CISCO has been talking about Smart + Connected Communities which have a single intelligent common network backbone on which multiple services can be built and provided thereby increasing efficiencies and effectiveness of the services.
They have been promoting this service for a reasonably long time now with some moderate success. When you think of the different challenges that CISCO has with regards to S+CC is very similar to the challenges that Sun Edison faced a few years ago.
A little about Sun Edison:
They were an organization in the business of installing and maintenance of solar power systems for large organizations. They had considerable expertise in installing and maintaining these solar systems. They had customers who were interested in these systems as well due to different reasons like green energy, low long term costs, etc. But these installations were huge requiring very high capital expenditures upfront and their customers were not willing to commit to such high capital expenditures.
They solved this challenge in a very unique way. They did the following:
1. Find customers (Example: Wal-Mart) who are willing to pay for the usage of the solar power once it is made available to them. They signed long-term power purchasing agreements (PPA’s) with this customer.
2. Find investors who want reasonable long term returns on investments (For example Pension funds). They sold the PPA’s to these long term investors who were then willing to invest in the upfront capital expense and considered this as the investment on which they get stable returns.
3. They also signed up with these investors for the maintenance of these installations.
4. Majority of their profits came from these maintenance contracts.
CISCO can also benefit from a similar strategy with some modification/adaption to overcome the challenge of high upfront capital expenditure for their customers.
Sun Edison was acquired by MEMC in November 2009. Here are some links from Sun Edison site which explains their business model:
This again goes to show that there can be solutions to our challenges around us and it pays to research well whenever we face some very stiff challenge.
