Anyone wondering when and where Cisco Systems Inc. was going to make its big push into the smart grid can stop wondering – it's now, and it's going to be everywhere.
Well, not quite everywhere – the networking giant isn't going to be building smart meters.
But in a Monday announcement, it laid out a smart grid strategy that includes linking those smart meters, as well as distribution and transmission monitoring and automation systems, into an "end-to-end, highly secure network infrastructure" that will also include data storage and energy management systems for homes and businesses.
"We see the smart grid communications infrastructure market to be in the realm of about $20 billion per year over the next five years," said Marie Hattar, vice president of network systems and security. "We at Cisco are hoping to participate in that market and play a leadership role there."
It's a bold pronouncement from a company that first stepped publicly into the smart grid space late last year, when it joined with giants like General Electric, Microsoft, IBM, Intel and Oracle in the Pecan Street Project, a smart grid effort being formed by municipal utility Austin Energy.
Cisco's next smart grid move came in January when it announced EnergyWise, software meant to link commercial buildings' phones, computers, and eventually HVAC, lighting and other building systems in an integrated energy management platform (see Cisco Jumps Into Energy Management for Computers, Buildings).
Last month it got into the smart meter business with a partnership with Florida Power & Light and its $200 million Energy Smart Miami project, which aims to link the city's homes and businesses with two-way communicating electric meters. That project also includes GE and smart grid communications networking provider Silver Spring Networks (see A Million Smart Meters for Miami).
Cisco will provide communications infrastructure for that Miami project, mostly at the distribution and transmission levels, Hattar said. But it's also working with utilities including Duke Energy and ITC in the United States, as well as Italy's Enel, France's EDF and Germany's Yello Strom, on other aspects of its smart grid plan.
"We're looking at a partnering strategy, but creating an ecosystem so utilities have their choice of who they want to utilize" for smart meters and other smart grid devices, she said.
While she wouldn't say which smart meter makers Cisco was working with, she did say the company would seek to integrate into its Internet protocol-based system smart meters that use proprietary communications technology as well as those based on IP (see Smart Grid: A Matter of Standards).
Cisco is also developing ways to integrate legacy utility protocols such as SCADA into its network, Hattar said. In terms of transmission and distribution communications, Cisco will be bringing ruggedized switches and routers for grid communications "over the next 12 to 16 months," she said.
Monday's announcement positions Cisco as a major threat for every other company in smart grid. Cisco, after all, is the dominant force in computer networking, and smart grid systems likely will be based to a large degree around the same protocols, software and hardware.
For Cisco, smart grid represents an opportunity to take its know-how into a new, and potentially larger market.
"If you think today about how large the routing and switching market is, it's about a $25 to $30 billion market," Hattar noted. "So if we're looking at $20 billion being the start of the [smart grid] rollout, I think it will far eclipse" the routing and switching market, she said.
Cisco already has a big footprint: big utilities and large corporations already own its equipment and a lot of consumers have wireless Internet gateways in their homes.
Just as important, Cisco has shown an uncanny knack for corporate diplomacy, with one of the best track records for buying companies and actually incorporating their technologies into their own product lines.
While Hattar wouldn't say whether Cisco was looking at any smart grid acquisitions, the company did acquire Richards-Zeta Building Intelligence, a building systems technology provider, in January. Several acquisitions in the smart grid industry over the past year or so have led to speculation that Cisco may be shopping for more (see Acquisitions in Smart Grid: Get Used to It).
Cisco's move was anticipated in a research note from Pacific Crest Securities analyst Brent Bracelin, who cited it as a natural contender in a smart grid IT market he estimated as a $3 billion to $5 billion annual opportunity over the next four years - lot smaller than Cisco's $20 billion-per-year estimate, but still sizable.
"Smart grid is such a new, nascent market," he said. "Cisco's not coming in and replacing people. What they are doing is coming in and saying, let's provide a suite of products that address the needs, and make energy distribution and monitoring and management more efficient."
Cisco also participates and often guides standards bodies and interest groups. Many expect Cisco to do the same here, particularly as it moves from managing energy in things it knows well, such as phones and networking equipment, into trying to manage power in buildings or between homes.
Cisco's business energy management push will be centered on its EnergyWise offering, Hattar said. Partners on that effort include computer power management startup Verdiem and network management software developer SolarWinds, as well as building controls maker Schneider Electric.
As for the home energy management business, an emerging market that includes startups like Tendril Networks and Greenbox Technology as well as large-scale appliance, thermostat and home automation players, "This is really a signal to say that we intend to be entering the home energy market," Hattar said. "At this point, we're not announcing the product."
Cisco also wants to play a role in "the significant build-out of data centers for utilities" to store the masses of data that smart meters and grid sensors will provide, Hattar said - a goal that meshes with Cisco's recent push into the server market (see New York Times story).
John Quealy, managing director of research for Canaccord Adams, said that Cisco 's biggest opportunity likely lies in the building energy management fields, where its existing presence gives it an advantage.
Cisco's emphasis on IP-based networks could also be a boost to companies seeking to use WiFi for in-home energy monitoring and management systems, such as GainSpan and Radio Thermostat Co. of America (see Get Ready for the WiFi Thermostat).
Distribution and transmission communications could be a harder nut to crack, Quealy said, given the smaller size of the market and the established position of competitors such as RuggedCom, not to mention efforts by giants like GE (see GE Offers WiMax Smart Meter Solution).
But, of course, Cisco's role as a "one-stop shop" for utilities looking to integrate various legacy and emerging technologies could give it an advantage, he added.
"It is a compelling value prop to have a highly visible networking firm help a utility roll out its network," he said – a fact that has not been missed by players like Oracle, GE and IBM, which have their own smart grid initiatives.