Cisco and IBM Muscle Their Way Into the Smart Grid

The beginning of the smart grid gold rush was marked by a profusion of startups, all touting different technologies for reducing energy usage and giving utilities more control. In the cacophony, it was difficult to see how things would end up, much less who would end up providing any direction. Any of the startups would have happily nominated themselves. A small set of much bigger companies, though, has different plans.

Cisco is announcing this morning that it's at work to create a "partner infrastructure" of companies all using a common IP infrastructure, to promote interoperability. Under its direction, the company hopes to guide the smart grid by building the network that it runs on â€" a network which all the smaller players must be able to work with.

To be fair, that's not an undesirable aim for anyone. Cisco is pushing an internet protocol (IP) similar to what it uses for its internet business. Because IP is a familiar and highly adaptable technology, utilities should be more willing to spend money on new smart grid networks once it's in place. This just happens to be advantageous for Cisco, with its pre-existing expertise; as senior director of marketing Inbar Lasser-Raab put it to me, "We're a very dominant player."

IBM wants to be in a similarly dominant position, so it just unveiled a system it calls SAFE, for Solution Architecture for Energy and Utilities Framework (hopefully, the name is the most unwieldy part). In essence, it's a software platform for utilities to use in managing their network. Startups are welcome to build applications for SAFE, but IBM wants to be the Microsoft-equivalent of the smart grid â€" having bungled its chance to be the real Microsoft in the 1980s.

Together, representatives from the two companies stood with the mayor of San Jose, Calif. yesterday to announce a new smart meter initiative ... pending funding, for which they're looking to the Federal government. Pacific Gas & Electric, the utility involved, just applied for $42.5 million in stimulus cash.

That's a scenario likely to play out in many other areas around the country, with Cisco, IBM and other giants like General Electric gaining traction not only because of their products, but because they are becoming deft hands at drawing funding. Smaller companies making the equipment and software applications won't have anything to complain about, but they probably won't be in charge.

Still, not everything is shaken out yet. Building the smart grid is a huge undertaking, and it's not yet apparent who the biggest winners will be. "The utilities are upgrading their grids for the first time in a hundred years," says Cisco's Lasser. "So they want to make sure they get the right one."

Incidentally, Lasser also says Cisco also has another new utility contract, but it can't yet announce who it's with. Update: The utility is Enmax. Another new development today is in southern California, where San Diego Gas & Electric has announced a new coalition with Cisco, IBM, GE and others.