system optimization, extraordinary customer intimacy about end product usage via connectivity, and “enterprise automation.”

Gbots represent the beginning of a new generation of smart systems technology that will provide customers with elegant and unobtrusive—sometimes even invisible—portals into networked customer support services. Before the end of this decade, many manufacturers will use smart, networked products to drive enormous growth with next-generation services.

If all this is such a good idea, why hasn’t it been done before? In short, enabling complex, multi-vendor systems with analytics and intelligence is extremely difficult -- many organizations have tried. Pacific Controls’ software agents literally and physically leverage the intelligence product manufacturers are building into their products, making something like a “smart building” much easier to contemplate than ever before. The building itself is literally on the Internet and the Internet is in the fabric of the building. Pacific Controls provides a more universal alternative to the many existing techniques for leveraging embedded data in ordinary electro-mechanical devices for monitoring and remote management - their technology enables analytics capabilities for component OEMs and equipment builders for both new and existing machines. Other technologies can be adapted and optimized for a special purpose but none are reaching for the ability to leverage the data and information “trapped” in most products today to the extent Pacific Controls’ approach does.

All of the major categories of connected solution suppliers (IT, carriers, connectivity, integration, applications, product OEMs, etc.) have histori¬cally operated within well-established business models that reflected the distinctive compe¬tencies that each group believed to be at its core. The advent of Smart Systems is causing a blurring between these legacy business models forcing all the major suppliers to re-think their strategies.

Apple and some of its peers in consumer space present an interesting case for how Smart Business models are developing across B2C and B2B. Apple is primarily a consumer-focused tech vendor. Still, Apple provides a model for creating a Smart System solution that pulls together technologies from multiple domains and packages  in a way that wins buyer acceptance. Looking beyond Apple to Google, Amazon, Facebook and other players coming from  roots in the evolv¬ing consumer mobile internet arena, there are a variety of new business models emerging from cloud services and related  platform players that are the embodiment of Smart Systems. Add to this the momentum  these players are creating via collaboration with their app communities -- Amazon has over 100,000 developers building applications and businesses; Apple with its iPhone and App Store has created a phenomenal lead position -- they are all driving entirely new forms of collaboration and peer product development.

The traditional notion of M2M applications has largely grown up in a B2B context where  equip¬ment manufacturers develop remote services and support automation tied closely to their equipment services contracts. These models are focused almost exclusively on customer sup¬port and automation,  not on new Smart Services value beyond support. As these two classes of business models inch closer to each other in the marketplace it is increasingly evident that the consumer Smart Business models provide many lessons for the “cloistered” equipment manufacturers in the various B2B arenas.  But in both cases there are some common threads – connected smart devices, continuous always-on smart services and ultimately an increasingly complex set of interactions we have often called the “The Pervasive Internet of Interactions.”  

The business benefits of large-scale collaboration and social networking tools in the B2B arena are finally being recognized as is the impact of these forces on existing business models. What is a device, what is an application and what is a service will likely no longer be the same.  This means imagining new device and  service innovations that align with customer needs as they evolve in this new chapter of the marketplace.  In this chapter, experiences and solutions are likely to be very very different from even the most advanced of today’s user experiences. The experiences in this new chapter will cut across smart devices, smart services and pervasive interactions.

For individuals and businesses, new consumption & interaction models will significantly impact traditional business models. It’s inevitable. Delivering real-time interactions across apps, services and devices will require innovation in user experience, interaction models, application models, and delivery models. This will require, as we have often pointed out, new service delivery platforms that are considerably different than those that exist today.   It seems clearer and clearer that these platform innovations will happen in small steps, providing a significant opportunity for new players to potentially lead the way.

Devices, services and interactions, while all complementary, have historically had distinct business goals and divergent models. The ability to closely couple devices, services and user experience has emerged as a requirement to stay ahead of the innovation curve. The three thrusts need to be mutually supportive without inhibiting each other.  In the next chapter of Smart Business, the best innovators will come to see the continuously evolving relationship between and among smart devices, services and interactions as fertile ground for innovation. The three need to be interwoven and mutually supportive, and increasingly, success in each will go to the players that effectively utilize their combined potential.  The opportunities this opens up to forward thinking organizations are nearly infinite. Businesses can begin to explore many new possibilities for real-time solutions unthink¬able just a few years ago.

Smart Systems reposition the whole relationship of people and devices [the real world] to business systems. They must be built upon across-the-board digital automation, accomplished by enabling intelligent devices to communicate with and control each other, along with a whole new generation of information tools for managing rich, vast streams of meaningful data. The goal is to network smart devices into systems that are self-sensing, self-controlling, and self-optimizing—automatically, without human intervention.


Such systems will open an entirely new portfolio of “killer apps” that will transform the way business is done around the world, and profoundly improve customer satisfaction and vendor profitability. This represents an entirely new life for suppliers of IT infrastructure, software, Telecom operators, and for manufacturers of equipment, systems and solutions.

In the complex world of business-to-business solutions, there is no vendor that has established a clear leadership position. The “Internet of Things” represents a market of vast potential for technology suppliers (players providing silicon, network connectivity/services, IT back-ends, etc.), but what about the community of diversified manufacturers and solutions providers such as the Siemens, GE’s, Honeywell’s, Emerson’s, United Technologies and the like? How will the diversified manufacturers of assets and equipment align themselves with the Smart Systems opportunity as it develops?

Today, companies and governments have growing awareness and analysis of their financial assets and liabilities. This is what drove the growth of IT and network infrastructure over the last fifteen years. In contrast, in the era of Smart Systems, awareness and analysis will focus on physical assets and liabilities, such as cars, trucks, airplanes, buildings, hospitals, pipelines, equipment, and machinery. Physical assets tend to be very industry-specific and the means to optimize them will vary greatly from industry to industry.

Players like Bosch, ABB, Samsung, Hitachi and Alstom are using their strengths in key verticals to expand into Smart Systems. They already have equipment and systems in our buildings, vehicles, factories, offices, and homes. They have also created software and services that run and automate these complex environments. Ultimately they could be the community best positioned to break ahead of the pack, if they don’t become their own worst enemies that is.

Most people don’t think of these players as “ICT” vendors that compete in the same space as IBM, Oracle, or HP.  However, the competitive relationship is changing. In key verticals like healthcare, smart grid, and related infrastructure, GE, Siemens and a broad range of manufacturers are already providing core software products, as well as the core assets and equipment that form the basis of systems and solutions for end customers such as hospitals, electric utilities, and water/waste treatment providers. These companies are the equipment solution leaders in verticals where they are moving to aggressively add sensors and analytical software for tracking the performance and condition of these assets. These players have close, ongoing intimacy with major vertical industry segments and they are much more grounded in the real world than the general IT and communications technology community. Additionally, they are much more application and vertical-market fluent. These suppliers are positioned to be involved on both the physical and virtual side of the Smart Systems opportunity and will, in our opinion, evolve to positions of significance as the Smart Systems opportunity continues to develop.  

Equipment manufacturers and industry solution providers have much to gain, and just as much (or more) to lose if they don’t position themselves properly.

The killer apps of the Smart Systems era such as equipment monitoring, predictive maintenance, asset management, and other “Smart Services” will be intensely dependent on developing alliances and value-added relationships. If you look at the amount of money that businesses spend on these problems, or could save with better solutions, you see that there are far more dollars available in Smart Services than in the merely product-based activities of yesterday. This opportunity is far more significant than just capturing more of the [or protecting] installed equipment services and aftermarket parts revenues. Incalculable value will flow from integrating many real-world assets and facilitating monitoring, control, and systems intelligence. The architects of Smart Systems alliances will drive that value and command it.

The equipment and systems these players provide will increasingly leverage embedded computing and networking technology to deliver smart, remotely “monitorable” assets that will support entirely new modes of customer-asset interaction and service delivery. Inside such systems, reliable and blindingly fast microprocessors do what they are very good at doing (and what people are very bad at doing): digesting billions of data-points, talking to each other about the data, and controlling each other based upon the state of the data -- all in a matter of nanoseconds.  This incessant stream of ongoing business information will be “invisible” to people but will meaningfully impact end customer balance sheets. All this invisible machine activity will make the state of (i.e., the information about) a business’s assets, costs, and liabilities vastly more visible to managers and to the decision-making process, especially when decision-makers need or want to know.  New tools will provide businesses and governments with far better real-time awareness of the status of their assets and liabilities, as well as vastly improved analysis of how to maximize the returns from the assets and the costs and risks from their liability.

A company that “sensors up the world” will control the world, and have a huge competitive advantage in vastly profitable ancillary activities such as the trading of energy.  Players like GE and Siemens may well typify this more than most. Their focus on leveraging installed equipment services to support expansion into a broader scope of customer systems and process management, as well as their ability to bundle life-cycle services, capital financing, and equipment, provides a stage upon which the real long-term gains driven by Smart Systems can be seen.

We recently visited with a global capital equipment leasing arm of a major diversified manufacturer, where a senior executive characterized the advantages of remote enablement and monitoring. “Remote management,” he said, “will turn our equipment, services, and financing competencies into ‘actuarial science.”

It’s clear that there are certain players who get this more than others.  We believe the organizations that get this story the most have evolved from a particular mix of businesses and competencies that tended to inform their view of the opportunity earlier. Typically these are businesses that have:

• An inter-related mix of components, sub-systems and complete equipment systems focused on multiple, parallel verticals such as energy, healthcare, transportation, infrastructure, etc.;
• Core competencies and line-of-business participation in digital power, control and automation;
• Early and aggressive development of “connected” services opportunities in the aftermarket;
• Solution delivery systems that have over the last ten or so years forced the development of skills to address complex systems – particularly involving software and IT infrastructure.

Many people inside these companies get this; but many more haven’t yet assimilated the entire picture. These companies are large bureaucracies founded on focused products addressing focused markets. The era of Smart Systems will cut across traditional product P&L and market boundaries like a machete. If the major diversified, industrial behemoths don’t see the implications of this soon, a new category of player may emerge to fill the crucial role.

Where will the IT infrastructure players land in the new world of Smart Systems? Where will the investment flow in M2M & Smart Systems over the next five to eight years and will it tend to benefit the IT players or others?

Investment in Smart Systems will likely be focused on a mix of traditional IT and network systems technologies coupled with new investments in core Smart Systems applications and integration technologies. What is important about this next wave of Smart Systems is the compounding effect of technology integration.    While there is standalone value in software systems, server infrastructure, network infrastructure, and client devices, it is the combination of all these innovations that will drive the last decade’s investment in IT infrastructure to inform smarter systems.

But will IT do anymore than just become “leverage” in the next chapter of Smart Systems?  These foundation technologies are important but will they increasingly become mature, declining value commodities?

For all its sophistication, today’s IT solutions are still a direct descendent of the mainframe technology {and business} model. IT still works on the same “batched computing” model—an archival model, yielding a historian’s perspective. Information about events is collected, stored, queried, analyzed, and reported upon. But all of this occurs after the fact.

This a very different thing from feeding real-time inputs of billions of tiny “state machines” into systems that continually compare machine-state(s) to sets of rules and then do something on that basis. In short, for connected devices and social networking to mean anything in business, the prevailing corporate IT model has to change.

Devices will need to host intelligent software components that communicate to other devices directly (peer-to-peer) or to logical collections of devices (peer-to-group) in any programming language, and do so autonomously. Combining the technologies that enable social networking and device networking helps bridge many gaps in today’s enterprise systems.

In its most basic and practical form, the story is “Enterprise 2.0 meets embedded device computing.” But that’s not as simple as it sounds. Capturing the real value of Internet-connected devices goes much further than providing connectivity, databasing, and some XML-based transport scheme. For example, real Web services will allow networked, embedded devices to execute remote applications as if those applications were part of the internal operating system. This type of enablement can bring extraordinary value to the growing population of network embedded devices and collaboration in and amongst devices as well as humans.

At the end of the day, the convergence of collaborative systems and machine to machine communications implies a total paradigm-shift in IT. The depth of this shift has begun to suggest itself, but it is by no means accomplished. It’s a shift from knowing “what happened” to knowing “what is happening”—all the time—and then automatically controlling systems with that knowledge. The IT community rarely talks these days about the need for ever-evolving information services that can be made available anywhere, anytime, in real-time, for any kind of information—human or device. Instead, they talk about “web services” or “cloud computing” interchangeably without giving it a thought. New collaboration platforms that are just now emerging in the marketplace show a keen understanding of how the network services “cloud” changes how we work together and how this next generation of platforms will “seep and creep” into the lives of workers.

For the IT infrastructure players to be able to really contribute anything to the Internet of Things and People, they will need to fully embrace the real-time benefits of internet collaboration – machine-to-machine; machine-to-people; and people-to-people. 

It’s really ironic that the wireless carrier world should be the closest of the large IT and network equipment “arms merchants” to really understand that the future of Smart Systems lies in the real-time collaboration of people and things.  After all, they are the only really large infrastructure players that have naturally evolved from a quasi “real-time” “real-world” legacy.  But the carriers, more or less just like the traditional IT equipment players, really just don’t get it.  They think that somehow the future holds some magical “value-added pipe for communications that will magically drive high margins……………“the blind leading the vision impaired.”

While the “Internet of Things” represents a market of vast potential, technology suppliers must be aware of the current industry dynamics if they are to successfully seize the opportunity. The leading IT and network “arms merchants” will all play important roles in the further evolution of information and communications technology and Smart Systems development but how will these players fair as the worlds of IT and communications technologies (ICT) continue to converge into a unified delivery platform?  And how will they come to grips with “life on the edge” … The Internet of Sensors, Things and People? 

As companies have awakened to the increasing interdependence of business and ICT, they are building capabilities to integrate all their assets with their enterprise systems in a much broader business and technology context. In the not too distant future, hundreds of millions, then billions, of smart communicating devices, will stretch the boundaries of today’s business and social systems, and create the potential to change the way we work, learn, entertain and innovate. Peer-to-peer information and network integration are combining to create new modes of collaboration and value creation. People, information, and technology are becoming more connected, distributed and pervasive, thus enabling the convergence of physical and virtual worlds. Information and communications technology will integrate knowledge, people and things into systems that enable awareness, creativity, better decision making, and, ultimately, higher value solutions.

Although companies will continue to invest in IT equipment and communications technologies, they will increasingly do so in the context of Smart Services. Customers will increasingly rely on external application service providers to facilitate the respective solutions based on their superior shared service delivery architectures as well as their partnerships with other technology infrastructure suppliers. As a result, we will see the emergence of a new Smart Systems and Services-centric ecosystems where large service providers act as aggregators and deliverers of applications and infrastructure services. 

But for the big ICT players this whole discussion is really only about infrastructure. While the ICT community may understand infrastructure they do not understand life at the edge of the network – where sensors, devices, and algorithms are literally becoming incorporated, along with the Internet, into physical infrastructure, making something like a “smart building” or a “smart grid” much easier to contemplate than ever before. The building or the substation is literally on the Internet and the Internet is in the very matter of the physical thing.

The Internet has driven a migration towards capabilities and resources that are shared between and among devices, processes, people and smarter systems. Integrated information and communications, particularly as the world evolves toward highly distributed smarter systems, represents both a significant threat and opportunity for traditional ICT suppliers.

Smart networked highly distributed systems will change everything. Much like the neurons of the brain, or ants in an anthill, or human beings in a society, as well as information devices connected to each other, the many “nodes” of a network may not be very “smart” in themselves, but if they are networked in a way that allows them to connect effortlessly and interoperate seamlessly, they begin to give rise to smart, complex, system-wide intelligence. That is, an entirely new order of “intelligence” emerges from the system as a whole—an intelligence that could not have been predicted by looking at any of the nodes individually -- it happens only if the network’s nodes are free to share information.

The realization of truly Smart Systems and Services will involve billions upon billions of smart network nodes that ultimately “take on a life of their own.” Our present-day conception of “intelligent devices” and ICT does not allow for that. Making everyday objects connect and interoperate with Smart Systems and computing infrastructure is not the core competency of the ICT players.

Many IT equipment suppliers and wireless carriers have made recent pronouncements concerning the scale of the Internet of Things and People. There are many significant challenges in realizing such growth:

• Challenges in adopting new business models and making the business case to support investments.
• Complex services and solution delivery eco-systems that require businesses to relate in new and different ways.
• Anticipation of new product, service and systems innovation modes that are not widely adopted today.
• Requirement for vertically-focused solutions from a supply-side world that historically has been far more horizontally driven.
• Poor alignment between and among IT, Telco, and emerging “specialist” Smart Systems suppliers.

Though the modes of the IT and network services are intermingling today, they have historically operated within well-established business models that reflected the distinctive competencies that each group believed to be at its core. The advent of Smart Systems is causing a blurring between these legacy business models forcing major suppliers to re-think their roles.

There is increasing evidence that large IT and Telco players will create new roles in evolving ecosystems as part of teams of suppliers that deliver Smart Services, but they must contemplate the threat of current revenues shrinking and shifting away to new Smart Systems and Services providers and the opportunity to develop new and different business models to capture the shifting value.

Part One

Who will be the winners and losers as the Smart Systems opportunity develops?  In the evolving complex world of machine-to-machine (M2M) and machine to people connected solutions, there are no vendors that have the clear leadership position that a player like Apple has in consumer Smart Systems applications.

While the “Internet of Things and People” represents a market of vast potential, technology suppliers must be aware of the current industry dynamics if they are to successfully navigate market development.  What are the defining characteristics and marketplace dynamics that will drive success ….. or failure?

Fostering Market Defining Business & Technology Platforms:

Smart Systems solutions will not work if they are just a disparate collection of hardware, software, and network products from different vendors. Business practices, as well as standards and protocols for interoperability, security, and performance will be required and will come in time. But for now, vendors that can provide technology and business platforms for integration, and can do so as a product that can be sold to diverse customers, will have an early advantage.

Managing The Contention Between “Vertical and Horizontal” Opportunities:

Vertical expertise will become an increasingly critical differentiator.  Will large IT vendors and carriers with dominant shares and scale economies in horizontal technologies add new “vertical” solution elements to their infrastructure offerings? How will smaller vendors focused on vertical niches perform in a world increasingly dominated by behemoths? Everyone will need to carefully pick the horizontal technologies that they want to master and/or the verticals that they want to dominate, but trying to manage the contention will be a tricky balancing act.

Complex Systems Will Drive Need For Open Ecosystems & Alliances:

The dynamics surrounding emerging Smart Systems are incredibly complex.  Basic enablement, network connectivity, systems integration services, value-added services, and other device management functions are all needs that generally must be addressed when customers seek to connect intelligent devices.  Given all of the elements that must be addressed from the customer standpoint, open alliances between suppliers clearly represent the best available means to address the complexity facing the end customer.
 
User Centered Experience Moves To The Forefront of Customer Value:

By combining technologies from multiple domains and packaging them into a cohesive user driven experience, Apple is able to win nearly universal buyer acceptance.  Looking beyond Apple to ZipCar, Facebook and other players coming from the rapidly evolving mobile internet arena, there are a variety of new business models emerging which embody user centered experience as the driving force underlying competitive differentiation. To say that user experience has not been a defining dimension in B2B players’ solution design methods would be a gross understatement.

To date, adoption of Smart Systems solutions has largely been the focus of equipment OEMs and “specialist” value-added services players. We believe the market has entered a phase where specification, justification and deployment of Smart Systems will shift to end use segments and customers – the dynamics of buying behavior will increasingly be ruled not by single-vendor solutions but by the integration of complex multi-vendor systems. This shift is occurring at the same time that the Telcos, large consolidated IT infrastructure players, professional services organizations and application players are expanding their presence in this arena.  Typical of emerging tech markets that are shifting to mainstream opportunities, new and established players all become challenged by the rapidly evolving competitive dynamics informing the maturation of customer solutions.

How well will various supplier groups align with the Smart Systems opportunity as it develops? Over the next several weeks, we will be exploring key segments of the supplier community developing Smart Systems solutions --- their market positions, strengths, weaknesses and strategies – stay tuned.

We have portrayed a vision of smart energy driven by real-time, interactive communication networks that provide services and are adopted in a manner very similar to the evolution of the web and the Internet. In this vision, customers and consumers would be able to see variable pricing changes in real time, supported by smart meters and energy management devices that read and visualize energy consumption at a high rate, leading, ultimately, to changes in consumer behavior. A brave new energy future where real-time energy data unleashes innovations and applications that we haven’t yet thought of.  

This vision of the future may be overly optimistic. Fully integrated two-way networked smart energy management is the outcome entrepreneurs and their investors are hoping for. The reality is that the consumer piece of the smart grid will look very different for many years to come. While it’s significant that utilities are starting to build out smart grid infrastructure, utilities are largely opting for networks that provide connections that are far from real time, and this could stifle the desired innovation.

Utilities today are largely designing smart grid networks to collect data from smart meters in a time frame that ranges from between every 15 minutes to an hour, then bringing that data back to a collection point on the network. From there, many utilities are only bringing data back to the utility back office where the numbers are processed and packaged for consumers once a day.  This implies crucial temporal issues: the resolution of the energy data (at what intervals the energy consumption is tracked) vs. the age of the data (how long it takes before it makes it back to the customer). 

There is a rapidly growing number of connectivity and smart meter infrastructure players getting funded who are, for the most part, tied mercilessly to this schema.  When an outside company partners with a utility to provide smart grid and energy management tools, it’s beholden to this setup. When say a Google with its PowerMeter energy tool or a Cisco with its Mediator building systems integration box — who both subscribe to a world where more information the better — works with a utility, smart meter data that is pushed to these tools has to make its way back to the utility before it can be sent to anyone’s system. That means that even for either Google’s energy tool or Cisco’s integration box, there will be a significant delay before information reaches consumers, and significant gaps in energy usage details. These delays and gaps can undercut the premise of how smart meter technologies will empower customers to make decisions about their energy use based on real-time costs.

Why are utilities not rolling out networks that can provide more real-time services? Primarily because of the cost. It costs more to build out networks that are more complex and provide more services. Utilities have to get regulatory approval for these smart grid rollouts and want to keep costs low, particularly because customers will end up indirectly paying for these programs and upgrades through rate hikes. Utilities want to move slowly because they aren’t sure how consumers will react. 

This fundamentally gets down to the fact that the utility industry doesn’t realize the disruptive nature and capabilities of communication networks. While networks have been changing the way we consume entertainment, work, talk to friends, and spend money, it’s perhaps not so clear to the utility industry how powerful the network effect will be. As many new non-traditional players enter the Smart Energy arena there are likely drive many new behaviors. Recent entrants include:

The many players focusing on residential energy opportunities such as Tendril and Control4;

Cisco Systems with its “Converged Buildings and Converged Communities thrust;

nPhase, the Qualcomm and Verizon joint venture with its Enterprise Smart Cleantech Services offering; 

Tridium/Honeywell’s introduction of the Sedona open source platform; and

Google with its ‘open’ meter solution based on the Android platform.

The closer the networks get to delivering real-time information, the more an ecosystem of innovation and new applications can be built up around this information. For example, look at the history of the telecom industry and location-based services. Many years ago, a debate arose around how often phone companies would enable their networks to ping the GPS in the cell phone — what would be most productive, people asked, once every couple of minutes, or closer to real time? For cell phone companies and utilities alike, it’s more expensive to provide data more frequently. But for cell phones and GPS, the debate ended when the killer location-based app — turn-by-turn driving directions – finally emerged.  Turn-by-turn driving directions only work when the data is available in real time — no one will use a service that tells you to turn a couple minutes after you pass the right street.

If integrated energy and information networks aren’t built to provide granular information then there’s less of a chance it will foster the innovation we need to reduce energy use.  Most utilities claim they plan to make networks more robust and collect and process data more frequently down the road. But it’s important for all participants to realize this variable could wreak havoc on current assumptions and plans about smart energy.