Buildings, traffic next frontiers for Microsoft

People need software to control electrical consumption, so Microsoft is moving into energy efficiency.

It already makes Office. Now, Microsoft wants a hand in controlling your office.

Like IBM, Microsoft has launched an effort to make itself a major player in the rapidly growing energy-efficiency market. The company is recruiting developers and is eyeing opportunities to produce software itself for building control systems, traffic management systems, or even the software that gets used by water quality management districts.

It's a strategy driven by opportunity and need. Climate change and rising power prices are forcing corporations and individuals to seek out ways to curb energy consumption. Besides costing more, energy is highly inefficiently used. Some studies note that about half of the electricity produced does not get used for a productive purpose. Carbon taxes, or cap-and-trade systems, are likely inevitable: all three U.S. presidential candidates support them.

On the other hand, building management and water control systems aren't exactly perched on the cutting edge. Many companies still sell closed, proprietary systems for controlling heating, lighting, etc. Two of the biggest clean-tech IPOs last year were for companies--Comverge and EnerNoc--that have devised systems for automatically curbing electricity consumption. IBM, meanwhile, is in the midst of conducting trials with utilities to control thermostats and appliances remotely.

"The whole transportation sector has huge inefficiencies that can be reduced by software," said Rob Bernard, Microsoft's chief environmental strategist, in a phone interview. When I asked him how big the need is for modern software for building management, he laughed. Years ago, he worked in commercial real estate.

"I am highly familiar with the massive opportunity for software and intelligence to optimize energy control systems," he said. "I think that buildings account for something like 37 percent of greenhouse gases around the globe. If you look at the big sectors--transportation, buildings and building management, deforestation, electrical grid, and utilities--in every one of those we are looking at how software can enable innovation."

As in other markets, Microsoft will rely heavily on third-party developers. The developers will come up with the applications, and these will run on MSFT platforms.

"We will build some applications ourselves and we will try to accelerate the entire market to address this problem," he said.

In December, it kicked off a program, called Ingenuity Point, in which developers submit applications or ideas for applications. Microsoft then gives awards each quarter to the best ideas and tries to promote the most promising in the marketplace.

One of the winners, OSIsoft, for instance, has devised business intelligence applications for tracking how much water gets lost from the reservoir until it finally hits the tap. The company is also involved in a desalination project in Australia. The country is currently wrestling with a prolonged, severe drought. Another company in France has come up with a traffic management and monitoring application: this can help delivery companies avoid clogs and thus save gas.

Stay tuned for my upcoming, related article: Microsoft's plan to make more efficient products and curb energy in its own operations.