The year was 2011.
I was attending Cloud Connect in Santa Clara and having a coffee with Victor Chong, my friend and colleague from the HP days. He had just wrapped up a mobile app startup and was settling into a new job at eBay. While we had a nice time catching up, there was something he said that stuck with me.
One of the main things he learned from his experience in the brutal mobile app space was that it was "all about the data". You can build the best app in the world, but eventually, the owners of the data will find a way to squeeze your profits.
Back to 2015.
Seems obvious now doesn't it? With Facebook, Google, Uber, etc., we see how companies use data to transform industries and gain and/or maintain market dominance. Build a gigantic network of users, use the data you get from those users to dominate - pretty simple right? (Notice I didn't say "easy")
What does this have to do with GE's Predix Cloud Announcement?
It's all about user generated data. You might think that GE is a product company, and you'd be right. But it's also a services company that services millions of industrial devices in the energy, transportation, healthcare, and manufacturing sectors. These devices create literally exabytes of data, data which GE currently uses to service and maintain it's customers equipment and gain insights on product design, and in the future will be used for much more.
With $148+ Billion in sales, GE holds a sizable chunk of the industrial IoT (Internet of Things) market captive
In a stroke of genius, Amazon's Jeff Bezos, Chris Pinkham and others were able to develop a general purpose technology platform (public cloud) for a specific corner use case (ecommerce book store) and then extend that technology to create & transform other markets. In other words, for AWS to exist, they needed amazon.com to exist first. And for Amazon the bookstore to be sustainable and have the scale that would later enable AWS and Amazon as a general purpose eCommerce site, they had to have millions of customers as a bookstore first.
Build a network of users in a narrow corner case you can dominate, build a general purpose extensible technology platform to service that business, use that platform to dominate other segments. That is what GE is doing - they already have the network of devices, and the platform is there as well.
"GE businesses will begin migrating their software and analytics to the Predix Cloud in Q4 2015" - GE Press Release
There are others using the same strategy:
- Tesla: Started with developing technology to dominate the luxury electric car market - moving into general automotive and energy sectors.
- Uber: Built a multi-sided platform that connected millions of riders and drivers - moving into package delivery.
Can GE compete with the cloud heavyweights like Amazon, Google, MSFT, etc?
Did I say it's all about the data? I did, but it's also all about the execution. Here are some pros and cons for why GE might be successful with Predix Cloud.
- Cloud incumbents already have a significant head start in operating large scale public clouds. Things like billing, SLA management, capacity management are far more complex when you're a cloud operator.
- Incumbents have a massive stable of world class talent and innovation track record - indicators that the pace of innovation isn't likely to slow any time soon.
- Many incumbents have strong leadership with experience leading companies in quickly changing industries.
- GE has plenty of talent and experience as an IT service provider. Gartner others estimate that enterprises spend anywhere from 3% to 6% or revenue on IT. This puts GE's annual IT spend at between $4.5 and $9 Billion. They're already a major player in IT and if you assume that 40% of the spend goes to employees and a fully burdened IT salary is $150k, then they've got between 12 and 24 thousand IT employees.
- They're not starting from zero. As Barb Darrow mentioned in her article about the GE announcement on Forbes, GE invested $105 million in Pivotal over two years ago. The number of Cloud Foundry, big data and cloud experts at GE is not public knowledge, but if they'll spend $100M in Pivotal, I bet they'll have invested heavily in talent as well.
- The field is wide open. Public cloud infrastructure, as it exists today, is not yet ready for the scale needed to handle 100's of billions of devices. McKinsey, for example, estimates that the market for IoT devices by 2020 will be 20-30 billion units.
- They're the experts in industrial control systems.
- They're not going it alone. GE is developing partnerships with key technology players like Intel and Cisco. Look for more of this type of ecosystem development in the near future.
According to Jack Welsh, former CEO, GE would not compete unless it thought it could be first or second in an industry.
I don't know if that's still a core tenet of GE leadership, but I'm guessing they think they can lead the emerging Industrial Internet. And I wouldn't bet against them.
Agree? Disagree? I'd love to learn from you.