This is great news for homeowners and contractors alike. The bill provisions $6 billion for energy-efficient or “green” retrofits. It is expected to fund renovations for 3 million families, create 168,000 new jobs and save consumers $9.2 billion on energy bills over the next 10 years.

But in order to cash in on upcoming rebates, homeowners and contractors will need to do their homework. There are 13 types of retrofits eligible for funding. Each retrofit has unique eligibility requirements and set rebate amounts. You can read the full text here.

We made it really easy to wade through the legalese. Below is a table that breaks down the 13 retrofits of the bill, along with the requirements and rebate amount for each. In addition to the requirements we listed, each retrofit must comply with Building Performance Institute (BPI) standards or other procedures to be approved by the Secretary of Energy.

We also decided to combine these retrofits into three packages that will help homeowners get the best bang for their buck. But first, let’s review the program details.

Who is Eligible and How to Qualify?
The Home Star bill offers two rebate programs, the “Silver Star” program and “Gold Star” program. Here are details for each:

• Silver Star – Unless another amount is specified in the “Rebate Amount” column above, homeowners will receive a $1,000 rebate for each retrofit listed in our table. The maximum amount of rebates paid out will be $3,000 or 50% of the total cost, whichever is lower. For example, if a homeowner spends a total of $4,000 on eligible retrofits, they will get $2,000 or 50% back as a rebate. If they spend $8,000 on eligible retrofits, they would only receive $3,000 in rebates instead of $4,000 (which would be 50% of the cost).
• Gold Star – To qualify for the Gold Star program, homeowners must reduce their total home energy consumption by 20%. A $3,000 rebate will be rewarded for this reduction. Homeowners can receive an additional $1,000 for each additional 5% reduction, up to a total rebate of $8,000 or 50% of the total retrofit cost. Rebates may be provided for any of the retrofits listed under the Silver Star program, or for any other energy-saving measure, including: home energy management systems, high-efficiency appliances, highly reflective roofing, awnings, canopies, and similar external fenestration (window) attachments, automatic boiler water temperature controllers, energy-efficient wood products, insulated vinyl siding, and mechanical air circulation and heat exchangers in a passive-solar home.

The Home Star bill also includes rebates for do-it-yourself (DIY) homeowners that are confident in taking on the renovations themselves. DIY’ers can get up to $250 in rebates for products purchased without installation service. This rebate is limited to attic insulation, crawl space insulation and/or air-sealing retrofits.

Seal Your House Envelope and Improve Insulation
Before carrying out any serious retrofit, homeowners need to weatherize and seal their house “envelope.” The envelope includes outer walls, windows, doors, floors and the ceiling. If the house is not properly sealed and insulated, then subsequent HVAC retrofits won’t be as effective.

Common Air Leaks

In some cases, savvy do-it-yourselfers may be able to handle these projects themselves. There are plenty of books and great online resources (e.g. ACEEE.org) that provide instructions. However, you should seriously consider hiring an auditor beforehand. Special diagnostics equipment will show where air is escaping and to what extent. For example, thermal imaging devices detect areas in walls that are poorly insulated and dispersing heat. This information would be unavailable without such devices.

So how much does it cost to seal all the air leaks in a home? Prices will obviously vary based on where you live, how big your property is and the scope of the retrofit. But it will likely cost a few thousand dollars to hire a contractor for this type of renovation. In this example from the New York Times, the author spent $3,760 for insulating and sealing the envelope of his 1,200 square foot home.

How much can homeowners expect to save? The Environmental Protection Agency (EPA) estimates that homeowners can save 20% on heating and cooling costs by sealing leaks and adding insulation. In New York – one of the most expensive places to heat a home with an average annual cost of $1,513 – this would be a yearly savings of $300 just for heating.

Continuing with the example from the New York Times, the Silver Star program would provide $1,880 (50%) in rebates for their retrofit. At an annual savings rate of $300, the renovation would pay for itself in six years (or less if you include cost savings from reduced air conditioning bills).

Repair and Replace Leaky Ducts
Ducts are notoriously leaky and inefficient. They are one of the usual suspects in a crime of high utility bills, or when rooms are difficult to heat and cool. The EPA calculates that 20% of air moving through ductwork is lost due to leaks, holes and poor connections. Other sources put estimates closer to 40%. So while suffering from “leaky ducts” may sound innocuous, it can have a big impact on the efficiency and costs of heating and cooling your home.

Fortunately, duct replacement and sealing is eligible for funding under the Home Star bill. Many homeowners will want to outsource this project to a qualified HVAC contractor. Contractors have equipment to detect leaks that otherwise may not be immediately visible. They also have methods to seal ducts that are inaccessible. For example, by spraying an adhesive or sealant through the duct work.

Replacing and sealing ducts can also be a DIY project, especially when ducts can be easily accessed in an attic or basement. Leaks should be sealed with mastic sealant or metal tape (not duct tape), then insulated to reduce heat loss and to further improve efficiency. The Lawrence Berkeley National Laboratory has an excellent guide on how to seal and insulate ducts.

Upgrade Your Furnace and Water Heater
Heating is the largest energy expense in homes, according to the American Council for an Energy-Efficient Economy (ACEEE). In colder parts of the country, it makes up 30 to 50% of annual energy bills. So improving the heating efficiency of your home will have the biggest impact on lowering your energy costs. Sealing air leaks is a good start, but replacing your heating system could provide real leverage towards cost savings.

If your furnace or boiler was purchased before 1990, then it is time to consider an upgrade. Modern furnaces are much more efficient than those that are older than 20 years. You can use rebates from the Home Star bill to replace your furnace, but you will need to meet their guidelines:

Water heaters are typically the second largest energy users after home heating and cooling systems. Replacing convention oil-fired water heaters with high-efficiency gas or electric heaters can save homeowners thousands of dollars over a 10 to 15 year period. The Home Star bill includes a variety of replacement options eligible for rebates.

Ground Source Heat Pump

An alternative to furnaces and boilers are ground source heat pumps (GSHPs). Also known as geothermal heat pumps, GSHPs are one of the most efficient systems for heating and cooling buildings. According to the International Ground Source Heat Pump Association, GSHPs are 50 to 70% more efficient than other heating systems, and 20 to 40% more efficient than traditional air conditioners. They can also be used as an alternative water-heating system and save up to 50% on water-heating bills.

Ground source heat pumps are more economical than using oil or air-source heat pumps, but there is still a lot of debate over GSHPs versus natural gas. Homeowners will need carry out their own due diligence beforehand.

Year over year, a ground source heat pump is more cost effective than natural gas. It’s the initial cost that really drives down the return on investment (ROI) and makes natural gas a more attractive option. However, there are several rebates and tax credits available that help subsidize the upfront cost.

Additional Financing Resources
With other legislation in the queue, it might take weeks or months to hear the Senate’s final decision on the Home Star bill. In the meantime, homeowners can receive funding from other sources to pay for green renovations. The federal government, state governments, local municipalities and even utility companies offer several options.

For example, homeowners can still receive a federal tax credit for 30% of the cost of energy-efficient products (up to a total credit of $1,500). This includes the purchase of central air conditioning systems (both the product and installation), electric heat pumps, furnaces and boilers, and whole-house ventilation fans. Visit the US Department of Energy Energy Savers website for more information.

Another great resource is the Database of State Incentives for Renewables and Efficiency or “DSIRE” website. This allows you to view rebates, loan and grant programs, financing options and tax credits offered in your region.

Finally, new home buyers should consider an energy-efficient mortgage or energy improvement mortgage. These mortgages allow consumers to count savings from energy bills as additional income, ultimately giving them more buying power. Home Energy Magazine has a helpful article here.

• McGraw Hill estimates it will become a $10 to $15 billion market by 2014;
• Pike Research puts it at $6.6 billion annually; and,
• SBI Energy predicts green renovations will make up 13% of the total renovation market by 2015.

To help electricians segue into their new role and win a piece of the burgeoning market, we decided to write this follow-up article. Here we present five green retrofits electricians should pitch to drive business. While our guide is intended for electricians, it can be used by any homeowner or building owner looking to adopt sustainable building practices.

1) Relamping
Out of all the green retrofit projects, lighting retrofits present the biggest opportunity for electricians. According to the American Council for an Energy-Efficient Economy (ACEEE), lighting accounts for more than 40 perent of the commercial sector’s electricity consumption. Not to mention, it makes up nearly 20 percent of all electricity used in the United States (including residential and industrial spaces). This chart from the ACEEE illustrates how much lighting energy is used by different types of buildings.

These numbers can be significantly reduced by replacing antiquated lighting systems with an energy efficient substitute. Take for example, light-emitting diodes (LEDs). LEDs are much more efficient than incandescent lamps – LEDs use 2 to 10 watts of electricity while incandescent lamps use 60 watts – and they are close to becoming a replacement for fluorescent tubes (see: Are LED Tubes Ready for Prime Time?).

In addition to reduced energy consumption and operating costs, there are other carrots and sticks motivating building owners to retrofit their lighting systems. Utility companies and other organizations offer incentives (here’s a handy look-up tool for California residents), while new legislation requires buildings to use energy-efficient lighting.

Finally, factor in the 2.2 million buildings that are candidates for lighting-system upgrades, and you’ve got a lot of low hanging fruit in the market.

2) Daylight Harvesting
Daylight harvesting is the practice of reducing artificial light in a room when sunlight is available. According to a study performed by the NRC Institute for Research in Construction, it can reduce lighting energy costs by 20 to 60%. Call it “upselling” if you will, but electricians should pitch this retrofit to customers that are already relamping their homes and buildings.

A daylight harvesting system uses photosensors to detect light levels in a room. As sunlight becomes available, the artificial lighting will be reduced. When it’s cloudy or becomes dark outside, the level of artificial lighting will increase.

Three other lighting controls worth mentioning here are dimmers, motion sensors and timers. These energy savers have been around for years, but they are just as relevant today as when they first came out. Homeowners looking for simple ways to reduce energy can install any of the above. For more information, check out the US Department of Energy’s lighting guide.

3) Heating, Ventilation and Air Conditioning (HVAC) Retrofits
Mechanical contractors are typically more qualified to take on heating, ventilation, and air conditioning (HVAC) retrofits. However, as electricians move into the role of energy contractors, they will need to provide a complete energy solution. Consider this quote from Lara Schwicht Richards, manager of marketing projects for the National Electrical Contractors Association (NECA).

“Energy solutions are a growing market for electrical contractors at a time when traditional construction work is declining,” she says. “Customers can look to electrical contractors to provide a total energy solution—integrating multiple technologies, when appropriate—for their building project rather than simply installing a single product.”

Some HVAC retrofits will always require the know-how of mechanical contractors. But others can be performed by an electrician because of their overlapping skills and knowledge. For example, electricians can install electrical consumption economizers – devices that reduce energy use of AC units – or programmable thermostats that optimize efficiency of HVAC equipment.

Energy Retrofitters, a licensed electrical contractor from Fort Worth Texas, lists other HVAC retrofits among their services like installing oil, acid, and moisture (OAM) purgers for chillers and adding special additives (e.g. thermo-conductive heat transferring compounds) to HVAC equipment. Both reduce electricity use in HVAC equipment.

4) Solar Photovoltaic (PV) Systems and Wind Turbines
Any article about green retrofits would be incomplete without a discussion of solar photovoltaic (PV) systems and wind turbines. Solar photovoltaic systems – a.k.a. solar panels – are gaining traction in both residential and commercial applications. Lower production costs, government rebates and tax incentives are the primary drivers of increased adoption.

Grid-Tie Solar System

Electricians will likely have the most success pitching “grid-tie” solar systems, especially in areas where sunlight is not abundant. Using this type of system, the building remains connected to the utility power grid but disconnects as soon as enough solar power is available. Because these systems actually generate electricity, building owners may be able to receive payment or energy credits from their utility company.

Wind turbines are another viable option for building owners looking to recoup electricity costs. While less common than solar photovoltaic systems, wind turbines can reduce electricity bills by 50 to 90%, according to the American Wind Energy Association. However, wind turbines aren’t for everyone. They are too big for urban or small-lot suburban homes, and of course they’re not effective in places with low wind speeds.

Other forms of renewable energy include biomass and geothermal systems. These alternative power generation methods are getting attention and they present job opportunities for electricians. As Rob Colgan, executive director of marketing for NECA, points out:

“Consumers are becoming more educated about alternatives to conventional power generation, such as solar, wind and biomass. Effectively using these alternative methods of power generation, however, takes specific skills and experience with a wide array of new products.”

5) Energy Management Systems and Monitoring Devices
Energy management systems have garnered a lot of press over the last year because of Microsoft Hohm and Google PowerMeter. With the aim of helping consumers monitor and manage energy consumption, these programs have the potential to drastically reduce our country’s carbon emissions. Studies show that giving consumers access to detailed home energy information results in 5 to 15% savings on monthly electricity. If half our country adopted these systems, Google says this would be the equivalent of taking eight million cars off the road!

Signing up for Hohm and PowerMeter is free and easy. However, accurately measuring energy use is more challenging. It requires the use of an energy monitoring device (e.g. TED). Installing these devices requires the knowledge of an electrician (or the bravery of a tech-savvy do-it-yourself’er). Multi-family, commercial and industrial buildings require a more sophisticated, “smart meter” system, and therefore necessitate the experience of electricians.

Wrapping up, these five retrofits make up a small portion of possible green renovations. There are hundreds more building products and technologies that will improve energy efficiency, while reducing energy costs. And with buildings producing up to 70% of some cities’ carbon emissions (as reported by the Energy Circle blog), there has never been a more relevant time to implement these technologies. So what other retrofits do you think we should include in our list? Leave us a comment if you know of a product, new technology or type of retrofit that can have a big impact on improving energy efficiency of a building.

1. Have you used, or are you using LED tubes instead of fluorescent tubes?
2. Do you think LED tubes are ready for commercial use? Why or why not?
3. Do you think LED tubes will become a standard replacement for fluorescents, eventually outnumbering fluorescent lights? Why or why not?

As expected, LEDs still make up a minority of lighting systems. The majority of building owners, electrical contractors and other industry professionals use fluorescent tubes or some form of lighting other than LEDs.

While only 29% of respondents have used LEDs, nearly everyone had an opinion on whether they are ready for widespread commercial use. Clearly there is still a lot of contention over the two technologies: 46% of respondents think they are not ready for prime time, 43% think they are, and another 11% voted “not sure.”

We asked these respondents to provide an explanation to support their answers. Of those who voted yes, energy savings and cost savings were the two most cited reasons for why LEDs are ready for widespread use. For those who answered no, poor quality, lower strength of light and higher upfront costs were the most common responses. Here are a few of our better responses:

Yes, the pricing continues to decrease and UL or ETL approved options are available. The payback is there and all led products are RoHS compliant (no mercury).

Yes, I have had no problems yet and have seen a 74% decrease in electrical usage with the same illumination.

No, why would I? LED’s in the market place are typically 40-60 lumens/watt. We use T5s with electronic ballast at 100+ lumens per watt.

No, most building owners are going to balk at a payback over 5 years.

I’m not sure. At the moment the tubes are expensive and not all meet the promises (age, light output, safety).

We also wanted to find out if people think LED tubes will become a standard replacement for fluorescents in the future. Sixty-eight percent of respondents said yes, 21% said no and another 11% voted “unsure.”

Again, we asked respondents to support their answers with an explanation. Energy efficiency and long-term cost savings were the most common answers for why LEDs will replace fluorescent tubes. For those that answered no, their explanations varied. Here are some of their responses:

Yes, the price will fall, quality will improve and people will adopt technology. LEDs are easy to dim, there is no flickering at startup, and different temperature whites are available.

Yes, LED’s produce a cleaner, more human friendly light. They cost less to operate and they contain no hazardous materials. The better question is why wouldn’t they outnumber fluorescents?

Yes, when the price comes down to account for a less than 10 yr payback compared to fluorescents.

No, something better will be invented (printable OLED on “wallpaper”?).

No, unlike incandescents, fluorescents are relatively energy efficient to start with, so the energy and financial gain by going to LED tubes is much less dramatic.

I’m not sure, it depends on light output and initial cost questions.

Thank you to all who participated in our survey, and to our blogger friends who helped spread the word about this!

We recently came across this very debate being held in a LinkedIn electrical construction group. It was a heated thread with two electrical contractors hashing out the pros and cons of using LED fluorescent tubes. To continue our series of articles on “green” construction, we thought we’d tackle the issue ourselves. So here we present our findings on LED fluorescent tubes.

Survey Results
We recently asked our blog readers and other industry professionals to participate in a short survey on LED vs fluorescent tubes. We received great feedback from participants, so be sure to check out our survey results.

What is a LED Fluorescent Tube?
“LED fluorescent tube” is a misnomer. LED lights and fluorescent lights are completely different technologies. LEDs are very small bulbs illuminated by movement of electrons in a diode. Fluorescent bulbs use electrodes and a gas combination of argon and mercury to produce light. So the name “LED fluorescent tube” really refers to an LED tube that reminds us of traditional fluorescent tubes (likely above your head as you read this).

LED Tubes

LED lights should also not be confused with compact fluorescent light (CFL) bulbs. CFLs use the same tecnology as fluorescent tubes to produce light, but on a smaller scale. They are a replacement for the incandescent bulbs commonly found in most home light fixtures. CFLs have garnered a lot of press because of their energy efficiency and environmental benefits (i.e. they use less power).

An LED tube is made up of hundreds of individual LEDs. They come in a variety of sizes (2, 4 or 6 feet), different temperatures (i.e. different colors of light) and varying arrays of LEDs. They can be purchased with new fixtures, or used for retrofitting existing fixtures. But keep in mind, they don’t require ballasts, so those will need to be removed when replacing fluorescent bulbs.

When comparing LEDs to fluorescent tubes, here are four key specifications you should review:

• Lumens – This is the unit of measurement for strength of light. Look for tubes with 1500 lumens or more.
• Watts – This is a unit of measurement for power consumption. Four foot LED tubes typically use 15 to 25 watts, while fluorescent tubes use more than 30 watts.
• Lifespan – This is how long the bulb will last. It’s measured in hours. 50,000 hours is common for LED tubes.
• Color temperature – The temperature of the light is the color of the light. It is measured in units of absolute temperature, or Kelvin (K). 3000K is considered warm (redder), 4100K is considered neutral, and 5800 K is cool (bluer).

Pros and Cons of LED and Fluorescent Tubes
To give recognition where it’s due, fluorescent tubes are a great invention. They have been lighting most of America ever since GE brought them to market back in 1938. They are four to six times more energy efficient than incandescent bulbs and are said to last 10 to 20 times longer. Of course there are disadvantages too.

Fluorescent tubes contain mercury and phosphor which present health and environmental risks. Lights require a ballast which adds to the cost of the lamp and can cause a buzzing noise. Finally, they flicker and the light is often drab.

Meanwhile, LED bulbs last longer than fluorescents, they don’t contain harmful ingredients like mercury and they use much less power than fluorescent lamps. And this is just for starters. LEDs aren’t perfect though. The tubes are generally not as bright and cost more up front. And unfortunately, cost will likely be the number one driver of greater adoption. So let’s compare the costs of each.

Costs of LED Tubes vs Fluorescent Tubes
The debate over LED vs fluorescent tubes always teeters at the cost argument. When comparing the upfront cost of one LED tube to one fluorescent tube, fluorescent wins. However, when you consider volume discounts and the lifespan of LEDs, the scale leans the opposite direction. Let’s compare the costs of each.

This table compares the first-year cost of a single commercial-grade (i.e. UL and CE compliant), four foot T8 LED tube to a four foot T8 fluorescent tube. To measure kilowatts per year, we assumed the lights would be on for 12 hours a day and 255 days a year. We used an average energy rating of 20 watts per hour for LEDs and 32 for fluorescents. To calculate energy cost, we used an average cost per kilowatt of $0.11.

Clearly fluorescents are less expensive in the first year. However, when you account for product longevity, LED tubes are the winner. LED tubes last an average of 50,000 hours (roughly 16 years) while fluorescent T8 tubes last an average of 25,000 (roughly 8 years). To determine this, we looked at every fluorescent T8 tube that Sylvania offers (nearly 150) and calculated average lifespan. To be precise, it was 24,787.67 hours.

In this next table, we compare the 16-year cost (the lifespan of an LED tube) of 40 LED tubes compared to 40 fluorescent tubes. In this example, the number 40 is somewhat arbitrary. We have twenty, 2′ x 4′ fixtures in our office, so we chose 40 bulbs as our comparison. Keep in mind, fluorescent fixtures require ballasts, so we’ll need to tack on an additional $400 to fluorescent tubes (20 ballasts at $20).

Using prices from our previous table, in the first year it will cost $3,069 for the energy and initial purchase of 40 LED tubes. The fluorescent tubes would cost $1,071. Every year thereafter, the energy costs of LED tubes will be $269, and $431 for the fluorescents. In the eighth year, the fluorescent bulbs will need to be replaced at a cost of $240.

You’ll notice the numbers in our table look a little different. That’s because we’ve included an annual energy inflation rate of 5%. We also used a 2.5% inflation rate to calculate the cost of the replacement fluorescent bulbs in the eighth year. Finally, we used a 6% discount rate to determine the net present value (NPV).

As our table reveals, the 16-year cost for 40 LED tubes is $6,431 while the cost for fluorescent tubes is $6,846. This is 6% in savings over the life of the tubes. Keep in mind, this is only 40 tubes. Building owners with more light fixtures will realize more savings as the volume discount will be greater and energy costs will be lower. So, over the lifespan of the product, LED tubes are more cost effective than fluorescent tubes.

A Bright Future for LED Tubes
The cost of manufacturing LEDs is dropping. Researchers at Purdue University have developed a way to create LEDs using inexpensive, metal-coated silicon wafers instead of expensive sapphire-based bulbs. This has the potential to bring the cost down to levels competitive with fluorescent tubes. You can stay up to date on news of this development over at the Eartheasy blog.

In the meantime, there’s no reason electrical contractors shouldn’t promote LED tubes. LED tubes can help building owners become eligible for government and utility company incentives. They help companies reach the desirable – and highly marketable – green cachet. They provide greater energy cost savings than fluorescents. And finally, they are simply better for the Earth. They are the future of commercial lighting.

What is remarkable is how closely the SaaS market’s evolution matches the definition of a disruptive technology that was described by Harvard Business School professor Clayton Christensen in The Innovator’s Dilemma (he later replaced the term with “disruptive innovation” in his subsequent book, The Innovator’s Solution). In fact, the SaaS dilemma that incumbent software vendors currently face is playing out almost page-for-page from Christensen’s books. As a result, we can use the disruptive innovation framework to gain insight into what’s to come in enterprise software.

After a decade of deriding SaaS technology as too simple, functionally incomplete and insecure, vendors such as Microsoft, Oracle, SAP and thousands of incumbent “on-premise” software vendors are now embracing SaaS. It’s an awkward embrace – one that threatens to cannibalize existing revenue steams, divert resources and eat up profits.

Of course, the innovator’s dilemma doesn’t destroy every incumbent. These incumbent market leaders are powerful, resilient innovators themselves. But for armchair quarterbacks like us, this the next five years will present a fascinating game to watch.

What is a Disruptive Innovation?
Disruptive innovation refers to new solutions – often technologies – that through a new delivery model, alternate pricing model or target market segment are able to disrupt existing competitive dynamics dramatically. For example, SaaS offers a new delivery model (i.e. hosted “in the cloud”), a new pricing model (i.e. subscription) and initially targeted smaller customers.

Initially, these disruptors target the least profitable customer segments – typically smaller or unsophisticated buyers. These are the only customers whose requirements are limited enough to accept the bare bones feature-set of the new system. Meanwhile, they appreciate the new model (i.e. it’s cheap and easy to get started). We certainly saw this in SaaS as small businesses or autonomous departments adopted customer relationship management (CRM) systems like Salesforce.com as early as 1999. For them, SaaS CRM was “good enough.”

The disruptive innovation cycle applied to SaaS.

Over time, however, disruptive innovators improve their performance and feature-set and can meet the needs of more sophisticated customers. Combine that with a little buzz around their new model (e.g. everybody’s talking about cloud computing these days), and the incumbent vendors start to take note. Of course, the incumbent still has plenty of ammunition to dismiss the new technology, since it remains functionally deficient relative to incumbent products and the most demanding customer segments (e.g. SaaS penetration into the ERP market remains limited).

I’ll posit that SaaS is now entering the penultimate – and most contentious – stage of disruption. At this point, the innovators start to gain serious momentum. Their products approach functional parity and they begin to steal substantial market share. The incumbents finally get serious about defending their traditional markets by releasing their own version of the innovation (in the case of SaaS, that means true web-based, on-demand, cloud computing, not just hosted client/server software). Unfortunately, it is often too late. Incumbents remain apprehensive about cannibalizing existing revenue and they face challenges replicating the innovation. Typically, most incumbents stagnate, decline and fade into obscurity. Only a few nimbly transition to the new model.

The innovator now becomes the incumbent and new innovators emerge. The cycle repeats.

SaaS Disruption Battles are Well Underway
Christensen mentions Salesforce.com in his second book, The Innovator’s Solution:

This company, with its inexpensive, simple, Internet-based system, is disrupting the leading providers of customer relationship management software, such as Siebel Systems.

I worked at another leading CRM vendor back when Salesforce.com was just a start-up. I remember meetings where executives derided the system as a toy. Most Salesforce.com implementations were just a half dozen users and most customers paid their subscription fees with a credit card (Gasp!). Since then, Salesforce.com has exceeded $1 billion in revenue and incumbent market-leader Siebel Systems sold out to Oracle after hitting tough times.

While Salesforce.com in the CRM market is the best example, the SaaS dilemma is playing out in numerous software markets. Gmail and Google Apps are nascent yet serious threats to Microsoft’s Outlook/Exchange and Office cash cows. We use both of the Google services extensively. NetSuite is a contender in enterprise resource planning (ERP), but hasn’t dented SAP or Oracle too badly as of yet.

Most interesting, however, is how this same battle is being waged by innovators in so many lesser followed market segments: SaaS construction project management, SaaS electronic medical records, SaaS property management, SaaS retail point of sale. The list goes on…

Most SaaS Shortcomings are Addressed
As I mentioned earlier, I believe we are entering the final stages of SaaS disruption. The SaaS model and its proponents have not defeated the incumbents, but SaaS solutions have reached functional parity to the point where incumbent derisions are starting to fall on deaf ears.

Let’s examine each of the top five objections to SaaS:

1. Web browsers are not interactive enough. This was true when web applications required a full page refresh to complete a transaction, but the maturation of JavaScript, AJAX, Adobe Flex and other web user interface technologies addressed this. HTML 5 will put this one to rest for good. I find my SaaS apps faster and more dependable than any on-premise app.
2. Hosted data is not secure enough. This one always perplexed me, since so many of us were comfortable with web banking as early as ten years ago. Few systems could be more valuable than financial transactions. Moreover, very few software buyers can afford to implement the same security infrastructure as a professional SaaS data center.
3. It’s not possible to integrate SaaS. This was true when few SaaS vendors had built APIs and there was no middleware for SaaS. Nowadays, API integration to SaaS applications is non-trivial, but not any more difficult than on-premise integration. I should know; we just finished a successful integration to Marketo, a SaaS marketing vendor.
4. You can’t customize SaaS systems. Again, this is changing. Many SaaS applications remain fairly “packaged,” but many vendors have successfully positioned this as a benefit (i.e. “adopt our best practices”). At the same time, SaaS customization tools are maturing. Salesforce.com has built an entire development environment, force.com.
5. Big companies want to own the software, not rent. This may be still be true in some cases, but in this economy the recurring nature of subscription payments is attractive. It also puts more of an onus on the vendor to earn their future subscription payments. I’m not convinced that this presents a concrete competitive advantage for incumbents.

Incumbents are Now Challenged to Counter SaaS
Now that SaaS vendors and incumbents are locked in a real battle – the gloves are off and incumbents are releasing their own SaaS systems – our analysis turns to the big challenges that incumbents will face. Let’s examine the five most significant characteristics of SaaS systems, and then explore why they are great for SaaS purists and a real challenge for incumbent on-premise vendors.

	Great for SaaS companies	Tough for incumbents
Browser-based	They can promote the benefits of not installing and maintaining client-side software. Plus anyone can use a web browser!	Moving to a web-based architecture is a near-complete rewrite. "Web-enabled" options are temporary, at best.
Subscription pricing	Not needing to justify a big purchase up front means fewer approvals and fewer risk-averse buyers to assuage. Also, great recurring revenue.	This is the core cannibalization issue: moving to subscription pricing will stall growth and maybe lead to revenue declines for some time.
Multi-tenant architecture	With all users on one codebase and database, changes are made in one location, but roll out globally. Also, computing resources are shared.	With thousands of installs, it's impossible to consolidate. There are incremental benefits to multi-tenancy, but the legacy customers remain.
Rapid release cycles	With changes being made to one codebase/database, releases can be rolled out weekly, even nightly. More releases = better products.	The quarterly, bi-yearly or annual release cycle is deeply ingrained in the DNA of an on-premise development organization.
Bought by business, not IT	It's far easier to sell to business units with their own budget, without the need for IT approval or budget. Faster sales cycles = growth.	IT relationships are a core advantage of incumbents. With SaaS, those relationships are less relevant - a competitive barrier is lifted.

It’s Not Over Yet – Not Even Close
Microsoft, Oracle and SAP still own the large enterprise market and the SME market. In hundreds of niche software markets, on-premise incumbents dominate. Even ten to fifteen years into the evolution of SaaS, SaaS vendors still possess minimal market share relative to incumbent vendors. While still powerful and often growing, all of these incumbents face the daunting challenge of SaaS disruption. Moreover, each of the major incumbents has started in earnest on credible SaaS offerings.

Microsoft has released Microsoft Dynamics CRM Online – the first Dynamics family application to be offered in a SaaS model. Microsoft has also released Microsoft Office Online as a counter to Google Docs.

Oracle, meanwhile, continues to grow its Oracle OnDemand solution set. While much of Oracle OnDemand consists of managed services for traditional on-premise solutions, their SaaS CRM offering (acquired through the Siebel deal) is true SaaS. So too are other solutions they acquired in recent years.

Finally, SAP’s Business ByDesign appears to be a pure SaaS, on-demand offering that is operating independently from the SAP mothership. Our own conversations with SAP employees have shown that the company is maintaining an arms-length relationship with the Business ByDesign team so that this in-house “start-up” can truly function as a nimble SaaS entity, unconstrained by SAP’s on-premise legacy.

If the disruption examples and case studies in Christensen’s book are a guide, we can expect to see a massive number of incumbent vendors stall, fade and become irrelevant over the next decade. Others will deftly navigate the transition.

In our comments section below, I’d like to start a conversation about which incumbent vendors will fade and which will transition. Please share your opinion.

To highlight this year’s innovations, we asked attendees, “What are the coolest, and most promising technologies at this year’s show?” The most popular response was “iRing.” iRing is a set of open source software solutions for ISO 15926 for the capital projects and facilities industry. It is a peer-to-peer service that allows any company to exchange data under the ISO 15926 standard, which is titled “Industrial automation systems and integration — Integration of life-cycle data for process plants including oil and gas production facilities.”

iRing solves a problem the industry has been trying to address for years: it provides a foundation for data interoperability between all members in the capital projects and facility operations/maintenance industries. Check out our video below to hear comments from FIATECH attendees:

In a down economy, are you just seeing software purchases scaled back, or are some organizations using the slow time to “get their house in order” and improve efficiency with new software?

Here’s what they had to say…

We see this as a coming renaissance in electrical contracting. There has been a revival of interest in the electrical trade as home owners and corporations adopt alternative methods (e.g. solar, wind, etc) to power buildings. What’s driving this? Federal incentives, lower material costs and savings from reduced energy spending.


A study by the American Solar Energy Society projects renewable energy jobs for electricians to grow approximately 900% by 2030, just in the state of Colorado.

To take advantage of upcoming opportunities, electricians will need to “green” their skill-set and re-brand themselves. We’ll share more on this later. First, let’s take a look at the trends driving this change.

Green Construction is on the Rise
According to a 2009 Booz Allen Hamilton study, green construction will skyrocket over the next five years. The report projects green construction to generate $554 billion dollars in GDP, provide $396 billion in labor earnings and support or create over 7.9 million jobs from 2009 to 2013. These figures are way up from the previous 8-year period. From 2000-2008, GDP from green construction was just $173 billion, labor earnings was $123 billion and number of jobs created was 2.4 million.




This growth comes directly from increased demand for green buildings, which is largely driven by cost savings from reduced property operating expenses, and by new regulations from federal legislation (e.g. American Clean Energy and Security Act).

Clearly, environmentally friendly construction affects the architecture engineering construction (AEC) industry collectively. But how will this impact electricians?

Electricians are in High Demand
The growing green construction market will create new demand for electricians. And to keep up with demand, electricians will need to diversify their skill-set. We obviously expect to see electricians working on solar photovoltaic and wind turbine installations, but that’s just the beginning. They’ll work on building retrofits, mass transit and light rail projects, “smart” electrical grid transmission systems and more. Here are a few examples of the unique places we expect electricians to find work:

• Lighting system upgrades – There are an estimated 2.2 million commercial buildings in the U.S. that have antiquated lighting systems (old fixtures, ballasts, lamps and controls). Additionally, all federal buildings are required to switch to Energy Star lighting products by the end of 2013 (in accordance with the Energy Independence and Security Act of 2007). Some of these upgrades can be handled by the local maintenance guy, but others will require the expertise and skill of electrical contractors.

• Parking lot electrical outlets – A state bill in Minnesota will require half of new parking facilities to include outlets to charge electric vehicles. Who will install these docking stations? Electricians of course. Members of the Minnesota Electrical Workers (IBEW) Local 292 are already preparing to provide labor for these projects. If successful, we expect other states and cities to follow Minnesota’s example.

• Wind turbine manufacturing – According to a report from the American Solar Energy Society (ASES), a typical 250-person wind turbine manufacturing company has two electricians as employees. This isn’t a large number, but it’s an example of the variety of job opportunities available.

• Electric vehicle electricians – Jobs for electricians will also emerge in adjacent industries. For example, electricians will need to be trained in auto mechanics – or auto mechanics will need to be trained in electrical contracting – in order to meet demand for electric vehicle maintenance. And the career outlook is good: electric vehicle electricians make an average of $39-$59 thousand a year.

For additional information on green job opportunities for electricians, check out this article from the National Electrical Contractors Association (NECA).

LEED Creates New Opportunities
Projects applying for Leadership in Energy and Environmental Design (LEED) status are growing just as fast as the rest of the green construction market. With many LEED credits being electric- and energy-related, electricians will have an opportunity to win work on these projects. However, they’ll need to get versed on credit requirements, and should even consider becoming a LEED accredited professional (AP). LEED projects get an extra point for having an AP on the job, which could be a selling-point when bidding on jobs.

Here’s a sample of credits that require the knowledge and skill of electricians.

Electricians Must Act Now
With so many opportunities on the horizon, contractors need to make sure they’re ready to win jobs. To get started, they must gain the skills and knowledge to take on green projects. Both the International Brotherhood of Electrical Workers (IBEW) and National Electrical Contractors Association (NECA) offer education programs for green electrical work.

Next, contractors should market and promote their new green credentials. Update your website and other marketing materials, syndicate a press release to trade magazines and local media, and get more exposure online by joining directories (e.g. CalFinder.com) or advertising in search engines.

Finally, update your bidding process to make sure you win those green electrical jobs. You’ll need to bid accurately to ensure job profitability, but competitively to make sure you win the job. This means having up-to-date pricing information on materials and labor. Good electrical estimating software will have specific capabilities to estimate solar panel installations and other types of renewable energy jobs.