The Rush to Internet of Things Platform Dominance- General Electric Opens its Predix Technology Platform
Supply Chain Matters has featured prior commentary regarding General Electric and its ongoing efforts to transform itself from a diversified industrial equipment manufacturer to that of both an equipment and software services provider. GE is an ongoing case study in the leveraging of Internet of Things (IoT) technology into new business models for its customers and for GE itself. The core of GE’s Industrial Internet strategy is the Predix IoT platform tailored for operating equipment environments.
In conjunction with the Mobile World Congress trade show being held in Barcelona, GE announced today the GE Digital Alliance Program, an effort dedicated to growing its digital industrial ecosystem. This expanded alliance program is billed as connecting systems integrator’s telecommunications service providers, independent software vendors, technology providers and resellers with the technology and digital industrial expertise of GE. For the first time, GE alliance members will be able to train and certify their developers and begin building a variety of additional industrial applications with Predix.
In a prior commentary reflecting on GE’s 2015 financial performance, we noted that the new GE Digital business unit delivered a reported $5 billion in revenues in 2015. The company’s goal is to triple Digital Business revenues by 2020.
Development efforts surrounding the core Predix operating system began in 2012 as an internal effort to connect the vast amount of sensor data generated by equipment products. By 2013, GE began to analyze data among fleets of machines and equipment to discover important analytics related to operational performance and maintenance needs. Operating units began to correlate certain operating environments with performance outliers and needs for unplanned maintenance. It was then that GE executives began to view Predix as a data and analytics platform tailored for the unique and demanding requirements of many forms of equipment networks made up of aircraft engines, turbines, wind mills or sophisticated medical equipment. That includes collecting very significant volumes of real-time data and harnessing that data into more predictive analytical insights into asset up-time and reliable performance. The CTO of GE Digital is of the belief that Industrial Internet platforms will break the zettabyte barrier (1000 exabytes) in the next five years.
GE has invested upwards of $1 billion in its Industrial Internet efforts thus far, in-essence making a significant strategic bet on the Predix platform. The industrial giant holds a strategic card as well, namely current existing customer relationships with global industrial companies eager to leverage new and more recurring revenue streams. Make no mistake, the expanded Digital Alliance program is a wide swath initiative to build extensive influence and critical technology and development mass in the IoT marketspace.
With today’s announcement, GE unveiled new Digital Alliance collaborations with Intel, Capgemini, TCS, Deloitte Digital, Infosys, Genpact, Softtek and Wipro Limited. They join existing Digital Alliance partners Accenture, AT&T, Verizon and Vodafone, Softbank Corporation and Cisco. We recently brought reader attention to Cisco’s announced acquisition of Jasper Technologies to broaden that firm’s IoT platform.
Other enterprise technology providers recognize the vast potential of IoT enabled business models that link equipment performance with add-on services. Thus, as Supply Chain Matters has observed, the battle of which platform is to be most utilized in now underway, and there is a lot at-stake. Firms such as Cisco, PTC, Microsoft and Oracle are now engaged in this effort of influence among IoT development communities.
As Supply Chain Matters has previously advised, the early adopters of IoT enabled business models related to industrial and supply chain needs should exercise some caution in their early prototype development efforts. Understand that vendors are indeed positioning for dominance and to do your homework on the long-term resilience and scalability aspects of the network platform. Just like previous item level tech waves such as RFID, the perspective is far broader than any existing single technology or services provider.
Vendors with influence and large pockets will continue to positioning for platform and indeed partner and industry dominance, but that should not be deterrence to early adoption business initiatives for new business models that can leverage IoT information. . Early adopters also have a buyer’s advantage in that customer references and early success stories are critical for technology vendors and services providers vying for dominance.
A large building or business initiative requires a solid foundation built for endurance, solid architecture and partner support resources. That should remain a guiding principle.
© 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
General Electric recently announced its fourth quarter and full 2015 financial results and made it a point to call attention to its new GE Digital business unit. It did so because GE’s bold goal is to be a top 10 software company by 2020. In its press and media outreach, GE declared that GE Digital accomplished $5 billion in 2015 revenues with anticipation of far more growth in the coming years.
This relatively new GE Digital business segment was formally launched in November after a series of internal re-alignments. The unit brings together all of GE’s digitally focused and Industrial Internet capabilities under a single business focus. This includes GE’s Software Center, the company’s global IT and commercial software teams along with cyber security teams.
The underlying mission of this business is to make intelligent machines and connected industrial equipment as an emerging reality. GE is of the belief that the Industrial Internet could add $10 to $15 trillion to the global economy over the next 20 years. This includes aircraft engines that can self-diagnose operating performance, alert to pending operating maintenance needs and automatically order required repair components. Railroad locomotives that can communicate onboard diagnostics, train operating conditions and train rail car composition. Data can be analyzed across fleets of similar equipment providing design engineers timely performance information while fleet owners have the ability to optimize operating assets.
GE executives are quick to differentiate Smart Machines and Industrial Internet from Internet of Things (IoT). The latter GE views as more consumer market focused. The Head of GE Digital, Bill Ruh, states in a recent blog post: “There’s a difference between running a smart thermostat in your house and controlling a power plant. We work in mission critical environments.”
Some in today’s broader tech world of IoT may take issue with GE’s succinct differentiation of consumer vs. industrial facing connected devices. Suffice to point out that the opportunities are indeed enormous for both dimensions. However, by our lens, it is rather important to differentiate the different scale, scope and function of needs for both, especially in the data security and scalability dimensions of industrial applications.
GE has indeed been a pathfinder in the notion of connected machines and is now beginning to harvest the financial and market benefits for being an early innovator. From its longstanding industrial roots, the company can surely grasp the notions of what is required for mission critical operating environments.
Other industrial manufacturing and enterprise software providers will surely escalate their commitment to intelligent machines and by 2020, there may well be a different software provider landscape with competitive dynamics. What we term IoT today become more differentiated and more succinct in application. As with all prior tech revolution, there will be winners, laggards and market casualties.
The good news, however, is that bringing the physical and digital aspects of supply chain information and decision-making together are no longer a distant vision, but within the realm of a five-year goal.
Up to now, Supply Chain Matters had not had the opportunity to weigh-in on this week’s rather stunning announcement regarding the intent of China’s appliance giant Haier to acquire General Electric’s Appliance business for a reported $5.4 billion.
Readers may recall that GE previously attempted to sell its appliance unit to Europe based Electrolux for $3.3 billion but that effort did not meet the approval of government regulators. Now, a similar process begins regarding this Haier deal and the prospects are just as challenging since this is a China state-owned company acquiring a very iconic global and U.S. brand. The deal calls for Haier to gain rights to the General Electric brand in appliances for the next 40 years. As we have noted in prior commentary, China’s manufacturers have long coveted global brand presence, at the GE brand is a jewel. Haier was obviously willing to pay far more for access to such a brand as well as deeper U.S. manufacturing and supply chain presence.
As today’s edition of The Wall; Street Journal points out, Haier has twice before attempted to buy its way into the U.S. market including a 2008 attempt to acquire the GE Appliance unit. In 2005, the Chinese firm unsuccessfully courted Maytag, ultimately losing to Whirlpool. The WSJ further points out the peril of this being a year of U.S. Presidential election politics which is a very timely observation. No doubt, we can expect at least a response from Donald Trump if not other would-be U.S. presidential candidates. One could not ask for more attractive political fodder.
If successful, Haier would gain additional U.S. manufacturing presence among GE’s nine manufacturing facilities that include 12,000 workers. That includes the current Haier manufacturing facility located in South Carolina.
One has to also consider the impact on GE Appliance’s current manufacturing workforce and supplier base, each of whom have been buffeted by constant news related to being sold to other global manufacturers. The current announcement adds more months of uncertainty.
Haier’s current U.S. presence has been limited to niche products and mostly privately branded wine refrigerators and window air conditioners. Thus, if this deal passes scrutiny, there are obvious short and longer-term industry supply chain implications. Haier currently indicates that it will maintain GE’s U.S. manufacturing presence in appliances. That is obviously reassuring and gains points for regulatory muster.
Obviously, this is yet another industry development to watch in the coming months.
The biggest news last week and perhaps for all of 2015 was the announcement that long-time rivals Dow Chemical and DuPont‘s intend to merge into a specialty chemicals giant of more than $120 billion. There are stated plans to split both enterprises into three separate companies providing different specialty chemical based product offerings.
This proposed deal has obvious massive implications.
Saturday’s edition of The Wall Street Journal carried the headline that this deal cements activists’ rise. A profound quote of that article stated:
“While they (activists) have become increasingly powerful in recent years, forcing companies to do everything from buying stock to selling assets, their ability to help bring about such a monumental deal represents a new high.”
Today, the WSJ further described long-simmering hostilities between Dow CEO Andrew Liveris and activist investor Daniel Loeb which reached a boiling point this weekend after the announcement on Friday. Loeb apparently declared that this deal was too rushed, and called for Liveris’s resignation.
In October, former Dupont CEO Ellen Kullman suddenly resigned after fending off one of the most prominent wave of activist investor assault on a corporate board. Kullman was succeeded on an interim basis by board member Edward Breen while the company searched for a permanent replacement. Breen, whose resume includes being Chairmen and CEO of Tyco International worked with Dow CEO Andrew Liveris to orchestrate this deal.
Our Supply Chain Matters initial perception is that the announced deal provides a significant new and scary watershed as to the degree of influence that activists portend to have on corporate CEO’s. That is qualified, however, as to whether government regulators would allow this deal to go through given the significant implications. Analysts at Piper Jaffrey were quoted as indicating: “The global natures of the antitrust hurdles are likely to be significant.”
The National Farmers Union (NFU) has already expressed its frustration for yet another enormous merger. NFU President Roger Johnson declared: “Having just five major players remaining in the marketplace would almost certainly increase the pressure for remaining companies to merge, resulting in even less competition, reduced innovation and likely higher costs for farmers. This announcement, combined with the on-again-off-again Monsanto/Syngenta merger, is creating a marketplace where farmers will have very few alternatives for purchasing inputs.” The National Corn Growers Association declared it will do all it can to protect farmer interests and preserve an open and competitive marketplace.
Do not be surprised to read of other such declarations.
Since both of these global companies supply materials at the lowest echelons of many different industry supply chains, this proposed merger has significant internal and external implications from many industry value-chain supply dimensions. These will unfold over the coming days and weeks and will likely take on market, technology and human resource dimensions, since the cost and the scale of this merger is momentous and far-reaching. How long the regulatory approval process actually occurs is likely anyone’s guess.
One thing is certain however, the specialty chemicals industry has reached a watershed moment, one that will likely redefine industry players and their associated supply chains for many years to come.
Since 2010, Supply Chan Matters has provided specific commentaries related to the global supply chain challenges of Canada based Bombardier. This week features another milestone, an announcement that Bombardier has hired a new Chief Procurement Officer with the challenge of centralizing all supply chain strategy among its commercial aerospace and surface transportation units while significantly reducing costs.
Our first commentary in 2010 reflected on the new C-Series commercial aircraft program, and how this diversified transportation equipment provider had joined the supply chain outsourcing perils of the commercial aerospace industry. A lot has transpired over these five years and the C-Series program continues to struggle. The cash drain of elongated delays of this program has affected the company financially and earlier this year, led to a number of senior executive changes including a new CEO. In May, the company announced a partial IPO involving its rail transportation business.
The appointment of Nico Buchholz as CPO is unique, in that in his former role as Vice President, Corporate Fleet and Executive Vice President of Fleet Management for Lufthansa AG, he led efforts for acquisition of new aircraft. This included the influencing of the design of the new C-Series, since Lufthansa remains the designated launch airline for the program. Mr. Buchholz is also reported as having an extensive aerospace industry background. In his new role, the CPO will report directly to recently recruited Bombardier President and CEO, Alain Bellemare.
In the announcement, CEO Bellemare indicates that strategic sourcing is key to achieving best-in-class performance and that the new CPO will develop a company-wide approach, structure and clear action plans to make that happen. In its reporting, The Wall Street Journal added that the appointment of Mr. Buchholz places the veteran aerospace executive in a key role for initiating broad cost cutting initiatives.
Centralization of supply chain strategy and sourcing is often a pre-cursor to needed cost reductions, and in the case of Bombardier, it will include four business segments with complex relationships with various global-based suppliers.
Thus begins another chapter of change involving Bombardier’s supply chain, this time with a centralized strategy and approach.
Supply Chain Matters extends congratulations and best wishes to Mr. Buchholz and his extended supply chain team on this new chapter.