A Software Boom?

A software boom in the midst of government and economic turmoil?

In the SRA (Strategy, Research & Advisory) practice of Five Point Partners we like to say we work “along the technology/business interface” at utilities.   That means we research, write about, analyze, and provide advice about, how technology affects the business of utilities, which is to keep the electrons, natural gas and water flowing.

Government and economic turmoil, such as we are seeing today, makes our work as business/technology researchers/analysts/advisors quite a bit harder.  Things that take place in Washington, DC, or the 50 state capitals, to county and municipal governments, tend to skew rather sharply what once would have been considered “normal” business trends.  Despite all that, however, we find our recent surveys, interviews and other research depicting a rather interesting phenomenon.  That is that despite everything that seems to be going wrong, or be in turmoil, business along the technology/business interface seems to be experiencing a mini-boom.

Over the last six months to a year, our research consistently has shown that in dealing with everything government is throwing at them, utilities are gearing up to install significant upgrades to their large software systems.  That research is reinforced by the fact that Five Point Partners’ other three divisions, which help utilities select, install and operate major software systems, are being forced to hire and expand rapidly to keep up with the demand for those services.   Our research shows that many utilities are reacting to new and rapidly changing government mandates by beginning a new wave of CIS, ERP, mobile, workforce, outage management and other software implementations.  And that doesn’t even include AMI, which, for better or worse, received a direct government push.

At the risk of being proven wrong, which is one of the risks researchers/analysts accept when they get into the work, it appears that technology vendors that provide the large software systems utilities use may be entering a period not seen since the late 1990s when the Y2K scare and “deregulation” movement created a software boom among utilities.   Whether this new mini-boom will be sustained in the midst of political/governmental turmoil around serious, fundamental political and economic concerns remains to be seen.  But since the replacement of major utility systems such as CIS, ERP, etc., is a multi-year process, despite everything going on elsewhere, technology vendors who serve utilities seem to be about to enter a period of growth and utilities a new generation of software capabilities.  That follows a period from about 2001 to 2008 or so when major system installations were rather few and far between, especially at IOUs.

It has been about 10 years since the last period of major utility software upgrades, so in many respects, the current uptick was to be expected.  That it is happening in the midst of a threatened fundamental government remaking of the industry in a different image (which also seems to happen about every 10 years), perhaps it should have been expected.  But regardless of the causes, our numbers show that the up-tick in major software implementations seems to be real.

Whether this uptick can be sustained over the next few years depends upon a number of other trends outside the industry that are almost impossible to forecast.  Those include political pressure to fundamentally remake the generation base―with still-unknown consequences―and a still-small, but increasingly vocal, movement to change the regulatory compact with regard to rate-basing utility investments.   Then, of course, there is very serious overall economic and political turmoil to be dealt with.  But for now, vendors of major software systems seem to be enjoying a potential boom in sales not seen since the last century.  Such a boom really would stand out amid a general malaise across the U.S. economy and perhaps point to better things ahead.