Microsoft recently ended its bid to create a new huge business managing consumer energy use.
When the effort was launched, many utility leaders braced themselves for a bruising competition for the hearts and minds of electricity users.
Microsoft and Google were feared as huge but nimble technology giants who would know how to mine information about energy use patterns to benefit customers. Some utilities saw themselves as endangered dinosaurs.
A debate emerged as to who should have access to customers’ energy use data. Did it belong to utilities? Should it be made available to new market entrants?
The fight has cooled.
In response to our inquiries earlier this summer, Microsoft’s public relations firm acknowledged via email: “Microsoft is discontinuing the Microsoft Hohm service effective May 31, 2012. While the response from customers and partners was promising during the service’s beta period, we have decided to focus on future products and solutions.”
I asked Jon Arnold, Microsoft managing director of the worldwide power & utilities industry, why Hohm failed. He replied via email that it is the result of a “combination of weak customer demand (recession, energy efficiency not mainstream) and the lack of a coherent national energy policy [that] encourages solutions like Hohm.“
Soon after Microsoft launched Hohm, I interviewed Craig Mundie, the company’s chief research and strategy officer. He said Hohm would be a four-phase effort over many years. Similar Microsoft initiatives would transform health care and education, Mundie said.
Microsoft intended to make money on its pioneering energy management business through advertising.
Mundie said a few years back, “Our primary focus here is not on the utility.” He continued: “It's on the consumer. If you're going to control demand, you have to start with where the demand is. The greatest single demand is actually in residences. It's an area where Microsoft has brand permission from the consumer to interact with them in their home.”
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As utilities wonder about the large amounts of information they are receiving from an ever smarter energy network that allow for innovations in operations as well as customer care, the Microsoft retreat must be carefully pondered.
A large potentially dangerous competitor may have suffered a setback.
But what are the implications of that setback to an industry making hundreds of millions of dollars of investments in new capabilities? What will be the business models for recovering those investments?
If Microsoft is stumped, what does that augur for investor-owned utilities, munis and co-ops?