Utilities IT Upgrades Offer OEM Opportunities

Sales opportunities continue to open up for electronics equipment vendors and IT firms in non-traditional markets around the world as more segments of the economy adopt technologies that could help them drive down costs, raise productivity, and improve services.

OEMs just need to know where to look and avoid restricting themselves to the traditional sales avenues. One area that is attracting increasing attention from IT equipment vendors, consultants, and services providers is the utilities market — especially in developed economies where a combination of deregulation, new rules, and the need to conserve scarce resources is driving the adoption of new technologies.

In Western Europe, for instance, spending on IT equipment and services by utilities providers is rising steadily and is forecast to increase 6.2 percent on a compounded annual growth rate between 2010 and 2015, according to a recent report from IDC, “Western Europe, Utilities Industry, IT Spending, 2010–2015 Forecast.”

In 2011 alone, the industry in Europe will spend about $9.1 billion on IT services and equipment, representing huge sales opportunities for companies serving the segment. That growth pace is expected to remain steady even through the ongoing economic disruption on the continent, because the utilities service providers expect solid operating returns from such investment, which will help them improve productivity as well as cut down on waste.

The adoption of IT productivity enhancement tools is not limited to electric utility companies although they have been in the forefront of embracing technology products. For instance, electricity utilities across Europe have been rolling out smart meters that provide better usage monitoring, reduce waste, and improve sales collection. The smart meters represent new sales opportunities, not just for OEMs, but also for semiconductor and other electronic component vendors. In addition to the electricity sector, utilities offering water and sewer services have also increased their IT spending, IDC observes.

Roberta Bigliani, head of EMEA at IDC Energy Insights, notes in a press release:

    While electricity's IT spending is already the most substantial in 2011, the sub-industry is not expected to lower its spending any time soon. The water sub-industry sector will have the slowest 2010–2015 growth rate, significantly below average at 4.8 percent, though this is to be expected as companies in the water sub-industry are often smaller, making it more difficult for them to find financial resources to invest in IT. Overall, though, utilities' IT investments will continue to be driven by smart metering 2012 rollouts, operational excellence, cost reductions, and the need to comply with energy policies and regulation.

Other findings from the IDC report include:

  • Electricity companies take the most significant share of IT spending, at 66.8 percent ($6.1 billion).
  • The gas and water segments are considerably smaller, but still important, at 16 percent and 13.1 percent respectively.
  • IT spending on sub-technologies by utilities is distributed less evenly for IT services than for hardware, with the report finding that “maintenance and support” leads with 32.7 percent share; implementations and operations are second and third, with 26.5 percent and 24.8 percent respectively.
  • Electricity companies' IT spending is already the most substantial in 2011, and will continue to have the fastest-growing above-average CAGR between 2010 and 2015 (6.7 percent), reaching just under $8 billion by 2015.
  • By 2015, the gas sector will have expanded IT spending below average at 5.9 percent 2010–2015 CAGR, bringing it to $1.9 billion by 2015. Western European gas companies will be spending $1.8 billion in IT products and services by 2015.

OK, the numbers may seem puny compared to what companies serving the consumer electronics industry might expect annually, but these figures are only for Western Europe. Similar investments are being undertaken by utilities in North and South America, China, Japan, and other parts of Asia. In Eastern Europe especially the utilities need to bring their IT operations up to latest standards as the countries integrate further with the rest of the global economy.

What this means is that bumper harvests await IT equipment vendors, components suppliers, and consulting services companies in the global utilities market. They just have to learn the lingo of the new market.

7 comments on “Utilities IT Upgrades Offer OEM Opportunities

  1. Daniel
    August 23, 2011

    Ann, now a day’s most of the companies are using one or another type of S/W tools to make their task easier. This is happening across different sector and irrespective of domains. I mean different IT tools are using by Mechanical, Electrical, supply chain or business or bio technological companies. The basic intention is task simplification, monitoring and tracking. CRM and ERP are some of the good tools for such companies.

  2. jbond
    August 23, 2011

    Though the numbers aren't exactly staggering, they are pretty promising considering they are for only Western Europe. I would be curious to see what the numbers would look like if all the major markets were combined. OEM companies should not dismiss this market segment and there is obvious room for growth throughout the globe.

  3. hwong
    August 23, 2011

    While I agree that there are still opportunities for OEM players, I don't think it will be very easy. The reason is that Utilities are very slow moving and they won't act on anything unless the regulatory parties are pushing them to do so.

  4. elctrnx_lyf
    August 23, 2011

    Certainly this is one area where we could see more and more electronics will be used in the future. SImilar way the utlity companies are also moving for many application softwares to make their work eaiser ranging from tracking the consumption to notify the defaulters.

  5. Taimoor Zubar
    August 23, 2011

    That's a good point. I think the use of electronics (hardware) is closely linked with software. With the trend for automation and moving to Enterprise Systems, I believe software may be the driving factor that's pushing the demand for hardware and electric components.

  6. Anna Young
    August 23, 2011

    @elctrnx_Iyf, I agree. The electronics software have played an instrumental role in interchanging energy and cost information between utility companies and consumers. For example, the adoption of  IT electronics/optek technology, required by smart meters has proved to be reliable. It reduces labour costs and aids data status collection.

    Many of these IT productivity enhancement tools are currently been roled out across Europe. This is an opportunity for OEMs and other electronic components vendors.




  7. Anna Young
    August 23, 2011

    The figures as you are aware reflects that of Western Europe alone. However, with similar investments undertaken by IT utility market in parts of Asia, North and South America and so on.

    It  basically reveals avenues for monetary rewards not only in Europe but other parts of the world for IT equipment vendors, components suppliers and consulting services companies.


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