This week, General Electric, specifically the company’s GE Digital group, hosted a group of Wall Street equity analysts at its campus in Silicon Valley to present a report of progress. Division CEO Bill Ruh predicted that GE is delivering the winning formula in efforts to leverage industrial networks and the Internet of Things (IoT) in assisting businesses to enable new industrial outcomes concerning asset management.
As Supply Chain Matters has pointed out in previous commentaries, GE has invested significant dollars and resources into the growth of its new digital business since its founding in 2011. Upon listening to the webcast of this briefing, it was clear to this author that GE intends to leverage its perceived first mover market advantage in enable the notions of industrial networks.
Development efforts surrounding the core GE 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.
In this week’s update, Ruh indicated to analysts GE’s forecast of over $6 billion in revenues for this unit this year, with a goal of over $15 billion in revenues by 2020. That 2020 revenue forecast is now lower than previous estimates indicated earlier this year. As we have noted in our other IoT focused commentary, there is still a lot of market education and maturation required.
He outlined four pillars to support this level of growth:
- A keen focus on customer outcomes particularly in business services growth.
- Support of incremental productivity needs of customer.
- The launching of “killer’ applications
- The leveraging of GE’s Predix operating system in the enabling of the Industrial Internet ecosystem. Ruh indicated that by the end of this year, there will be 20,000 developers working on Predix enabled applications.
What makes GE’s approach to IoT enablement unique is its current ability to leverage both advanced digital technologies as well as the deep vertical industrial equipment domain knowledge that exists across GE’s industry verticals. With a strong presence in transportation, commercial and military aircraft, alternative energy, and medical equipment sectors, there are a lot of potential opportunities to leverage. From an organizational perspective, GE currently leverages both a business horizontal and business unit vertical leadership structure surrounding GE Digital.
From a broader go-to-market strategy perspective, executives placed emphasis on ongoing efforts to open the Predix platform environment to more developers and partners and building out a richer ecosystem surrounding the platform. Other efforts are directed at building solid customer references in both traditional and outcome based pricing deals, building digital commercial scale among different key industry verticals.
GE Digital executives went to great lengths to point out their belief that industrial based IoT applications and network opportunities will be a far larger market segments that consumer focused IoT applications, pegging the latter segment as greater than $225 billion by 2020. That stated, during open Q&A, executives indicated a belief the 2017-18 timeframe will be the point of industry inflection in IoT enabled efforts. From this author’s lens, that is fairly consistent with comments and observations we’ve heard from other IoT focused technology and services providers.
One other area we wanted to highlight for our readers was that of GE’s stated approach, namely this this is an ongoing race, and that came across quite clearly in executive level presentations and open Q&A. This is an industrial company that is fostering a software industry type culture of fast innovation and maintaining market dominance. As a further point of reference, GE itself elected to begin efforts to move its corporate headquarters from pastoral central Connecticut to Boston’s seaport tech district principally to foster an overall culture of fast innovation. In March, Jeff Immelt took to the stage to tell Boston’s business leaders just how important their city is in his grand plan to redefine the industrial conglomerate- “I want people that are down in the Seaport, I want them to walk out of our office every day and be terrified. I want to be in the sea of ideas so paranoia reigns supreme.”
That is indeed a different corporate culture for a diversified industrial manufacturer.
GE is in a race among other enterprise technology providers, systems integrators and industry platform providers a race that presents differing roles of partner, co-developer and perhaps key competitor.
Like previous market inflection points such as Client-Server, ERP, RFID, Cloud and now IoT, the race is on, and rather than a sprint, it is a marathon that features many hills and valleys and environmental changes along the route. Only this time, the make-up now includes some very interesting new players, one’s that live, breathe and practice industrial networks, equipment, services and understanding of asset management.
Let the race continue.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
Supply Chain Matters Conversation with Tego- A Different Architectural Approach to Internet of Things Deployment
When this industry analyst attends technology and industry conferences, I attempt as time permits, to seek out what I believe our technology vendors that are providing unique or different technology approaches to business process needs. In our next two Supply Chain Matters postings, I will touch upon two such providers.
While attending the PTC LiveWorx 2016 Internet of Things Technology (IoT) conference in Boston, I had the opportunity to briefly speak with Tego, Inc.
One of the current considerations for business and IT teams in evaluating an IoT technology initiative is the overall architectural approach. Consideration can be given toward investment in a broad-based IoT network connectivity and supporting applications platform, essentially a predominant focus on a system-wide approach. However, some organizations that want to start on smaller, more manageable proof-of-concept or service management type initiatives will often find the platform approach somewhat beyond budget resources. That was the prime topic of conversation that I had with Tim Butler, the Founder and CEO of Tego.
Based in the innovation hub of Boston, and working with clients around the world, this provider’s original mission was in providing high-memory RFID tags along with the supporting technology to transmit data from tagged items. That has migrated to an RF-enabled platform to bring intelligence to assets. Initial efforts have been focused in aerospace and other industry settings where monitored equipment and assets include items such airplane seats, navigational systems, medical and other equipment. Tego’s efforts in aerospace alone have resulted in a supplier relationship with Airbus in the tagging of important serviceable assets such as life vests and seats for new aircraft such as the Airbus A350. Such assets have service lifecycles that extend from 3 to upwards of 20 years and it is important to be able to capture key service information throughout that lifecycle.
This provider offers an integrated and configurable platform consisting of multi-functional TegoChips, ruggedized TegoTags, and Tego OS software platform. The approach is essentially a reverse flow, namely allowing the physical asset to communicate and exchange key information with a database or business application. Butler is clearly passionate about Tego’s different approach and indicated that the firm has encountered many customer prospects with current limited budgets and resources, but has a need to make certain assets and equipment smarter and more interactive with other processes.
Tego’s smart asset approach can further allow businesses to bring intelligence to physical assets that exist beyond the reach of the Internet. As its web site points out, industrial assets don’t necessarily exist in climate-controlled environments bathed in WiFi signals. In the real world, objects can be found in geosynchronous orbit, at the ocean floor, exposed to gamma and x-ray radiation, or boiled in autoclaves. They may only rarely have the opportunity to upload or download data. Tego’s stated mission is to make every asset a smart one.
During our conversation, we also touched upon the topic of information security involving connected devices. Butler provided a compelling argument that his firm’s architectural approach can insure data security. He is not shy in declaring that Tego is setting a standard for new levels of intelligence and insights using a next-generation platform that unites high-capacity memory with unparalleled ruggedness and security.
We found this technology approach to be one that we wanted to make visible to our readers who may be seeking a different option in IoT or connected assets deployment.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
Supply Chain Matters Impressions of PTC LiveWorx 16 Internet of Things Technology Conference- Part Two
Product Lifecycle Management (PLM) and Internet of Things (IoT) technology provider PTC held its annual LiveWorx 16 IoT conference in Boston last week amid over 4500 attendees. Supply Chain Matters in the person of this industry analyst was invited to once again attend this annual event and walked away with varying impressions regarding the state of IoT adoption and on some shifts among PTC’s ongoing product strategies.
In our previous Part One commentary, we shared various overall impressions, insights and takeaways. In this Part Two posting, we share additional impressions.
Prediction Seven within our 2016 Predictions for Industry and Global Supply Chains (available for complimentary download in our Research Center) anticipated that B2b focused manufacturers and services providers would broaden their perspectives on connected devices and enhancing customer needs, but also stumble because of conflicts in approach, conflicts in stakeholder interests or data silo approaches. We were therefore especially eager to attend the LiveWorx panel discussion featuring select PTC partners. This panel consisted of executives from Cognizant, Dell, Flowserve, Glassbeam, HP Enterprise, National Instruments, ServiceMax and SAP.
Most all of these panelists observed that for now, most customers are not seeking out a specific IoT initiative per-se. Instead, they are seeking technology to assist in resolving use cases involving ongoing business challenges in manufacturing or supply chain or tapping new business opportunities and revenue streams. One panelist indicated that the current hype surrounding IoT has many teams “scratching their heads” in terms of selecting start points or understanding what business problems IoT will solve. From our lens, that reflects a need for broader market education.
Where projects lean toward IoT, the sales and approval cycle tends to be elongated, cited in the range of 6-12 months, with indications that discussion with up to 7 people representing different business functions such as IT, manufacturing, service management and other functions are involved.
Regarding project ROI, the panel indicated that IoT related projects must address definitive returns to the business in areas such as moving the revenue needle, avoidance of expensive downtime particularly in process intensive industry settings, safety of operations and of-course, enhanced customer service and response.
Another common challenge cited by panelists was the need for ubiquitous connectivity of networks, both in broadband Internet connections and mobile devices. Noted was that today, many customers do not have the scalable networks to support the large amounts of data flow implied by IoT use cases, along with the perception that doing so now would be cost prohibitive. One panelist questioned the large amounts of “junk” data now being collected.
As noted in our Part One posting, information and data security remains a top customer concern with panelists indicating that a lot of additional multi-industry education remains to be done. A separate panelist noted this as consistently one of the top three concerns from any customer. One panelist with lots of experience in process based industry observed that industry already has data security standards that are well-understood. This panelist pointed out that the controller domain will always be protected by separate protocols than the data extract domain.
One other area we wanted to highlight for our readers was the topic of what is commonly termed agile engineering. This is practice commonly adapted by software and technology companies that promotes the creation of scrum teams that conduct frequent product prototypes, gaining immediate customer feedback on a proposed new product, and moving forward with yet another improved prototype until the ultimate product is released. With more multi-industry products now having more and more technology and software content, classic “waterfall” engineering processes have a hard time keeping up with needs for constant agility. Readers may note the common thread among equipment product recalls of-late has been problems with the functioning software component or needs to update that software to address hardware issues.
PTC executives addressed this specific challenge in the industry analyst and press briefing, along with why they believe that augmenting PLM processes with more AR and VR tools can help support more agile engineering needs. To help in this effort, PTC is sponsoring specific thought leadership for customers to more fully understand agile engineering needs and requirements.
We did manage to attend a couple of breakout sessions focused on Service Lifecycle Management (SLM) and specifically customer efforts to upgrade older versions of either MCA or Xelus service parts planning application to PTC’s latest releases. From the customer presentations we observed, the upgrade process was reported in positive terms. What was more interesting was the motivations for upgrading, which ranged from internal business changes or consolidation to needs to upgrade to more modern and more advanced planning capabilities.
Finally, during the executive Q&A, PTC CEO Heppelmann indicated that he does not expect PTC to get any more deeply involved in supply chain management focused IoT application needs. Rather, PTC will allow its partner network to address SCM business and process needs utilizing PTC technology platform and applications.
Overall, LiveWorx 16 was a much more productive and educational conference this year, one that reflected on PTC making its own transitions into the current realities of the current Industrial IoT market.
© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
Supply Chain Matters Impressions of PTC LiveWorx 16 Internet of Things Technology Conference- Part One
Product Lifecycle Management (PLM) and Internet of Things (IoT) technology provider PTC held its annual LiveWorx 16 IoT conference in Boston last week amid over 4500 attendees. Supply Chain Matters in the person of this industry analyst was invited to once again attend this annual event and walked away with varying impressions regarding the state of IoT adoption and on some shifts among PTC’s ongoing product strategies. Unlike last year’s LiveWorx conference, this year’s audience messaging was much more focused on broader and more succinct strategies and actual technology users seemed to outnumber prospective technology providers looking to cash in on a new wave of technology.
In the opening keynote address referencing the current state of IoT adoption, PTC President and CEO Jim Heppelmann established this year’s conference themes, namely that IoT is the defining technology of our times and that it has the potential, more than any other technology, to enable journeys of business transformation. He cited researcher and scientist Roy Amara and what has since been known as Amara’s Law:
“We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.”
Heppelmann went on to describe his ongoing collaboration with Harvard Business School professor Michael Porter in outlining both the immediate and longer-term business impacts of this technology along with current barriers of adoption. We should point out to our readers that Professor Porter is a member of the board of directors at PTC.
The remainder of the opening CEO keynote reinforced in onstage and live software demonstrations somewhat of what we believe is a shift in PTC’s product strategies concerning IoT. There is now for more emphasis on leveraging both augmented and virtual reality technology to IoT and PLM focused applications. Stated was the belief that the combination of AR and VR, aligned with forms of analytics, is game changing to IoT, and is a capability that will differentiate PTC in the broader IoT spectrum.
We learned later that PTC has garnered 700 IoT focused customers, more than half of which have begun migrating from a PLM software installed base perspective. To springboard this journey going forward, PTC has developed a series of business process journey roadmaps for customers addressing both engineering and manufacturing process migration needs. That stated, the vision and journey for IoT must come from higher C-level executive sponsorship and a broader buyer audience. PTC has adjusted its sales prospecting strategy to target C-level executives via the joint research efforts with Professor Porter.
A second broad keynote focusing on overall platform strategy, anchored by Group President Rob Gremley addressed 30 months of ongoing development and acquisitions that now make-up what was described as a PTC integrated platform of applications:
- PTC kepware to support industrial network connectivity.
- PTC ThingWorx supporting applications and advanced analytics
- PTC Vuforia Suite supporting augmented reality applications.
Noted was that there are two general paths for enabling IoT, one being the deployment of applications and solutions to business needs, the other being deployment and leveraging of an IoT platform. PTC intends to support both of these needs,
Regarding the latter platform, announced at this conference was a new partnership with Amazon Web Services (AWS) to provide industrial network infrastructure support for customers. AWS executive Mark Relph noted for the audience that Amazon has been supporting IoT and more complex industrial network needs for quite some time. Further announced was that AWS would be one of four other Cloud platform partners for PTC. At a later senior executive level news conference, I queried Gremley on potential names of the three other network partnerships. They apparently include Microsoft and its Azure platform, SAP and its HANA platform, and perhaps Salesforce. Another mention was that of the potential of General Electric’s Predix industrial platform. Gremley further indicated that PTC will not necessarily cap these network partnerships, that such partnerships will be based on specific customer needs and desires. However, he clarified that network partners are not going to be unlimited.
One obvious takeaway for our readers is this analyst’s impression that PTC has now taken a more open system approach to IoT platform technology deployment, which is good for customers.
As our readers are very aware, data and network security is one of the fundamental concerns related to broader deployment of IoT business process models. Thus we had anticipated that this year’s LiveWorx would feature a keynote addressing this area. That did not occur for various reasons.
However, we did attend a breakout session titled: Facing the Real Security Challenges of IoT, and delivered by PTC Senior Director Rob Black. By our view, this was a session that should have been featured as a main stage keynote. It was informative and addressed current vulnerabilities in older industrial network data protocols, how IoT Cloud based security is different than standard applications, and what organizations are responsible for information security. Attendees had to walk away much more informed and much more aware of security needs. By our lens, such sessions need to be incorporated in any and all IoT focused conferences. Teams need to be aware and must be prepared to address the realities of information security. At last fall’s Oracle Open World conference, we were pleased to observe Oracle founder and senior executive Larry Ellison address the need for information security directly in an on-stage keynote.
In Part Two of our Supply Chain Matters LiveWorx attendance commentary, we will some other impressions and takeaways, including highlights of a panel of PTC partners who addressed current IoT customer initiatives and how they are being approached. We found quite a number of learnings from this session that need to be shared.
Equipment and capital goods manufacturers have increasingly re-discovered new and growing revenue opportunities that reside in added services and service parts sectors related to in-service equipment. Such opportunities are especially pertinent across commercial or defense focused aircraft which have operational service that spans many years of service. However, when an industry dominant such as Boeing decides that it wants to take more control as well as revenue cut of all service parts, the financial implications and subsequent impacts will reverberate among all key suppliers.
Today’s edition of The Wall Street Journal reports such an implication as Boeing elects to secure a new source of revenue beyond building aircraft. (Paid subscription required) The report indicates that whereas in the past, Boeing’s largest suppliers such as Spirit AeroSystems or Rockwell Collins could sell respective manufactured parts directly to airline and aircraft operators for in-service service replacement needs, the OEM elected in late February to prohibit suppliers from directly selling proprietary service parts, along with suspending licenses to suppliers to sell any such proprietary parts to its customers. The WSJ characterizes this development:
“It is the most aggressive move to-date in Boeing’s year-long effort to assert control over distribution-and the resulting revenue- of parts.”
According to the report, Boeing is looking to nearly triple revenues associated with commercial and defense aviation parts and services business by 2025.
Supply chain teams in these sectors know all too well that margins on service parts can far exceed those for original equipment production needs. According to the WSJ, it can be upwards of 4X more than what Boeing pays for the part to support initial production. Suppliers will often forego margins on supply contracts to a customer such as Boeing with the expectation that multi-year margins can be garnered in service parts needs over the operating life of an aircraft model.
In a highly regulated industry such as commercial or defense focused aircraft, certain structural or key operating parts have designated service-life provisions which must be adhered to, thus assuring ongoing component stocking and service part demand needs.
The WSJ report further links these moves to Boeing’s ongoing Partnering for Success initiative addressing added cost control opportunities among existing suppliers. According to the report:
“Boeing also prohibited some suppliers from being given new work or withheld regulatory approvals for parts until revised (supply) contracts were complete.”
The report cites a Credit Suisse aerospace industry analyst as indicating:
“The economics of being a Boeing supplier could be facing their greatest challenge yet.”
While airlines themselves have become increasingly concerned by the rising prices of service parts charged by suppliers, by our Supply Chain Matters lens, this revised strategy by Boeing does not necessarily address nor mitigate that trend. It obviously takes away profitability opportunities for suppliers while adding yet another intermediary in the service parts supply chain.
One of the most promising service management opportunities related to commercial and defense focused aircraft resides in the leveraging of Internet of Things (IoT) focused technologies that would allow operating equipment the ability to communicate service and replacement needs based on operating environmental conditions. Rather that static, fixed maintenance schedules, the opportunity is for the equipment itself to self-diagnose its parts replacement needs.
Many original equipment manufacturers are thus positioning to take advantage of such technologies in new service focused business models. That includes aircraft engine producers such as General Electric and CFM International. With this latest move by Boeing, a new participant is added to the overall business model, a participant that must share the same technology tenets being promoted in automated performance monitoring and service dispatch. Add the notion of IoT platform providers positing for their portion of the overall business model via platform adoption and subsequent dominance, and the picture begins to turn to one we have witnessed before with breakthrough technology. Every participant attempting to position for leveraged control of a promising new business model while target customers have to determine what all of this implies for added efficiencies or cost savings.
The dilemma of commercial aircraft supply chains that presented multi-year order backlogs and insatiable demand for more fuel-efficient technology-laden new aircraft has met the reality of more educated and aggressive airline customers, coupled with rapidly changing economic times. These forces are inserting their influence on aircraft pricing, delivery expectations and operating service needs.
Boeing is now responding to these needs by aggressive supply chain cost and headcount reductions, and now, demanding its proportional cut of service parts revenues. In essence, like too many supply chain dominants, the picture is again moving the need of cost reduction or added revenue needs down the supply chain.
More and more, the notion of we are all in this to share industry growth opportunities together reverts back to the supply chain dominant as the ultimate long-term benefactor.
Respective suppliers will obviously have to determine their own response strategies. Larger suppliers will be able to find means to remain resilient to such changes while smaller suppliers may feel the bulk of the pain. In the long-run, the party that ultimately controls the customer relationship along with product and process design ends up to be the eventual winner.