I recommend taking a look at Grid Net for a sense of where the market is likely to go next. In my recent chat with Ray Bell, Grid Net founder and CEO, I came away impressed with his strategic insights. He has a great sense of which issues will come to the fore as the Smart Grid enters the next phase of its evolution.

Whether or not Grid Net will be on the right side of those issues remains to be seen. But succeeding as a startup requires you to make some bets — and Ray is placing two big ones. He’s also facing a big new competitor.

(If you are not familiar with Grid Net, jump over to our company profile for a quick overview.)

Bet Number 1: Standards

To hear Ray Bell tell it, the Smart Grid isn't much different than any other communications network. So it’s no surprise that he’s borrowing business models from the networking and cable industries, where he had long experience before entering the Smart Grid space, including time at Cisco Systems.

He's banking that his experience —and the insights it gave him —will make him successful again. In fact, he left the CEO slot at Silver Spring Networks, a Grid Net rival (and in full disclosure a SGN sponsor), when his colleagues insisted on a closed design. He firmly believes open standards reduce costs and complexity, and make it easy to add services and applications across the network. In theory, it's all just plug-and-play.

It’s no surprise then that his PolicyNet Smart Grid NMS™ operating system is built on open standards. Or that it is designed to be the same kind of “carrier-class” system that the telcos and cable companies run today. It’s the open design that really sets Grid Net apart from rivals, and Ray is convinced that’s key to his company's success. No surprise there, either. The same strategy had great success at Cisco Systems, which pressed for open hardware standards and won, leaving companies with proprietary modems in the dust.

Bet Number 2: WiMAX

Bell is also betting on the WiMAX wireless platform. Many folks question whether WiMAX will catch on in a big way. Sure it's faster, more powerful, and more secure than today’s cellular or WiFi —but that extra capacity seems like overkill to some. So I asked General Electric VP John McDonald what he thinks. His team ran the numbers and found that WiFi is more than adequate for today's needs, but will rapidly choke when utilities add distribution automation and real-time control. Bandwidth needs are going to add up exponentially in the years ahead.

That bandwidth concern may explain why GE is betting (at least partly) on WiMax as well. In fact, GE is a Grid Net customer and uses Grid Net technology and design for its WiMAX-based smart meter. But GE is a Silver Spring customer, too. So I asked Ray face-to-face what he thinks about his best customer also playing on the opposing team. As Bell sees it, he can simply open source his technology, effectively making it a standard. Doing that puts him in a strong position to focus on application software that runs on the network.

And if he's wrong about WiMAX? He assures me his OS can run on the top of any transmission system.

Our Take

Smart Grid vendors have been able to get away with proprietary and semi-proprietary systems until now. We think that era has ended. (Even the Smart Grid stimulus bill continues to up the ante on standards, as noted in the news story linked at the end.) We think Bell’s standards bet will pay off. How much depends on how fast his rivals catch on and how fast they convert.

WiMAX is harder to judge. My gut tells me it is going to succeed. But I don’t have any hard evidence other than my instincts from decades as a technology analyst.

In either case, Bell’s biggest challenge may be his former company, Cisco Systems, which has just launched into the Smart Grid space in a big way (see link below). In theory, Bell should know how to negotiate this fine line in a way that turns his company into a Cisco asset and partner. In practice, Cisco often stomps on entire categories of companies when it sets out to dominate a market, and Grid Net could end up as collateral damage.

   SGN’s Grid Net Profile

   SGN’s May 19 news story on the latest standards pronouncement

   SGN’s story on Cisco’s entry into the Smart Grid market