GE at a Pivotal point

Software is eating the world and it’s a no brainer that GE decided to take the plunge into software development. CloudFieldNotes_1Late in 2011 GE announced that it would invest $1B in software over three years as it seeks to use software to make its products more profitable. One could argue that this was a late move for GE, after all IBM recognized the power and importance of software in the nineties and over the past three decades has invested heavily in software and services while divesting some of its hardware assets.

On the heels of its software initiative, GE launched its Industrial Internet initiative, which is the convergence of the global industrial system with advanced computing, analytics, low-cost sensing and connectivity via the Internet.  To make this a successful initiative GE needs key enabling technologies such as cloud, big data and analytics to come together so that it can make sense of vast amount of data that will be created by the machines. And on that note, earlier this week GE announced that it would invest $105 million for a 10% stake in EMC and VMware’s newest venture – Pivotal.

Pivotal inherited assets and people from VMware and EMC with a mission to build a new platform for a new era. The platform will consist of Cloud Foundry for its Cloud Fabric, Spring and vFabric for its Application Fabric and Pivotal HD, GemFire and GPDB for its Data Fabric. While individually these assets may be successful as Pivotal is expected to bring in $300 million in revenue by the end of 2013, over all integration remains a key challenge and will take a long time for Pivotal to address. Still GE has faith in the management’s ability to execute.

Will Pivotal enable GE to compete against other companies in the IoT space? Will the Pivotal One Platform enable GE to build the services it needs for its Industrial Internet initiative? Netflix didn’t choose CloudFoundry and other Pivotal assets as they didn’t meet its needs and instead built its own platform.  But unfortunately for GE, IBM has a head start against GE having launched the smarter planet initiative in 2008 and showing 25% YoY growth in the most recent quarter. So rather than building its own platform, GE made the right move to focus on its core competencies and partner with someone who can build the platform for it. It certainly used a rather unorthodox model of partnership by taking a sizable investment stake in Pivotal vs. simply buying the product, thus having a strong ability to influence the product direction. Perhaps GE’s investment will pay off…

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