CISCO +Siemens + SAP/SYBASE: My Smart Grid Combo Dream Team # 2

So why CISCO?

Living into the smart grid future will require innovation, entrepreneurship, speed and flexibility to shape the standards, imaging the market potential, and assemble the modular components to make it work. It is more architecture than engineering.  It requires that marriage of IT and operational technology (OT) often lauded but rarely delivered.  CISCO has the networks, collaboration and data center management skills to make smart grid hum!  It has the server technology and smart grid market presence to be an immediate contributor to the scalability of the investment.

With a market cap of $133 billion CSCO has the scale and presence to lead a smart grid future and the entrepreneurial DNA to keep innovating its way thru the standards setting and morphing of the segment.  Its many acquisitions give it experience with integration.  But CSCO alone lacks the power systems expertise and the back of enterprise operations skills to make all the solutions and services work once you plug all those CSCO parts together.  If CSCO wants to successfully compete to be one of the market leaders in the smart grid consolidation race underway it needs to bulk up on services at the customer end of the value chain and bulk up on power systems expertise at the operations end.

And most important, CISCO and SYBASE bring the Silicon Valley entrepreneurial culture to offset the bureaucratic ABB power system tradition and the task-master SAP German culture of enterprise software.  The combo probably will not work with the Germans or Swiss in charge but they are essential to make it work seamlessly and with precision over time.

SAP recently announced it was acquiring Sybase to expand its mobile platform potential and give it a market presence beyond its traditional enterprise software services business line.  Together they have a market cap of $55 billion. This combo seems to suggest that mobility is the SAP wave of the future.  That’s OK but it is a crowded space and wireless is a means to an end not the BIG deal.  SAP is locked in a fierce battle for market leadership in the enterprise software space with Oracle.  This is a dead end that limits its flexibility and forces it into a race to the slaughterhouse of cloud computing services from IBM and others out to take market share by building better mousetraps.

SAP is still on my short list of possible smart grid dream team combinations because it has the enterprise software capacity and the scalability to deal with that tsunami of smart meter data at the front end of the energy value chain as well as the enterprise back end.  But SAP lacks the knowledge of the electricity sector and the network and server capabilities to make the smart grid cloud work.

Joining forces with players like CSCO and SI to build a smart grid enable future does nothing to diminish SAP’s enterprise software potential in global markets but it frees it from the death march against a larger Oracle and puts Larry Ellison on the defensive playing catch up to a fearsome combination with a $282 billion market cap—more than twice ORCL’s $113 billion—with vastly better core competencies and capacity to deliver solutions.

Siemens is a market leader in power systems and much more including building systems, communications networks, IT solutions, healthcare, and finance with a market cap of about $95 billion and a global presence. Like other conglomerates it has the capacity to take on projects of scale and certainly can manage the infrastructure, data and financial aspects of the smart grid transformation ahead.  But it is too small to beat GE and ABB on its own and “dabbling” with acquisitions like Ventyx do not do enough to add the full range of capabilities it needs to dominate the smart grid future.  And for players like Siemens –as the old joke goes—if you are not the lead dog the view is always the same.

Dominating the smart grid future is a game of skill and chicken.  The skill is assembling the right players and technical pieces to quickly dominate the North American and European markets and then extend that reach around the world.  It is also a game of chicken because you won’t get a second change to build the dominate team in this fast consolidating market.  You have to do it right the first time and you must be bold about it both marking your territory for dominate leadership and terrifying your opponents into dating  and marrying some weaker and uglier guy in the corner.

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