The match has started, says Guido Bartels, General Manager of IBM’s (s IBM) Global Energy & Utilities industry, in reference to the increasingly competitive smart grid industry. IBM, which sells a long list of networking and integration software as well as consulting services to utilities, has been selling “smart grid” technology since 2004, says Bartels (who was on our Top 15 Smart Grid Influencers list). But as the smart grid industry is about to receive $4 billion in federal stimulus funds and could generate an estimated $210 billion in revenues between 2010 to 2015, the market is about to get a whole lot more crowded. What does that mean for IBM? Big Blue has to “stay on its toes,” says Bartels, and yes, it’s likely that IBM will make some acquisitions in the smart grid space.
Bartels says his utility group tends to be “very proactive” when it comes to accelerating its business, and that can include acquisitions. IBM has a history of purchasing firms in this sector. Acquisitions that have contributed to IBM’s smart grid business include data management firm FileNet (bought in August 2006 for $1.6 billion), and network management software company Micromuse ($865 million in December 2005), and Bartels says “there’s no reason that IBM wouldn’t continue to do acquisitions in this space.”
So in what sectors of the smart grid is IBM particularly keen to accelerate its business? Bartels says IBM has been looking very closely at software for electric vehicles. If you look at what will be the next big thing for this sector, it’ll be when a critical mass of electric vehicles will be plugged into the grid, said Bartels. This will fundamentally effect everything from demand response, to consumer empowerment, to distributed generation. IBM Energy & Utilities VP Allan Schurr also previously told us that IBM is looking for startups with innovative technology to acquire, develop and scale up to handle a multi-million vehicle electric fleet.
Another area is business analytics, says Bartels. There will be an influx of data created by adding digital intelligence to the power grid and that will require an increasing need for tools to manage, process and analyze that data. The industry also needs more solutions for “overall integration,” — basically helping older, current and new utility systems integrate together — explained Bartels.
Across the smart grid sector, acquisitions haven’t been rampant, but several small startups have been snapped up over the last couple of years. GridPoint bought electric vehicle charging software maker V2Green last year, and energy management software player Lixar this year. Smart grid networking company Silver Spring Networks acquired energy management software developer Greenbox recently, too.
While IBM might snap up a couple companies, most firms have a much better chance at partnering with Big Blue. Last month IBM launched new software that acts as a sort of glue between utilities and third-party smart grid vendors, called “Solution Architecture for Energy and Utilities Framework (SAFE).” Companies already working with IBM’s SAFE are ESRI, SISCO, Retriever Communications, Trilliant, BPL Global, Coulomb Technologies, eMeter, Enterprise Information Management, Itron (s ITRI), OSIsoft and PowerSense.
When it comes to partnerships with IBM, Bartels has a few tips:
- Know the utility industry: utilities have long investment cycles, manage risk very carefully, and don’t want to experiment.
- Recognize and appreciate the unique characteristics of the utilities (like don’t repeat “smart grid” a dozen times in the first meeting).
- Don’t spread yourself too thin and don’t try to make your product everything for everybody. So basically find a niche and specialize.
- Don’t talk about your successes too soon.
Likely these tips hold true for potential acquisitions as well. While Bartels wouldn’t give more details of IBM’s acquisition plans, one thing’s for certain, the computing giant knows it needs to stay competitive. Bartels says the company’s competitors initially didn’t see the opportunities in the smart grid space, and saw the industry through single products and distinct solutions outside of their core competency. But more recently, competitors have woken up to the sector and realized that “the smart grid is an enabling technology.” “The game is on,” says Bartels.