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Managing the cost and complexity of large-scale smart meter deployments is proving to be a significant challenge for many utilities. Advanced metering infrastructure (AMI) managed services (AMS) has emerged as a third-party option in which the day-to-day operations of the AMI system are outsourced to managed service providers, often via cloud-based resources.

To date, smaller utilities have been the primary customers for AMS, but by the middle of this decade, larger utilities will also increasingly choose to outsource these functions, according to a new report from Pike Research.

By 2020, AMS will represent half of the overall AMI market, with annual revenues of more than $2.2 billion, the report forecasts.

“AMS remains something of a well-kept secret, but the market is poised to take off,” says Bob Lockhart, a senior research analyst at Pike Research. “While there’s more current activity and more installed end points than you would expect today, the current volumes pale in comparison with what is likely to come over the rest of this decade.

“The successful AMS vendors will be those that can stick to a business dialogue with their clients while internally optimizing their technology and delivery capability continuously,” he notes.

Some utilities will want to roll the entire infrastructure cost into their monthly service fees to avoid any capital outlay, while others - especially large regulated utilities in North America - will want to capitalize the infrastructure, even if it remains at a cloud hosting center, the report says. In some cases, these choices will be determined, at least in part, by federal incentives.

Some large utilities in the U.S. that did not obtain stimulus funds through the American Recovery and Reinvestment Act of 2009 may consider AMS if they do not believe that they can get a rate case approved for AMI capital expenses in the current political environment, the report notes.

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