Challenges to Cisco’s Smart Grid Strategy

. Cisco is one of America's great companies. But that doesn't mean it has a lock on creating the grid's first operating system.  I see at least five challenges in its way.   Finding the right business model. Can Cisco really foist the cloud computing model onto utilities? After all, utilities make money by building and owning assets. Those assets go into their rate base, on which they earn a regulated return. And utilities notoriously prefer to have close control of all their systems. . Helping utilities find the right business model. Today, utilities are asked to spend

enormous amounts on Smart Grid equipment that has the effect of reducing their electricity sales and revenues. Spend more. Make less. I described this quandary recently as the smart grid threat you are not worrying about (but should be). Unless vendors help their utility customers find viable, economically sustainable business models, they'll face a shrinking market.

When asked how utilities are supposed to pay for it all, Cisco execs hemmed and hawed, eventually admitting that the long-term model was "not yet fleshed out." General Electric's Jeff Immelt was equally unhelpful during a recent press conference, according to an e-mail from a vendor friend in attendance. Immelt reportedly said of utilities: "I think that eventually their model will change, it has to... and someday it will. In the meantime, you want to make sure you are fully invested in the Smart Grid so as to capitalize on it when it does change."

With all due respect to Immelt, utilities are not going to “fully invest” billions in the Smart Grid in the vague hope that someday they'll figure out a way to pay for it. It’s the other way around.

And when I say "help utilities,” I mean everything from financial modeling to benefits analysis to lobbying to research studies to testimony in front of policymakers and regulators. I'm hopeful Cisco is up to it. The company was certainly able to make a difference in the early days of the Internet through tactics such as its Net Impact study.

Finding or training a utility-savvy sales team. The utility sales cycle is long and circuitous. It requires that you get buy off from the CEO, the head of each siloed department, the technology folks, the financial folks, the operations crew, the unions, the regulators and, increasingly, the consumer advocates.

Recruiting and supporting developers. In the long term, victory will go to the platform that has the most applications. Microsoft got very good at supporting Windows developers. Apple thrives in large part because it has a vibrant ecosystem building apps for its iPhone and iPad. Google is urgently recruiting developers for both its browser and its Android operating system. Cisco will likewise have to learn how to lure developers to its camp. (In conjunction with several partners, General Electric just announced a $200 million competition to attract the best new Smart Grid applications. The battle for the brightest minds has already started.)

Finding the competitive/cooperative balance. Cisco is a tough, hard-nosed competitor. Its reputation precedes it. It will be met with hopeful trust by some, but suspicion by others. It is entering a market long dominated by very large, very entrenched companies. It cannot succeed without many partnerships. It must maneuver aggressively yet delicately as it chooses who to treat as friend and who as foe. And as the first company to openly declare itself as an end-to-end solution, it must do all this with a target on its back.

What do you see as the biggest challenge to Cisco’s Smart Grid ambitions? Inquiring colleagues want to know, so use the comment form below. And vote in the Quick Poll to select who you see as Cisco’s biggest foe in the future.

You might also be interested in …

Smart Power Business Models for a Smarter Grid

Why Today's Utilities May Soon Be Obsolete (and What May Replace Them)

Smart Grid Growth Brings Challenges — and More Than a Little Anxiety — for Utilities

The Good News and Bad News about Cisco’s Smart Grid Strategy

From Distributing to Connecting: Utilities’ Evolving Role in a Smart Grid World

Intel's Smart Grid Ambitions: A Swift Kick in the Apps

Related SGN channels …

Smart Grid Strategies

Smart Grid Policy & Regulation

Smart Grid Business Case

Stay connected with SGN …

Smart Grid Discussions: Get LinkedIn with Jesse

Smart Grid on Facebook

Follow Us on Twitter

Try our RSS feed

Get our email digest