IssueAlert Emerging Technologies ~
May, 2004
A New Day for Utility and
Energy Technology Suite Solution Providers: SPL Announces Acquisition
of CES International
By Ethan L. Cohen, Director, Utility and Energy
Technology
Nobody involved in the business of technology has ever proven
that independent software vendors had to be trick ponies to
win races in markets. While several software developers in the
utility and energy technology marketplace have taken an increasingly
strong product development focus and orientation, San Francisco-based
SPL WorldGroup has taken its particular CIS product focus and
is putting its stake in the ground as multi-product utility
software suite supplier by acquiring Atlanta-based CES International,
a prominent provider of Outage Management (OMS) and Energy Delivery
Management (EDM) software.
“The acquisition of CES International is a highly logical
and decidedly strategic effort by SPL to serve its customers
with solutions that meet utilities' increasingly tight IT budgets
and match utilities' expectations for improved operational performance
and efficiency,” says Guerry Waters, vice president of
Strategy and Marketing for SPL. “Our customer and the
market at large will be very well served by this acquisition
as this integrated approach will, for the first time, enable
utilities to deliver effective real-time service,” remarks
John Blend, CEO.
“The synergies between the value proposition of the two
companies and the combined suite of products encompassing CIS,
OMS, and EDM is quite compelling,” says Jon T. Brock,
COO of UtiliPoint International. Utilities have for years recognized
that one of the keys to operational efficiency has been to tie
the knot between the business of customer service with the business
of electricity distribution and power delivery. In the early
days this meant doing very creative things like tying CIS to
OMS and asset management systems and using the data to populate
utility operational mapping systems and then doing a whole lot
of manual run around to communicate with line crews and customers.
“In today’s more sophisticated utility IT environment
where the touch points between CIS and OMS are less numerous,
and the relationships between utility back office systems like
OMS and Workflow Management and Scheduling (WMS) and proactive
Customer Relationship Management (CRM) and communication are
to define, and simpler to integrate with one another the power,
and value, of the proposition of a product suite offering has
become more tenable,” Brock added.
In view of the current state of energy information technology
markets, which have been sluggish over the past few years and
the increasing likelihood of further shakeout in the utility
CIS space, SPL’s acquisition of CES International may
prove to be not only logically and conceptually sound from a
market viewpoint, but financially sound from a company revenue
growth perspective. While the financial terms of the acquisition
remain confidential, there is strong indication that the deal
does not shred SPL’s relatively strong balance sheet,
and the likelihood that the deal could produce additional revenue
and profitability for the company over the short term is fairly
high. Leverage is the watchword here, as prior to the acquisition
CES International had 40 OMS or EDM customers of which only
six were also previous CIS customers of SPL.
Despite the fact that there is no evidence based rule that
would make this acquisition look like a bad deal there is a
real question out there about what the right business approach
and most appropriate business model for a utility technology
supplier should be. "The question," says Christopher
Perdue, director of the market research practice at UtiliPoint,
“is difficult to answer because there will likely be utilities
who have different expectations of vendors and different needs.”
However, Perdue adds, “What seems clear is that acquisitions
like this one change the dynamics of the utility information
technology market from a competitive environment that differentiates
based on price to one that can be esteemed on the basis of performance
and capability.”
Another challenge for SPL and other utility information technology
vendors taking the acquisition plunge, is getting the right
read of the market and understanding what bundle of products
and product suites will really be attractive to utilities. The
logical combination of CIS with OMS and EDM does not mean that
other combinations such as CIS and asset management are not
also logical or attractive. The combination also does not mean
that in a performance or capabilities based market that we now
have suite vendors vs. suite vendors or suite vendors versus
single product developers market. There are plenty of industry
examples of companies that have developed or purchased multiple
products, but ultimately failed to create real synergy and market
traction with a product suite offering.
Regardless of business model or approach, it is fair to say
that the continuing “status quo” of paradigm shift
and fast paced technology chains remains. As the sun rises on
a new day of software product suite vendors, UtiliPoint will
all the more eagerly track the results of SPL and all the other
players in the utility and energy information technology marketplace.
