It’s officially a trend: smart grid companies building or buying software that will manage energy consumption within the home. This morning smart grid networking company Silver Spring Networks announced that it plans to buy Greenbox Technology, a 2-year-old startup founded by the creators of the well-known interactive web technology Flash, which has built software to measure a home’s energy consumption. The companies wouldn’t disclose the price of the acquisition agreement.
The news comes on the heels of a stream of announcements from smart grid companies both building and buying home energy management software. In June, GridPoint announced that it had bought up the energy business of a quiet Canadian company called Lixar SRS. Smart meter software firm eMeter put its efforts into building its home energy management tool, as has Microsoft (with Hohm) and Google (with PowerMeter).
Why does every company want a home energy management play these days? Well, first off, it’s pretty inexpensive to both build and buy these tools. It’s basically the cost of the time and salaries for software development. Compared with hardware and networking components that firms like Silver Spring have been spending money on, home energy software is pretty cheap.
Creating or acquiring products that can extend across the network is also an easy way to expand business to existing customers. eMeter figured that its customers were already buying its software that connected meters to the utility back office, so why not take the short leap to the other side of the meter? For Silver Spring, it’s the same scenario — the company supplies hardware and software for the networking component of the smart grid, so moving further to the edge of the network and into the home could be a natural evolution.
In addition, a solid home energy product could be a good way of marketing and becoming a household name for consumers. Consumers aren’t going to remember the name of the company that sells network software on the power grid, but software that a consumer uses every day could have considerable branding power. A company like Silver Spring could want consumer recognition for a variety of reasons, like helping win over utility deals.
For Silver Spring, the acquisition is also about growing larger and appearing bigger to a utility. Particularly now that Cisco is competing for the networking portion of the smart grid (and using pretty much the same strategy as Silver Spring) the company needs to become — and look — as large as possible to win over as many utility deals as it can.
Silver Spring does seem to be bringing in enough revenue now to fuel such an expansion. CEO Scott Lang told Bloomberg last month that the company would hit profitability in the third quarter of this year and expects to hit $200 million in revenue by 2010. Many have speculated that perhaps an IPO is even in the cards for the company next year.
For Greenbox, the acquisition says a few things. First off, when I’ve seen the company’s energy management software in demos, it’s always looked rich and easy to use. The fact that Silver Spring bought it is a testament to that. But the issue remained over the last year that it’s become very difficult to build a standalone company around just home energy management software — particularly when Google announced that it would be offering its PowerMeter home energy software for free, which caused the value of home energy software to drop.
Expect more and more consolidation in the smart grid home energy management software space. As we’ve written about a few times (and more in-depth for our GigaOM Pro subscription service) there’s been a lot of money invested into home energy management software, and companies are still launching on a daily basis. For the companies that have built solid products and launched a couple of years ago (like Greenbox) there’s the possibility of finding an acquirer. But expect many more of these companies to fold over the coming months.