A Quiet Overhaul: How Tech Vendors Like Open Are Rewiring Utilities — and Why Investors Should Care

Why the utilities transformation is suddenly an investment issue

The utility business still looks steady on the surface: predictable demand, regulated rates and steady cash flow. But beneath that calm, a structural shift is changing the rules for capital allocation. Customers want digital billing, cleaner energy and two-way control of devices. Regulators are demanding faster decarbonization and tighter grid security. And new technology — from cloud software to grid-edge controls — makes it cheaper to add features that used to be impossible.

That matters for investors because utilities no longer only compete on poles and wires. They now compete on software, services and customer experience. Those require different spending profiles: more operating expenses on platforms, different kinds of capital projects, and tighter partnerships with third-party vendors. Companies that adapt can expand margins and find new revenue streams. Companies that don’t may see customers drift to alternatives or face higher regulatory scrutiny. In short: the sector’s capital allocation choices today will shape returns for the next decade.

The three structural engines changing utilities

First, customers are going digital. Residential and business customers expect mobile apps, flexible billing, rooftop solar integration and the ability to control consumption in real time. That demand forces utilities to build or buy modern customer platforms that can handle data and seamless interactions. This is not a regional trend; utilities from Europe to Asia and the U.S. are reporting similar pressure as smart meters and distributed resources spread.

Second, regulation is tightening and shifting incentives. Policymakers are pushing faster emissions cuts, resilience standards and cybersecurity rules. Regulators now reward not just kilowatt-hour delivery but resilience, equitable access and faster outage restoration. That changes what projects get approved and how returns are calculated. Expect more non-traditional rate cases and new tariff designs that reward flexibility and distributed resources.

Third, breakthrough technology is lowering the barrier for disruption. Cloud software, edge computing, advanced analytics and low-cost sensors enable rapid deployment of grid controls and customer services. Vendors can now offer modular solutions — for meter data management, outage prediction or DER orchestration — that integrate into legacy systems. This reduces the time and cost for utilities to pilot new offerings and scale them when they work.

Together, these drivers create a global pattern: faster product cycles, higher software spend, and a premium on firms that can bridge old infrastructure and new digital services.

Open and peers: building the soft layer utilities are missing

Open positions itself as a vendor that stitches the utility world to the modern web. Its products sit between customers, distributed energy resources and the utility back office. That means customer-facing apps, device control APIs, data pipelines from meters and orchestration tools for DERs. The business model blends recurring software fees with implementation and integration work. For utilities, that lowers the internal burden of hiring large development teams and speeds up time to market for new services.

Revenue pathways for Open and similar vendors are straightforward: platform subscriptions, per-transaction fees for marketplace-style services, and professional services for implementation. They may also share upside through revenue-sharing deals when they enable new customer products, like demand-response programs or rooftop solar marketplaces. Unlike systems integrators that only do one-off projects, these vendors aim for ongoing contracts that convert one-time capex into steady opex for utilities.

In the utility value chain, such vendors sit at the intersection of IT and OT — connecting billing, customer relationship systems and physical grid controls. That role gives them leverage: if a vendor becomes the default provider for DER orchestration or customer engagement, it can influence how value is split between utilities, device makers and end customers.

How this reroutes value for investors: winners, losers and capital flow

For shareholders, the big change is where returns will come from. Traditional utility returns have come from long-lived assets and stable rate bases. The new era adds variable, software-driven earnings. Winners will likely be utilities that adopt platform models strategically: those can unlock new fees, reduce operating cost per customer, and improve customer retention. Vendors that secure large, multi-year contracts will see recurring revenue and strong margins once scale is reached.

Losers include utilities that cling to old procurement models and slow integration timelines. They will face higher implementation costs, missed revenue from new services, and potential political pressure for poor service outcomes. On the supplier side, pure hardware vendors may struggle as buyers prefer integrated software-hardware solutions or cloud-first approaches.

Capital allocation will shift: expect more spending on software and services (operating expense) and smarter, smaller capital projects that prioritize flexibility. This can lower headline capex but raise ongoing contract commitments. For fixed-income investors, the credit picture is mixed: lower capex can improve cash flow, but long-term service contracts create new obligations that ratings models must treat differently.

We’re cautiously optimistic. The change favors firms that move early and scale. But timing matters: revenue recognition, contract stickiness and integration success will separate winners from also-rans over a multi-year horizon.

What could go wrong with the new playbook

There are clear downside scenarios. First, regulatory pushback could slow adoption. If regulators view vendor-led models as shifting risk unfairly to ratepayers, they might restrict recovery of service fees or impose tighter oversight. Second, technology integration often underestimates legacy complexity. Projects can overrun cost and time budgets, denting investor confidence and margins. Third, customer behaviour is unpredictable: not every customer will pay for premium digital services or adopt DERs at scale, which would shrink the addressable market for platform vendors.

Finally, cybersecurity failures or high-profile outages tied to new software could trigger heavy fines and reputational damage, accelerating regulatory scrutiny and making utilities more cautious about outsourcing critical controls.

Concrete signals investors should track next

Watch a handful of measurable cues. Track the portion of utility spend moving to software and services in quarterly filings. Monitor rate cases for language around recovery of subscription-style fees and DER-enablement costs. Look for multi-year vendor contracts with revenue-share clauses or performance-linked fees — those signal durable vendor economics. On the operational side, measure improvements in customer churn, digital engagement metrics, DER interconnection times and outage restoration speeds after vendor deployments.

Also follow regulatory milestones: new distribution planning rules, cybersecurity mandates, and tariff reforms that reward flexibility. Finally, use vendor signals: customer win announcements, platform adoption rates and any move from one-time projects to recurring contracts. When several utilities begin to standardize on the same vendor, that’s a clear sign the market is consolidating in favor of software-led players.

For investors, the choice is now tactical and strategic. The sector’s income stability remains valuable, but the story of future returns is increasingly written in code, not just copper. Firms like Open are small gears in a much larger machine — and those gears could decide who pays less and who earns more over the next decade.