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13 July 2018

GE’s Predix gets a win with DEWA, not a complete disaster yet

General Electric’s GE Digital Wing has not had a great start in life. GE itself has had a difficult decade, as it struggles to adapt to a changing world. GE Digital and its Predix PaaS was meant to be an easy win for the industrial giant, able to trade on its brand name to create a cloud-based IoT platform that customers would flock to. But this has not been the case, and Predix has been something of a flop.

However, a win with Dubai Electricity and Water Authority (DEWA) is a sign that a corner is close to being turned, and recent comments by GE Digital CEO Bill Ruh have added some clarity – after a pivot that saw Predix shift from a GE-hosted service to one that could be spun up in private clouds or on public clouds like AWS.

Under former CEO Jeff Immelt, who retired rather early last October, GE Digital acquired ServiceMax ($915m) and Meridium ($495m) in 2016, to get the ball rolling. However, GE’s market value began putting pressure on GE Digital, and so spending was apparently reined in – leading to that shift (something of an admission of failure) to the private cloud options. GE had gone as far as starting to build data centers for Predix, after all. That shift in strategy was done very quietly.

Speaking to ComputerWorld, Ruh said that “we realized very early on that being in the data center cloud business didn’t make any sense, because you’re in an arms race with Amazon and Microsoft and Google, who are spending billions and billions of dollars on data centers that you can’t and shouldn’t produce.”

Immelt’s replacement, John Flannery, said in November 2017 that Digital would become much more focused on a handful of applications, and now three years into the project, it hopes to double 2017’s Predix revenues in 2018, reaching $1bn. According to Ruh, the new strategy is to pitch Predix at GE’s core customers, for specific applications (such as analytics, predictive maintenance, etc.), rather than trying to sell a platform on which to build other things.

Ruh added that this allowed GE engineers to focus on these applications, rather than building out data centers. “We found ourselves focusing on two application areas – asset performance management and service automation – and really holding ourselves true to those areas. That’s proven to be really effective, because we’re really the leaders in those areas.”

In closing, Ruh said that “Europe in the last quarter was almost equal to North America in terms of orders, which is great because we were seeing a lot of weakness in our product line a little over a year ago, and now we’re seeing a lot of strength in the pipeline, a lot of strength in the sales. So we’re pretty excited about what we’re seeing in Europe.”

Currently, the Oil & Gas, Energy, and Industrial sectors are, unsurprisingly, the largest customers for Predix. BP and EDF are active users, and a more recent partnership with SIG Holdings, a Swiss food packaging firm, saw Predix used in around 400 factories.

The new DEWA signing is a continuation of the energy trend, with DEWA looking to improve efficiency in its Generation division. To this end, Predix is going to be integrated into its power plants, which will funnel data to the cloud-based Predix analytics system. Predictive maintenance, using those AI-based analytics to spot when an appliance or machine needs servicing, is the main objective here.

But even if Predix grows into a successful business, GE may never return to its glory days. It was emphatically dumped out of the Dow Jones Industrial Average, after spending over a century in the index. Its stock now sits at $13.99. A year ago, it was $26.58, itself down from a high in December 2016 of $31.60. August 2000 was the zenith, when stock was worth $59.31, and a peak of $41.03 was wiped out in the 2008 financial crisis – where the stock fell to just $8.51.

Under Immelt’s tenure, GE was posting gradual progress with its stock price, up until that December 2016 shift. Immelt took charge in 2001, after then-CEO Jack Welch retired earlier than expected. In 2001, GE was 5th on the Fortune 500. In 2017, it had slipped to 13th.

As such, Flannery has to turn the boat around. This could include selling off parts of GE, and Digital may well be one of them. It pales in comparison to its Energy wing, and if shareholders get snappy, it might be one of the easier division to cut loose – spun-out or sold to one of the large cloud vendors. To this end, GE has announced that it is spinning out the Healthcare division, as well as slowly selling the 62% stake in oil-focused Baker Hughes – so perhaps Digital doesn’t have to worry about surviving the cut so much.