Cisco Smart Grid Efforts Include Alliance, Acquisition

Over two days, Cisco Systems bolstered its smart grid efforts by partnering with Itron and buying Arch Networks.

Cisco Systems is ramping up its push into the smart grid space, bolstering its efforts with a partnership and an acquisition.

A day after Cisco unveiled a partnership with Itron to create an IP-based communications network for the smart grid market, the networking giant announced Sept. 2 that it is buying Arch Rock, a privately held company that makes IP-based wireless network technology for smart grid applications.

No financial details were released. Cisco expects the deal to close by the end of the year.

Combined, the two moves illustrate Cisco's aggressive push into the burgeoning smart-grid market, an effort that started in May 2009 when the company announced its Cisco Smart Grid Initiative. At the time, Cisco officials said they believed it could become a $20 billion market, and they haven't backed away from that idea over the past 15 months.

Cisco is looking to take its networking and communications expertise and apply it to the power industry, making both the delivery of energy by utilities and the consumption of power by consumers more efficient.

Smart grids is one of more than two dozen new business sectors-which CEO John Chambers calls "market adjacencies"-that Cisco is pursuing as it looks to expand its revenue base by growing beyond its roots as a network technology provider to become a broad-based IT company.

Brian White, an analyst with Ticonderoga Securities, said Cisco's efforts will help it generate more than $100 billion in sales over the next decade, and that the smart grid push-which Cisco officials have said will become a larger financial opportunity than the Internet-makes sense for the company.

"Smart grid also plays into Cisco's Smart+Connected Community initiative that we believe will become significant in the coming years," White said in a Sept. 2 research note. "Looking out a few years, we believe that a meaningful transition to smart grids is inevitable for utility companies and is expected to meaningfully increase Cisco's overall addressable market."

He said he expects Cisco to use Arch Rock's technology in the smart meter products it will develop with Itron.

Cisco officials see the Itron partnership as a key to the company's smart grid future.

"The alliance between Cisco and Itron represents a major step forward in the realization of a modern, more intelligent energy infrastructure," Laura Ipsen, senior vice president and general manager for Cisco's Smart Grid business unit, said in a statement. "Together, we aim to enable standardization of the smart-grid architecture and help create an end-to-end communications platform. As a result, utilities will benefit from an energy grid that is more secure, scalable and reliable, as well as solutions that are easier to maintain and able to support future needs."

Cisco and Itron will jointly create a reference design for a standard to be used for smart grid and smart metering network communications, using IPv6, the latest version of the Internet Protocol.

Using the protocol will mean greater network performance and enhanced communications. IPv6 also integrates network security into its framework.

Itron will embed Cisco IP technology into its OpenWay meters and sell Cisco networking hardware and software as part of its smart meter deployments.

Arch Rock's technology enables utilities to connect such distributed intelligent devices as smart meters over wireless mesh networks, which Cisco officials said dovetails with its partnership with Itron.