Cisco Rethinking Energy Market Strategy

It was a blink-and-you-missed it comment made during Cisco's fiscal fourth quarter earnings call, but there it was: Cisco is de-emphasizing its investment in the energy management market.

Gary Moore, Cisco's executive vice president and COO, said during the call that Cisco is rethinking its strategy around energy management devices and also its Network Building Mediator product, which addresses utility usage in buildings.

"We communicated this week the decision to adjust our investments in our energy business to match the needs of the market by focusing on energy management through standards-based solutions and will no longer be investing in premise energy management devices," Moore said during the call. "As part of these efforts, we're exploring options for our Network Building Mediator and Mediator Manager product line."

Moore's statements followed reports earlier this month suggesting Cisco was backing off of its building management initiative entirely, and that the futures of the Network Building Mediator products were uncertain.

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The energy market has previously been a key "adjacency" for Cisco, but Cisco has changed a lot of the rhetoric around its so-called "30 adjacencies" as the company restructures and looks to refocus on core technology markets.

There's more evidence of changes to Cisco's energy strategy. Cisco, for example, confirmed to CRN and other outlets that Ed Richards, a former director of worldwide business development, had taken Cisco's early retirement package. It was Richards' company, Richards-Zeta, that Cisco bought in 2009 to spearhead its building management market presence.

Cisco also discussed its changing strategy in a post written by Laura Ipsen, senior vice president and general manager of Cisco's Connected Energy Group, and posted to Cisco's Platform corporate blog late Wednesday.

"As with every business, we must be vigilant in applying lessons learned and willing to adapt our strategy to evolving conditions be they economic, technological or policy-related," Ipsen wrote. "So after several customer pilots, we are refining our strategy so we can most effectively apply our experience and expertise in IP-based communications to the electric, gas and water networks globally."

Ipsen also said that Cisco is still deciding what to do next with its Mediator and Mediator Manager products, echoing Moore's comments on the earnings call.

"We are actively pursuing several strategic options for Cisco's Network Building Mediator and Mediator Manager product line, with an emphasis on minimizing the impact on current customers, partners and employees." Ipsen wrote. "For energy management in the home, we will transition our focus from creating premise energy management devices to using the network as the platform for supporting innovative applications and architectures that will improve our customers' value proposition in the consumer energy management market."

NEXT: Cisco's Role In The Smart Grid Ecosystem

In recent years, Cisco Chairman and CEO John Chambers has described smart grid as a potentially $20 billion-a-year-business.The smart grid energy market overall has been eyed for some years by vendors and solution providers alike as a potential golden opportunity for IT investment. In a 2010 study by ABI Research, global investment in smart grids and smart metering technology was pegged at about $45 billion by 2015.

Cisco's changing energy strategy comes as some of the industry's best known vendors rethink their own moves specific to the market. Microsoft, for example, is in the process of closing down Hohm, its energy management service. Google is also shuttering its home energy monitoring service, PowerMeter, later this year.

Meanwhile, IBM acquired building management software specialist Tririga in March, joining companies like Honeywell (buying Akuacom and E-Mon), Schneider Electric (Vizelia and D5X) and Siemens (SureGrid) that have bought building management-centric assets in the past 18 months.

There are also a number of companies like Redwood Systems that focus specifically on the building management market and offer installation and integration opportunities through channel partners.

Cisco made several moves in 2010 focused on the market segment, including its September 2010 acquisition of Arch Rock, a maker of IP-based wireless network technology for smart grid applications, and its strategic alliance with power metering vendor Itron, announced that same month.

The greater role for channel partners in the segment remains vaguely defined. In an interview with CRN last fall, Paul DeMartini, vice president and CTO of Cisco's Smart Grid team, said the opportunity is nascent.

"From my own experience, there's an enormous amount of money and effort and basically mindshare being spent on getting the basic systems working," DeMartini said. "Moving to a standards-based platform, there's much more attention and energy that can be focused on getting solutions integrators to create business value for these customers."

In her Wednesday blog post, Cisco's Ipsen said Cisco will remain focused on the segment.

"Our commitment to the industry remains strong and our vision for energy management and Smart Grid has not changed -- to transform energy production, distribution, consumption and management using an end-to-end IP platform," Ipsen wrote.