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Oracle’s Purchase of Opower Marks a New Phase for the Customer Engagement Software Market

On May 2, 2016, Oracle announced that it will acquire Opower, a provider of customer engagement and energy efficiency software for the utility industry. Oracle will pay $10.30 a share in cash, representing a 30% premium higher than Friday 29 April’s closing price. The total deal is valued at $532 million, net of Opower’s cash.

Oracle is already a heavy weight in the utility software market, providing utilities with a range of cloud-based software solutions such as customer information systems, enterprise resource management and workforce management systems. It plans to make Opower’s software part of its Oracle Utilities Industry Cloud Platform and integrate Opower staff into Oracle's global utility business unit. Our take is that Opower’s front-end customer engagement tools and segmentation analytics will be a good addition for Oracle’s capabilities across back-end customer information systems.

What is interesting is that the Opower deal follows a series of other acquisitions of utility customer engagement software start-ups by larger players. Back in December 2014, EnerNOC acquired Pulse Energy, a software firm that helps utilities to increase engagement with their business customers around energy management. In October 2015, Ecova bought up Retroficiency which provides utilities with virtual energy auditing software and customer engagement tools. These deals suggest that following an initial period of fast growth, utility software start-ups ultimately need the scale and stability provided through larger firms. Opower had already announced a downbeat forecast in its March 2016 release, related to high rates of non-renewals and slower sales growth in Europe and Asia. It would have also been facing challenges in tapping into the customer care market, as many of its existing relationships were with utility marketing managers rather than CIOs.

Verdantix finds that the latest announcement from Oracle indicates a new phase for the customer engagement software market. Opower, once the poster child for utility customer engagement, has ultimately opted to integrate into a larger software firm to be part of a broader offering to the utility sector. There will be pressure on other utility software start-ups like FirstFuel and Onzo to determine their strategy going forward.