The Big 6: How ABB stacks up against the other giants in the smart grid race
By Jesse Berst
Pundits sometimes joke that ABB stands for "A Bunch of Businesses." In reality, most of ABB's money comes from two areas, a) automation (industrial automation, process control, robots) and 2) power (T&D components, substations, switchgear).
The Switzerland-based company describes itself as "a global leader in power and
A broad portfolio. For the past several years, ABB has been filling gaps in its capabilities. Today it has arguably the most balanced portfolio, thanks in part to recent acquisitions such as:
Â· Baldor Electric (variable speed electric motors)
Â· Epyon (EV charging)
Â· Mincom (software and services)
Â· Obvient Strategies (asset management)
Â· PowerCorp (renewables integration and microgrids)
Â· Thomas & Betts (low-voltage electrical components)
Â· Trasfor (specialty transformers)
Â· Tropos Networks (field area networks)
Â· Ventyx (IT and back office)
Â· A controlling interest in Validus DC Systems (direct current infrastructure for data centers)
Robust balance sheet. It's often smarter for big companies to buy their way into new markets, rather than relying exclusively on internal innovation. ABB has the money to play, as it has already shown with a string of acquisitions. The parent company has a market capitalization north of $41 billion. TheStreet website says ABB's strengths "can be seen in multiple areas, such as its revenue growth, attractive valuation levels, and largely solid financial position with reasonable debt levels."
A truly global company. More than 50% of ABB's revenue base is in high-growth emerging markets such as China and India. The smart grid is a global phenomenon and ABB is ideally suited to cash in.
Industrial-strength capabilities. ABB may not be as nimble as some in the medium-voltage and low-voltage spaces. But there's no denying that it is up to virtually any electric power challenge, no matter how formidable.
Software/hardware balance. ABB's acquisition of software company Ventyx looks better and better in hindsight. All of its competitors are working hard to improve their software capabilities, but ABB has the lead in my view (use the Comment form to agree or disagree).
Making acquisitions work. Most big industrials crush the life out of the companies they buy, slamming them with bureaucracy and massive overhead. In the smart grid space, ABB has done better than most, at least with the Ventyx acquisition. After that purchase, it not only allowed the company to operate independently, it transferred many of its software activities to the more nimble Ventyx.
Despite that success, it is very easy for big companies to get distracted by shopping for the next acquisition or slowed down by the pain of digesting the last one. Indeed, the parent company has been chided by analysts for "overpaying for acquisitions and not delivering synergies."
Becoming software savvy. I told you recently why General Electric is now a software company. In short, value is migrating from hardware to software, accelerated by the Internet of Things (IoT) and all the data it makes available. Like all the other industrials, ABB must learn to become a great software company too. Fortunately, it has made a strong start. "We acquired Ventyx to bring software to ABB's core. Ventyx is a play to bring IT and OT together" Bane told me.
Improving thought leadership. ABB was late to jump on the smart grid bandwagon. Even today, its market share outpaces its mind share. Customers rightfully turn to ABB for best practices and solid performance. But ask those same customers where they look for thought leadership and they are more likely to answer Silver Spring Networks or Cisco or even General Electric.
I see at least two places where ABB could and should step forward. First, the smart grid division could get a lot of mileage by getting in front of the trend to merge IT and OT. They're doing it. But they're not leading the conversation.
Second, the company as a whole needs to respond to the Internet of Things (IoT) challenge. IoT is now established as The Next Big Thing (and the smart grid as the IoT's first showcase). ABB needs a unifying corporate initiative that explains to the world why it will be a major player in this burgeoning sector. IBM has its Smarter Planet. General Electric has its newly announced Industrial Internet initiative. Siemens has its "Internet of Things at Work" research effort. ABB needs a future-friendly umbrella story as well.
ABB's top management has historically stayed out of the spotlight. At this juncture, I think they should drop their Swiss staidness. It's time to show thought leadership.
Low-cost hardware. I believe all of the major industrials need to be concerned about the arrival of low-cost equipment sourced from China, Korea and other low-cost centers. For instance, I am aware of several companies selling transformer monitors that do 80% of the job at 20% of the cost compared to "traditional" ABB gear. From where I sit, none of the industrials is taking this threat seriously enough.
How do you see ABB vis Ã vis its competition? Please vote in the Quick Poll and add your insights and experiences to the discussion using the Comment form below.
Jesse Berst is the founder and chief analyst of Smart Grid News.com, the industry's oldest and largest smart grid site. A frequent keynoter at industry events in the U.S. and abroad, he also serves on advisory committees for Pacific Northwest National Laboratory and the Institute for Electric Efficiency. He often provides strategic consulting to large corporations and venture-backed startups. He is a member of the advisory boards of GridGlo and Calico Energy Services.