Clients may be kings but partners are critical says Cyan’s boss who wants to follow ARM’s model
Cyan Technology’s executive chairman, John Cronin, has years of telecoms experience on his side. Now he’s applying lessons learned in other businesses to make strides in smart metering for emerging markets such as China, India and Brazil. But, he tells Jeremy Cowan, he just wishes he could give their chips away free!
John Cronin: We’ve outsourced a piece of engineering work to Poland, and we’ve branched out into South Africa. Paul Dinsmore is a partner of ours there. He used to be a director of Cable & Wireless when I was there, 25 years back. He left, and went to Africa, then he set up his own company in the telco space and built a huge network of players. He saw that we did a deal with Vodafone for their global partnership and contacted me over Skype.
So now he’s our agent out in Africa and he’s put us in touch with many mobile operators and system integrators such as XLink. We’re setting up partnerships, the first of which we have just announced with XLink. And we’ve gone from telecoms to Machine-to-Machine (M2M) and the Internet of Things (IoT). (Also see: Cyan receives Proof of Concept order and signs South African distribution deal with XLink.)
M2M Now: But it’s all pretty much the same communications path, just with a new face on it.
JC: That’s right. And you know what makes me smile, if you think of what the telco industry did over 30 years, where it reinvented itself, from the Post Office telephone days to where it is today. I think that’s where the utility industry is at. It’s old school. They haven’t had to focus on customers, consumers. Telco used to call them subscribers and it’s a different mindset. What I’ve seen from the telco industry is going to happen for the energy industry. There’s going to be a transformation needed and more inward investment from private equity etc. to move it forward.
M2M Now: Does it take that inward investment to drive it forward?
JC: It’s partly the inward investment, partly regulatory regimes, to make sure that they’re not too stringent on some of the OpEx, because they are very protective of their assets within utilities. In some countries they’ve got several regulators, depending on the size of the country. I think the policy makers and the regulators have to get on message in really understanding the vision – what’s possible with the Internet of Things, Machine-to-Machine.
People talk about managing rat traps and bins, but you’ve got to monetise today to get to all of that. So, smart cities and the rest of it, what is practical? That’s where we step in, to smart metering, smart lighting, smart gas, and smart water and it evolves from there. Because that’s what people are monetising today, and willing to pay for those benefits.
M2M Now: The parallels between utilities and telcos are enormous. It’s just that utilities are probably 10 years behind.
JC: Yes, and it’s interesting because if you take Severn Trent (a UK-based water utility), they took a senior CEO out of BT Openreach, Liv Garfield. Somebody has recognised it in Severn Trent, and she’s a smart lady. I knew Liv Garfield when I was managing director for Arqiva.
Arqiva runs most of the portfolio for towers for all the mobile operators in the UK. So, when I was there I said, “Well, what else can I do with the towers?” I actually got Arqiva, in 2008, into smart metering. I had a chap who came to me, Simon Higgins and he said, “Look, there’s this smart metering that we should get into, we can sweat the assets of our towers. We’ve got 412 spectrum, we can use the towers and sell it into the utilities.” I was like, “Oh, what’s smart metering?” In 2008 it was like … (Laughter)
M2M Now: What’s that? (Laughter)
JC: Actually he came with the business case and from there I backed him to the board of Arqiva. Then BT approached us to say, “Why don’t we join forces? Because we could do all the back office stuff, and men in vans.” So, they came along. We then had Detica for security coming in, and then we tried a Cambridge company to develop a module for us, but that fell over. Then Simon went off to Canada, because he’d heard about smart metering rolling out there.
Then we brought Sensus into the pot, using some of their technology for the UK, for that consortium. I’m pleased (Arqiva) won the bidding for Scotland and North of England, and O2 won the (English) Midlands and the South.
It’s interesting now that Peter Mainz, who was the Sensus CEO, (a $1 billion company) is now on the board of Cyan. He says, “You guys have definitely got something for emerging markets and are a thought leader.”
Then I was asked to look at Cyan. I’d never heard of them, and they said, “Look, we’re after a chairman. It’s a typical British technology company, hiding its light under a bushel. Great engineers. Cyan had got something but really weren’t promoting themselves.”
M2M Now: Why, was that just culture?
JC: I think culture really. You’ve got to understand that Cyan have been around a long time, trying to find a home. It was in the microcontroller /microprocessing technology end, until a few years back. What it should have done was rebrand itself, to get rid of some of the legacy. So, four or five years back, forget hardware this is all about software. This is all about communications. It’s a different play, isn’t it, than making microcontrollers?
When I went there I thought, “What is it they’re focused on?” They were all focused on a large customer called TNEB in India – a utility with 19 million customers – and they were focused on selling (smart) lighting into China from the bottom-up. I said from a communist country point of view, what you need to do is work from top-down, we’ve got to find partners.
Actually, when I arrived I said, “I think we’re a bit early for smart lighting.” Lighting is really going to really take off globally next year, in my opinion. There’s a big, big tender coming out for half a million points in Sao Paulo, Brazil. It’s supposed to be this year, but it’s gone back to 2016. There are about 10 or 11 consortia all forming for that.
Cyan was early for there. Then I compared Cyan to what Arqiva had, because that’s all I could benchmark against, and I said, “Well, it’s low cost for emerging markets, and the power is less than a mobile phone, for what we deliver. We don’t need huge deployments, we don’t need big towers, and big dishes.”
We have a module, a chipset which fits inside a (smart) meter. Then we have a data concentrator unit, which is the size of a home hub that can fit onto a wall or telegraph pole at any level, the higher the better for wireless, because it’s sub-GHz that we do. We can bring in anywhere between 50 to 250 devices, depending on the range and the solution. It’s a mesh network, which is self-forming, self-healing if a part goes down. From the data concentrator unit it then goes over secure IP, and we then have some head-end software, that is like an API that we then deliver to the utility billing system. That could be SAP or Oracle or whoever’s billing system.
So, low cost of deployment compared to the huge cost of Arqiva. It’s unlicensed spectrum so you don’t have to pay for the spectrum. They were paying for 412 MHz spectrum here, so that’s less cost. Then there’s our ease of integration. We can take about 12 weeks to say to a meter manufacturer, “Let’s put our module into your meter. Let’s have several meters on the benches in Cambridge and work with them.”
Some of our competition we know takes 9-12 months to do integration,, because they’re using western world product stack, and some of the bigger players have got this product stack that they’ve deployed in North America and are saying, “Well, for emerging markets etc. we’ve built this, so you can take that. There’s a price point and the integration is quite complex.”
Whereas we’re saying, “We’ve developed the product for the emerging markets, with those customers.” It’s British technology, developed in-Cambridge. If you can sell in India at the cost price point, you can sell virtually anywhere in the world, to be honest, and that’s what we’ve done. That’s why we’re quite competitive there. Steve Page, our COO, and his team have put in over 200 man-years of investment, a multi-skilled development team that covers RF hardware design engineers, regulatory experience – because dealing with different regulators in different countries you have to go through a process – having mesh network firmware design, communications infrastructure development, meter protocol and interoperability techniques.
M2M Now: What does that mean in practice?
JC: We have interoperability against different meter manufacturers. The utility can still be agnostic to which meter manufacturer they have, because each utility tends to have at least three different meter manufacturers as they don’t want all their eggs in one basket. And no one meter manufacturer can deliver all those millions of meters. (Utilities) like to have agnostic meters, and we allow that as long as they have our chip in each one, whatever meter they can talk to one another, through our protocols and our communications device.
What is also important is security. So, we’ve built that in there.
Also what is important, Jeremy, is to have scalability of the software, and robustness as well.
When I arrived, that’s what I picked out, so we focused on one customer, focused on lighting in China, got some great technology people, and I thought I can help do something, and build it out.
M2M Now: Was your assumption correct?
JC: I did get someone to kick the tyres on the technology before I stepped in. It was somebody that left Arqiva, he was involved with smart metering in the early days. He said, “Crikey John, pity we didn’t know about these ourselves before.” That’s life, but it just goes to show about messaging and communication, how important it is that you can miss opportunities that are on your doorstep.
So, why would I say I’m starting to prove the model? First of all, in the last six months we’ve won several contracts in India, both public and private utilities. We’ve won Tata Power.
M2M Now: Yes.
JC: Essel Utilities, part of the $5 billion company, Essel Group. Then, in January we won CESC Mysore, which is a £1 million contract, and we’re doing the M2M there so we’re supplying the meters, communications, data concentrator units, and the software. We’ve deployed as well into Brazil…
M2M Now: Is that a commercial deployment?
JC: Commercial deployment, yes. Cyan were focused on one large customer. So, I’ve built out the sales pipeline, made it deeper and wider in India. When I arrived we used to fly executives from London to India, 10 days there then back again. No consistency of message on the ground. Now I’ve got local people, a country manager in India, three sales managers, a solutions manager, project managers, field application engineers. So we’ve got the soup-to-nuts. The people on the ground who know the utility are there, can talk to them and all our partners and the ecosystem that we’ve built up. (Also see: Cyan increases operations in India and appoints new Country Manager.)
It’s second to none, you know, the ecosystem. We are classed as thought-leaders in India. Even though we are a small company, because we’ve invested and been there for a long time, five years in India, we’ve been invited to speak at all sorts of shows. Just last August-September, I was invited to Goa, for the policy makers in the industry for their ‘energy retreat’. This is Government ministers, policy makers, regulators, CEOs, all coming together for a few days to talk about the issues, what are the problems, the technology in action. There were only two Western world speakers there, myself and somebody from North America, and I was on the platform talking about India’s smart metering issues.
M2M Now: Just how big is Cyan now?
JC: We’ve got about 12 people in India. In the UK we’re probably about 30. So, the model isn’t to scale with a huge outfit of employed people. We go through partners to market. Paul Dinsmore, who I mentioned, is setting up partnerships in Africa that will be mobile operators, meter manufacturers and system integrators, such as XLink; all players that we’re going to deal with to get to market.
In Brazil, a different model: we’ve got two re-sellers. Would you believe, they found us? In the lighting product that we have with a company called Aska in China, who supplied some components to Ilumatic in Brazil. They stripped back the product and discovered the Cyan module inside, then contacted us in Cambridge. Thank goodness we branded somewhere. (Laughter) They’re selling the lighting product. I went along with the UKTI (Dept of Trade & Industry) trip 12 months back and I met Sao Paulo City Hall. I got the meeting through the trip, and then I contacted the partners. (Also see: Cyan and Ilumatic work together on first Brazilian pilot project.)
We all joined up and they gave us a pilot there and then. We’ve deployed lighting in an area of Sao Paulo, so the City Hall could see that it works and play around with them. The transformation that’s happening in Brazil; the utilities have had all the power and the lighting under their roof, but now the Brazilians are spinning out and making the lighting independent. That’s why they’ve delayed a lot of the PPPs (public-private partnerships) that are going on until they’ve spun out these companies from the utilities into independent bodies.
Now we’ve got a deeper and wider sales part in India, we’ve opened up these in Brazil and Africa.
Through our Brazil partners we have actually come up with a retrofit product. Instead of having to change the meter out, and put a smart meter in and ripping it out, we’ve got a product that sits alongside a meter, so it can make a dumb meter smart. All the ‘smartness’ is in the retrofit, a box that sits alongside it. What we’re now doing, is saying to meter manufacturers: where they’ve got a perspex cover on any meter, make the perspex bigger and fit the retrofit underneath. So it’s nice and snug within the whole. (Also see: Cyan provides retrofit module to enable smart upgrade of existing meter deployments.)
If you’re on the asset base of a utility it’s easier then to sell your product. If you’re on the asset base then that product is paid for by the consumer within their tariffs. If it’s outside the utility has to pay, so it’s a harder sale. That’s what we’re working on with our partners there, system integrators, meter manufacturers, data carriers. Vodafone for instance is one.
Some of the partners that we have in India like Larsen & Toubro, they’re a $14 billion turnover company with about $22 billion market cap, that’s just huge. I mean obviously they’re into all sorts of stuff and they got their own meters. We’ve got partnerships with Wipro, TCS, all of them. In India we’re integrated with eight meter manufacturers.
Also we partner with medium-sized system integrators, people that do billing, etc. You have to cover off end-to-end within the ecosystem.
That’s what we do in every country. The aim is to use partners to go to market, not to build up huge Cyan resources. Also with these data concentrator boxes, we say to people in India, “You manufacture that in country”. It gets taxes down on the import duties. We’re not into hardware, we’re into the communications and software. It gives them more margin and another reason to do business with us. So we can give them a reference design for the retrofit, a reference design for the data concentrator unit.
When we get to huge volumes where we want to license the module that I talked about we want to put that under a licence royalty payment like ARM™’s business model.
M2M Now: Are you doing that already?
JC: We’re starting to have conversations with them. The ARM model is where that future strategy is.
If I had enough money I’d just say to every meter manufacturer, “Here’s free chips,” everything’s got a chip in it. Not only meters but this is the Internet of Things, you just get it out in the marketplace. It’s a bit like having Bluetooth on your phone. Every phone’s got Bluetooth but not everybody uses it. If it’s there you can connect it when you want to.
We did a business case in Africa where somebody had got 200,000 meters under GPRS. So they’d got a GPRS modem in every single meter with a SIM card. Putting our mesh chip actually saves over a 10-year model. It saves them $150 million by converting from GPRS modems to mesh where you have greater distribution. That’s without the ‘losses’ and all the other benefits that you get.
Here you’ve got a SIM card in, so it goes over secure IP. With our relationship with Vodafone they build us into their mobile platform. So in fact our data concentrator unit on a Vodafone network is seen as a SIM card on their network management centres.
We’re just about to launch a next generation data concentrator unit and then have a serial, USB and Ethernet port where we can offer not only GPRS but also 3G, 4G, 5G, satellite and fibre connection. Offering these other communications medium for backhaul through use of external modems will allow Cyan to offer customers greater flexibility. In some areas if the mobiles are not that good you might need any of these as a backup. So we’re constantly thinking, “What else do we need, and what are the standards?”
M2M Now: What are the advantages for utilities and customers of wireless mesh?
JC: We’ve developed a proprietary mesh-based solution. That’s sub-GHz. It gives excellent long range communications. Bluetooth is very good in your car, it’s hands-free, but walk 10 paces away from your car and it cuts off.
ZigBee is good if you want to connect into this office here because it’s a nice open plan office. But we’re about the neighbourhood network, going from this building out, whereas ZigBee isn’t that great for distance, especially in some of the emerging markets we operate in.
The test in India was that you had to go through two reinforced concrete walls at a minimum of 60 metres. ZigBee would go through one concrete reinforced wall and less than 30 metres.
Rather than adopting complex and huge cost to the meter, we’re using data concentrator units (DCUs) to get the cost down for people. We talked to one utility in India whereby they’re saying, “Just cost in deploying these DCUs everywhere, deploy all of these and get a mesh network going back to a billing system. We will then decide what we want to hook up with, whether that’s an electricity meter, water, gas, traffic lights, or telecom towers.”
M2M Now: Presumably that enables what’s been so lacking in most discussions around smart meters and smart city deployment, that they’re in multiple industries and multiple verticals. At the moment it seems to be a point solution, one at a time. You don’t get the benefits of cross-fertilisation of the data or of scale.
JC: Absolutely spot on. That’s some of the issues that I think the UK has got. If you think there’s 27 million electricity meters here in the UK, 27 million gas. In India you’re talking about 200 million electricity meters alone.
By the way, those are the first smart metering AMI orders in India won by a British company. I’m not saying we’re going to win everything, of course we’re not, but if you’re in at the beginning that’s a good start.
The issue that we deal with in emerging markets is different to the west. In the western world we’re all about the green, carbon issues. These countries aren’t there yet. If you think that in India alone they lose $32 billion a year through ATC (aggregate technical and commercial) losses, $16 billion of that is stolen.
M2M Now: That’s just in India?
JC: That’s just in India. In Brazil theft is 20%, and in India it’s 30-50% depending on the utility. That’s from (market analysts) Frost & Sullivan. South Africa’s energy loss is huge, anywhere between 25 and 40%. Most of that can be attributed to theft there. There’s other technical losses on top of that, meter tampering, billing errors and metering errors.
In South Africa only 32% of the population have access to electricity.
In India 300 million people aren’t on the grid. By bringing them on to the grid you’re actually going to get approximately a 300 million meter opportunity over time.
Some of our partners from India have taken us into other areas, so we’re talking to people in Egypt, other parts of Africa, and Mexico. We’ve had people approach us from Eastern Europe. I’ve noticed since about October (2014) that people have come onto our website and we’re getting leads through the internet which we’ve never had before. So I suppose there’s more awareness about who we are.
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