September 1, 2011
So here goes:
- Prediction No. 1: IT is the buyer of ECEM systems. "During the next few years [I wrote in December 2009] we believe that enterprise IT organization will emerge with the clear ownership role [for] ECEM systems. IT will bring its expertise in data analysis, data integrity, network connectivity, and overall systems architecture to bear on the corporate sustainability challenge. The faster that data sources for ECEM become more instrumented, more granular, [and] more real-time … the faster IT will move to the center of ECEM system evaluation, implementation, and operation."
Interim Grade: D. IT organizations have NOT emerged with a clear ownership role for carbon and energy management. In fact, no functional area of enterprise operations — not facilities, not CSR/sustainability, not finance, not supply chain — has taken on ECEM buying authority and ownership. Instead, it's typically a combination of these roles and others.
I have recently done inquiries with three prospective buyers of ECEM systems, very large companies in hospitality, transportation, and banking. All three are looking to move from spreadsheet-based accounting to true enterprise systems-of-record, encompassing both carbon accounting/reporting and energy management.
And at all three, there were multiple constituencies around the table during our discussion, working together to create a short(er) list of potential vendors and then put those suppliers through their paces. IT was at the table in all three cases, but in none of them was IT leading the discussion nor bringing the budget to the table.
Revised Prediction No. 1: Finance is the buyer. I would now put my money (so to speak) on Finance departments and execs as the central buyer/owner of ECEM systems. The costs reduction, risk mitigation, and business reporting transparency created by ECEM implementations will increasingly fall under Finance's remit.
- Prediction No. 2: Energy cost savings drive ECEM investment. "Energy efficiency and resulting cost savings will remain the No. 1 motivator for ECEM implementations [again from the December 2009 report]. Regulatory developments will help too, but we are not making any big bets on breakthroughs in company behavior; so far, even the most progressive regulatory moves have been watered down and/or delayed."
Interim Grade: A-. Carbon regulation has been even more of a fizzle than we expected; otherwise, this prediction is spot-on. It is all about energy management, efficiency, and cost reduction. We have seen vendor after vendor deemphasizing the "C word" and putting energy front-and-center in their market positioning and ROI arithmetic.
Revised Prediction No. 2: No change.
- Prediction No. 3: Enterprise Software Vendors Win. "The nexus of the customer challenge, and of supplier success, is handling the messy issues of information integration, verification, analysis, and display [from the December 2009 report]. And our bet is that the leaders in enterprise ERP. Performance management, and business intelligence — i.e., CA, IBM, Oracle, SAP, and SAS — will be the best equipped from a development resource, customer base, and channel perspective to dominate the ECEM market."
Interim Grade: B+. It's still early, but this forecast looks pretty good. There are plenty of contenders, in fact, many more than when we wrote our original report. The startups such as ENX and Hara are hanging in; the longstanding EH&S players IHS, Enablon, and Enviance are very credible; and others from the IT and building management arenas are still lurking at the fringes.
But we continue to believe that the mainstream market will be captured by the likes of CA, IBM, Oracle, and SAP — companies that are, not coincidentally, the leaders in business performance solutions (including budgeting, forecasting, financial reporting, and performance measurement), which are, not coincidentally, sold to Finance organizations.
As sustainability metrics are increasingly linked with, and become part of, companies' performance metrics, and as their financial reporting increasingly incorporates non-financial measures such as sustainability, these providers of corporate software backbones will be the primary enablers.
Revised Prediction No. 3. I would anticipate more acquisitions in this space, and more partnerships between consulting services and software players. Otherwise, I'm doubling down on the original forecast.
Perhaps you have some different predictions or opinions about my bets — as always, we welcome your input in the comments below.