©2004 infonetrix llc all rights reserved worldwide 4-1 part four market analysis & future...

4-1©2004 InfoNetrix LLC All Rights Reserved Worldwide

PART FOURMarket Analysis & Future Outlook

Market Horizons™ ReportMarket Horizons™ ReportGeospatial & Field Automation Solutions (GFAS) in the North

American Utilities Marketplace (2003-2007)

4-2©2004 InfoNetrix LLC All Rights Reserved WorldwidePART 4: Market Analysis & Future Outlook

About This Report

InfoNetrix LLC, an independent technical research and consulting firm specialized

in utility automation and information technology (Utility Automation/IT) markets

conducted the research for this report. InfoNetrix reports are available for

subscription by any and all interested parties, foreign and domestic (except as

prohibited by law), in accordance with the pricing and terms set forth in the

prospectus, provided separately.

This report addresses Geospatial & Field Automation Solutions (GFAS) in the North

American Utilities Marketplace. Other reports in the Market Horizons™ Series

provide similar analyses of Real-time Automation & Controls (RTAC) in the North

American Electric Utilities Marketplace and Real-time Automation & Controls

(RTAC) in the North American Water/Wastewater Utilities Marketplace.

Please visit www.InfoNetrix.com for more information about these and other

InfoNetrix Advisory Services.

InfoNetrix LLC, an independent technical research and consulting firm specialized

in utility automation and information technology (Utility Automation/IT) markets

conducted the research for this report. InfoNetrix reports are available for

subscription by any and all interested parties, foreign and domestic (except as

prohibited by law), in accordance with the pricing and terms set forth in the

prospectus, provided separately.

This report addresses Geospatial & Field Automation Solutions (GFAS) in the North

American Utilities Marketplace. Other reports in the Market Horizons™ Series

provide similar analyses of Real-time Automation & Controls (RTAC) in the North

American Electric Utilities Marketplace and Real-time Automation & Controls

(RTAC) in the North American Water/Wastewater Utilities Marketplace.

Please visit www.InfoNetrix.com for more information about these and other

InfoNetrix Advisory Services.


General Information & Notifications

PURPOSE

The information contained in this document is for the sole use of InfoNetrix clients

and is not to be distributed outside client organizations. No part of this publication

may be reproduced, transcribed, or transmitted in any form or by any means,

electronic or mechanical, including photocopying, recording, or by any electronic

storage and retrieval system, without permission in writing from the copyright owner.

DISCLAIMER

This publication has been prepared with care, however, no guarantee of accuracy,

completeness, or warranty of any kind is expressed or implied, nor shall InfoNetrix

be liable to any user of the publication or any portion(s) hereof for any direct or

indirect damages, expenses, costs or losses of any kind resulting from its use.

COUNTRY OF ORIGIN

United States of America

PURPOSE

The information contained in this document is for the sole use of InfoNetrix clients

and is not to be distributed outside client organizations. No part of this publication

may be reproduced, transcribed, or transmitted in any form or by any means,

electronic or mechanical, including photocopying, recording, or by any electronic

storage and retrieval system, without permission in writing from the copyright owner.

DISCLAIMER

This publication has been prepared with care, however, no guarantee of accuracy,

completeness, or warranty of any kind is expressed or implied, nor shall InfoNetrix

be liable to any user of the publication or any portion(s) hereof for any direct or

indirect damages, expenses, costs or losses of any kind resulting from its use.

COUNTRY OF ORIGIN

United States of America


Research Standards & Methodology

The preparation of this report follows generally accepted standards of market research practice and is based on principles of truthfulness and professionalism. A reasonable and prudent effort has been made to ensure that factors and circumstances having a material impact on any decision-making process derived from, or impacted by, this report are included in the analyses and recommendations. The representations of industry and market data and portrayals of the business environment are based on market research conducted by experienced professionals with broad knowledge and experience in the markets addressed.

The information upon which the findings and analyses contained in this report are based was obtained through a combination of telephone interviews with key suppliers and consultants and other individuals with extensive market knowledge and experience, augmented by survey with a cross section of utility managers and ongoing interactive research with over 1,000 utilities annually. Each telephone interview/survey was guided by a specially designed questionnaire to obtain pertinent data, insights and market perspectives. These interviews were augmented by secondary research across a wide range of reliable public and proprietary information sources pertinent to the study.

The preparation of this report follows generally accepted standards of market research practice and is based on principles of truthfulness and professionalism. A reasonable and prudent effort has been made to ensure that factors and circumstances having a material impact on any decision-making process derived from, or impacted by, this report are included in the analyses and recommendations. The representations of industry and market data and portrayals of the business environment are based on market research conducted by experienced professionals with broad knowledge and experience in the markets addressed.

The information upon which the findings and analyses contained in this report are based was obtained through a combination of telephone interviews with key suppliers and consultants and other individuals with extensive market knowledge and experience, augmented by survey with a cross section of utility managers and ongoing interactive research with over 1,000 utilities annually. Each telephone interview/survey was guided by a specially designed questionnaire to obtain pertinent data, insights and market perspectives. These interviews were augmented by secondary research across a wide range of reliable public and proprietary information sources pertinent to the study.


Research Reliability & Acceptance

The information presented in this report was gathered, recorded and analyzed with care and precision. However, there will undoubtedly be differences between the findings presented and actual results for various reasons and, because future events and circumstances frequently do not occur as expected, those differences may be material.

For these and other reasons (including, but not necessarily limited to human error, misinterpretations, misunderstandings and information sensitivities among respondents), the resulting data will most likely not be completely accurate in all respects. Moreover, the forecasts presented herein reflect judgments made as of the period during which this report was prepared. As such, some aspects can be expected to change as a result of numerous direct and indirect factors, which are beyond the scope of this report to accurately predict. For example, it assumes that current events will continue to have the same effect on the marketplace in the future and that the conventional wisdom of today will continue to be completely applicable to future market conditions, which is at best, unlikely.

By accepting and using the information contained in this report, the user assumes all responsibility for its use for any and all purposes as user may deem appropriate and agrees to hold InfoNetrix, its principals and its staff harmless from any direct, indirect or consequential damages resulting from, or in any way related to, such use(s). However, InfoNetrix actively solicits and welcomes inquiries or other input regarding any errors, omissions or inconsistencies discovered during the course of using this report. Please direct any such correspondence to InfoNetrix Client Services.

(Detailed company contact information is provided on the web at: www.InfoNetrix.com.)

The information presented in this report was gathered, recorded and analyzed with care and precision. However, there will undoubtedly be differences between the findings presented and actual results for various reasons and, because future events and circumstances frequently do not occur as expected, those differences may be material.

For these and other reasons (including, but not necessarily limited to human error, misinterpretations, misunderstandings and information sensitivities among respondents), the resulting data will most likely not be completely accurate in all respects. Moreover, the forecasts presented herein reflect judgments made as of the period during which this report was prepared. As such, some aspects can be expected to change as a result of numerous direct and indirect factors, which are beyond the scope of this report to accurately predict. For example, it assumes that current events will continue to have the same effect on the marketplace in the future and that the conventional wisdom of today will continue to be completely applicable to future market conditions, which is at best, unlikely.

By accepting and using the information contained in this report, the user assumes all responsibility for its use for any and all purposes as user may deem appropriate and agrees to hold InfoNetrix, its principals and its staff harmless from any direct, indirect or consequential damages resulting from, or in any way related to, such use(s). However, InfoNetrix actively solicits and welcomes inquiries or other input regarding any errors, omissions or inconsistencies discovered during the course of using this report. Please direct any such correspondence to InfoNetrix Client Services.

(Detailed company contact information is provided on the web at: www.InfoNetrix.com.)


Market Horizons™ Report Contents

1. Executive Market Briefing

2. Marketplace Characteristics

3. Market Drivers, Issues & Trends

4. Market Analysis & Future Outlook5. Supplier Environment


Market Analysis & Future Outlook

• Current Market Assessment• Market Outlook Synopsis• General Market Outlook• Systems & Services Outlook• Field Automation Solutions Outlook


“You don't take technologies to market, you take products to market. A technology reaches the marketplace if it supports a product that provides utility and value."

- Alberto Leon-Garcia, IEEE Fellow & Professor, University of Toronto

Current Market Assessment Market Perspective


Current Market Assessment Market Composition & Direction

• Slowed pace of change in utility market structure & composition Deregulatory/privatization models over-promised and under-performed Last round of M&A activity still being digested/rationalized by utilities Pervasive trend toward a back-to-basics utility business model

• Market restructuring (Electric) & privatization (Water/Wastewater) Electric restructuring continued despite delays and setbacks Standard Market Design (SMD) still 1-2 years from final adoption ISO/RTO plan moving forward slowly, more confidently (except in

Southeastern US where it is stalled indefinitely) Privatization in re-evaluation stage (benefits not being realized)

• National Energy Bill may be enacted in 2004 Contents and key implications for electric & gas remain uncertain Passage seen as a definitive step in overall industry direction Will likely foster improved investment confidence by utilities


Current Market Assessment Market Values & Growth

• Market rebounded in 2003, but issues linger: Continued utility spending restraints…

• National economic recovery sustainability remains uncertain • Budgetary & funding uncertainties (especially for municipal utilities)

Utility business realignment and redefinition• Completing painful withdrawals from non-core business areas• Ongoing utility mergers, acquisitions & divestitures• Some privatization reversals; fewer new initiatives

Regulatory policies and politics • National Energy Policy remains stalled in US Congress• Regional ISO/RTO and SMD plans still unfolding for electric utilities• Largely un-funded yet pervasive security mandates evolving

Supplier challenges…• Intensified price competition (with slow recovery expected)• Further pressure for more standards and product standardization • Substantial reductions in the number of large projects


Current Market Assessment Project Opportunities: AM/FM/GIS

• Geospatial (AM/FM/GIS) Systems Substantially all of the largest utilities now have some type of

geospatial system in place Most future IOU projects will be expansions/enhancements

to existing systems A large portion of enhancement projects will be sole-sourced Moderate growth in numbers of large ($1M+) projects, still

concentrated primarily among Tier 1 & Tier 2 IOUs Continuing incremental upgrades/expansions by IOUs Increasing numbers of smaller projects among MUNIs &

RECs, gaining momentum in future years Some “push up” from lower price ranges into $75K-$350K

ranges will augment actual growth in these ranges


• Technical & Integration Services (TIS) TIS opportunities increasing but trail AM/FM/GIS projects

• Large utilities moving toward more outsourcing in 2003-07• Smaller utilities (MUNIs/RECs) less likely to outsource services• Most municipals rely on internal resources (i.e., other

departments, city/county engineering staff, etc.) when available Influx of smaller geospatial systems projects among MUNIs,

RECs and private water companies create less demand for outsourced services than IOU projects

• More modest project scopes• Strong preference for use of internal resources

Continued sharp declines in large conversion projects• Most conversion projects for largest utilities are complete• Some projects in 2002 forecast were delayed due to recession• Utility mergers create a few large integration projects each year

Current Market Assessment Project Opportunities: TIS


• Good growth and increased FAS spending by utilities of all types and sizes Fewer pilots and proof-of-concept projects More blanket deployments, especially for:

• Outage Management Systems

• Work Management Systems

• Workforce Management Systems

Growing utility realization that FAS delivers:• Productivity and operational efficiency

• Improved customer service

• Documentation of performance improvement

• Measurable ROI when properly applied

Current Market Assessment Project Opportunities: FAS


• Opportunity Outlook Nominal growth in under $75K ASP range; mainly entry-level, first-time

REC and small MUNI buyers Rapid growth across lower project ranges ($75K-$350K), driven by

growing numbers of smaller projects among all utility types Projects in higher ASP ranges ($350K-$3M+) will be mainly for large

IOUs and other utilities serving 100K+ customers Water projects escalate in 2004-07 as economy recovers

• Average Selling Price (ASP) Outlook Nominal increases (3-8% CAGR; 2003-07) across most ranges Rapid ASP increases (11-12% CAGR; 2003-07) in $75K-$200K range

• Market Value Outlook Very strong growth (30-40% CAGR; 2003-07) in $75K-$200K range,

driven extensively by rapid increases in number of smaller, COTS AM/FM/GIS projects among MUNI & REC buyers

“Push up” from lowest ASP range ($<75K) adds to growth at next level

Market Outlook Synopsis AM/FM/GIS Systems


• Opportunity Outlook No growth among very small projects (≤$75K); most too small to be

outsource candidates Best growth opportunity (largest numbers of projects) is in middle

ASP ranges ($350K-$1Mil) as outsourcing trend takes hold Projects in higher ASP ranges ($350K-$3M+) will be mainly for

large IOUs and other utilities serving 100K+ customers Water projects escalate in 2004-07 as economy recovers

• Average Selling Price (ASP) Outlook Nominal increases (1-6% CAGR; 2003-07) across most ranges Flat ASPs for largest projects ($3M+)

• Market Value Outlook Very strong growth (20-40% CAGR; 2003-07) across middle ASP

ranges, driven extensively by outsourcing trends and rapid increases in number of AM/FM/GIS projects with TIS component

Anticipated“push up” from lower ASP ranges driving some growth

Market Outlook Synopsis TIS Systems


• Opportunity Outlook Accelerating deployments of OMS & WMS/WFM driven mainly by

productivity improvement, operational efficiency and customer service enhancement

Best growth opportunity (largest numbers of projects) is in lower ASP ranges ($75K-$350K); mainly entry-level systems

Projects in higher ASP ranges ($350K-$3M+) will be mainly for large IOUs and other utilities serving 100K+ customers

Water projects escalate in 2004-07 as economy recovers

• Average Selling Price (ASP) Outlook Nominal increases (4-8% CAGR; 2003-07) across all ASP ranges

• Market Value Outlook Very strong growth (15-30% CAGR; 2003-07) across all ASP

ranges, attributable to relatively small annual values at this stage of market development

Anticipated“push up” from lower ASP ranges driving some growth

Market Outlook Synopsis FAS Systems


• FAS remains best prospect for future growth and increased spending by utilities of all types and sizes Fewer pilots and proof-of-concept projects More blanket deployments, especially for:




Growing realization that FAS delivers:• Productivity and operational efficiency




General Market OutlookProject Opportunities


1,920

1,372

1,019

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2002 2003 2004 2005 2006 2007 2003-07

Geospatial Systems Projects TIS Projects FAS Projects

1,920

1,372

1,019

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2002 2003 2004 2005 2006 2007 2003-07

Geospatial Systems Projects TIS Projects FAS Projects

General Market ProfileAll GFAS Project Opportunities

Number of Project Opportunities


• FAS remains best prospect for future growth and increased spending by utilities of all types and sizes Fewer pilots and proof-of-concept projects More blanket deployments, especially for:




Growing realization that FAS delivers:• Productivity and operational efficiency




General Market OutlookMarket Values


General Market ProfileGFAS Market Values (All Sectors)

$157.6 $179.4 $215.0$298.1

$390.4 $472.7

$1,555.6

$1

$10

$100

$1,000

$10,000

2002 2003 2004 2005 2006 2007 2003-07

Annual Expenditures ($ Millions)


$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

2002 2003 2004 2005 2006 2007

Geospatial Systems Technical & Integration Services Field Automation Solutions

Annual Expenditures ($Millions)

General Market ProfileMarket Composition & Contributions


Annual Geospatial Systems & Services Expenditures ($Millions)

$119.9$136.1

$160.2

$224.6

$292.9

$349.4

$0

$100

$200

$300

2002 2003 2004 2005 2006 2007

Geospatial Systems Technical & Integration Services Systems & Services (Combined)

$119.9$136.1

$160.2

$224.6

$292.9

$349.4

$0

$100

$200

$300

2002 2003 2004 2005 2006 2007

Geospatial Systems Technical & Integration Services Systems & Services (Combined)

Systems & Services OutlookGFAS Systems & Services Values


-25

25

75

125

175

Under $150K 75 85 95 115 118 120

≥$150K to $350K 63 72 90 120 155 170

≥350K to $1.5M 50 60 71 93 128 145

≥$1.5M to $5.0M 20 23 25 30 35 36

≥$5.0M to $10.0M 15 18 20 22 22 23

Over $10.0M 5 5 5 6 6 7

2002 2003 2004 2005 2006 2007-25

25

75

125

175

Under $150K 75 85 95 115 118 120

≥$150K to $350K 63 72 90 120 155 170

≥350K to $1.5M 50 60 71 93 128 145

≥$1.5M to $5.0M 20 23 25 30 35 36

≥$5.0M to $10.0M 15 18 20 22 22 23

Over $10.0M 5 5 5 6 6 7

2002 2003 2004 2005 2006 2007

Average Selling Price Ranges

Detailed Market ProfileAll Geospatial Systems Opportunities

Number of Opportunities



$0

$10

$20

$30

$40

$50

Under $150K $3.8 $4.5 $5.4 $7.1 $8.0 $8.4

≥$150K to $350K $6.3 $7.6 $10.3 $16.6 $23.7 $29.8

≥350K to $1.5M $15.0 $18.0 $22.0 $29.3 $42.9 $49.3

≥$1.5M to $5.0M $10.0 $11.7 $13.0 $17.4 $22.5 $26.2

≥$5.0M to $10.0M $30.0 $34.2 $39.0 $44.1 $47.0 $53.7

Over $10.0M $17.5 $16.6 $17.3 $21.1 $21.3 $25.3

2002 2003 2004 2005 2006 2007$0

$10

$20

$30

$40

$50

Under $150K $3.8 $4.5 $5.4 $7.1 $8.0 $8.4

≥$150K to $350K $6.3 $7.6 $10.3 $16.6 $23.7 $29.8

≥350K to $1.5M $15.0 $18.0 $22.0 $29.3 $42.9 $49.3

≥$1.5M to $5.0M $10.0 $11.7 $13.0 $17.4 $22.5 $26.2

≥$5.0M to $10.0M $30.0 $34.2 $39.0 $44.1 $47.0 $53.7

Over $10.0M $17.5 $16.6 $17.3 $21.1 $21.3 $25.3

2002 2003 2004 2005 2006 2007


Detailed Market ProfileAll Geospatial Systems Values


0102030405060708090

100110

Under $150K 75 75 72 70 71 71

≥$150K to $350K 48 49 55 85 95 105

≥350K to $1.5M 31 41 60 75 92 100

≥$1.5M to $5.0M 15 19 28 35 47 55

≥$5.0M to $10.0M 6 6 7 10 13 15

Over $10.0M 0 0 1 3 7 10

2002 2003 2004 2005 2006 20070

102030405060708090

100110

Under $150K 75 75 72 70 71 71

≥$150K to $350K 48 49 55 85 95 105

≥350K to $1.5M 31 41 60 75 92 100

≥$1.5M to $5.0M 15 19 28 35 47 55

≥$5.0M to $10.0M 6 6 7 10 13 15

Over $10.0M 0 0 1 3 7 10

2002 2003 2004 2005 2006 2007


Detailed Market ProfileAll TIS Project Opportunities




$0

$10

$20

$30

$40

Under $150K $3.8 $3.9 $3.8 $3.9 $4.1 $4.3

≥$150K to $350K $4.8 $5.1 $5.9 $9.4 $10.8 $12.4

≥350K to $1.5M $9.3 $12.5 $18.4 $23.3 $29.0 $31.8

≥$1.5M to $5.0M $7.5 $9.9 $14.9 $20.5 $29.1 $37.2

≥$5.0M to $10.0M $12.0 $12.0 $7.1 $22.0 $30.6 $36.3

Over $10.0M $0.0 $0.0 $3.2 $10.1 $23.9 $34.8

2002 2003 2004 2005 2006 2007$0

$10

$20

$30

$40

Under $150K $3.8 $3.9 $3.8 $3.9 $4.1 $4.3

≥$150K to $350K $4.8 $5.1 $5.9 $9.4 $10.8 $12.4

≥350K to $1.5M $9.3 $12.5 $18.4 $23.3 $29.0 $31.8

≥$1.5M to $5.0M $7.5 $9.9 $14.9 $20.5 $29.1 $37.2

≥$5.0M to $10.0M $12.0 $12.0 $7.1 $22.0 $30.6 $36.3

Over $10.0M $0.0 $0.0 $3.2 $10.1 $23.9 $34.8

2002 2003 2004 2005 2006 2007


Detailed Market ProfileAll TIS Project Values


Field Automation Solutions Outlook

$37.7$43.3

$54.8$73.5

$97.5 $123.3

$392.4

$1

$10

$100

$1,000

2002 2003 2004 2005 2006 2007 2003-07

Annual Expenditures ($ Millions)


0

20

40

60

80

100

Under $150K 34 35 42 48 56 70

≥$150K to $350K 39 40 50 63 75 85

≥350K to $1.5M 40 42 53 67 80 88

≥$1.5M to $5.0M 12 12 13 14 16 20

≥$5.0M to $10.0M 5 5 5 7 9 12

Over $10.0M 0 0 1 2 4 5

2002 2003 2004 2005 2006 20070

20

40

60

80

100

Under $150K 34 35 42 48 56 70

≥$150K to $350K 39 40 50 63 75 85

≥350K to $1.5M 40 42 53 67 80 88

≥$1.5M to $5.0M 12 12 13 14 16 20

≥$5.0M to $10.0M 5 5 5 7 9 12

Over $10.0M 0 0 1 2 4 5

2002 2003 2004 2005 2006 2007


Detailed Market ProfileAll FAS Project Opportunities




$0

$5

$10

$15

$20

$25

$30

$35

Under $150K $1.7 $2.2 $2.7 $3.4 $3.9 $5.0

≥$150K to $350K $6.0 $6.7 $9.1 $11.7 $14.1 $16.2

≥350K to $1.5M $11.0 $12.6 $16.4 $21.1 $26.0 $29.5

≥$1.5M to $5.0M $9.0 $10.3 $11.4 $12.4 $14.4 $18.5

≥$5.0M to $10.0M $10.0 $11.5 $12.0 $18.2 $24.3 $34.2

Over $10.0M $0.0 $0.0 $3.2 $6.8 $14.8 $20.0

2002 2003 2004 2005 2006 2007$0

$5

$10

$15

$20

$25

$30

$35

Under $150K $1.7 $2.2 $2.7 $3.4 $3.9 $5.0

≥$150K to $350K $6.0 $6.7 $9.1 $11.7 $14.1 $16.2

≥350K to $1.5M $11.0 $12.6 $16.4 $21.1 $26.0 $29.5

≥$1.5M to $5.0M $9.0 $10.3 $11.4 $12.4 $14.4 $18.5

≥$5.0M to $10.0M $10.0 $11.5 $12.0 $18.2 $24.3 $34.2

Over $10.0M $0.0 $0.0 $3.2 $6.8 $14.8 $20.0

2002 2003 2004 2005 2006 2007


Detailed Market ProfileAll FAS Project Values

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