Predix Sale Rumor Means Lessons Should Be Learned, but It's Not the Death of IIoT

In July 2018, the Wall Street Journal published rumors that General Electric (GE) was putting up for sale parts of its GE Digital business. The article was quickly followed up by Bloomberg, which made a credible argument that a financial or strategic partnership may be more likely. After speaking with GE, Guidehouse Insights understands that a financial partnership is GE’s preferred strategy. This is not a new model for GE: its control systems software is partially owned by Alstom. GE’s Predix and associated businesses are the assets most likely be offered to potential investment partners. This is another chapter in a turbulent period that has seen GE suffer in its core business and lose ground to rivals. However, neither GE nor Predix is in disaster mode. While there are lessons to be learned, it is not the death of GE, Predix, or the industrial Internet of Things (IIoT).

The Consequence of Overambition

It can’t be doubted: Predix got off to a shaky start. GE threw an enormous amount of investment capital at a strategy for end-to-end ownership of an IIoT platform. This included developing its own cloud platform and analytics software, eschewing the more common strategy to create partnerships. GE also kicked-off an ambitious but ultimately premature marketing push, which many criticized for making claims beyond Predix’s capability.

However, GE found it difficult to differentiate in what quickly became a crowded market. Plans for domination quickly turned to plans for survival, because GE found selling Predix somewhat harder than it probably first envisaged.

Predix’s differentiation—that everything was GE-owned—actually made it less appealing. Would an IT manager gamble on a new GE cloud platform, or take a less risky option with Amazon Web Services (AWS) or Microsoft Azure? There were on-off-on again partnerships because GE could never make up its mind whether to partner or develop on its own. And then there were the market rumors, never quite addressed by GE, that if a customer moved from Predix to a different platform they would not be able to migrate their own data.

GE Is Seeking a Strategic Partner

But GE managed to get Predix on track. It announced partnerships with AWS and Microsoft Azure; it became more open about its work with analytics specialists SAS. In its 2017 annual report it announced a more focused strategy to concentrate on existing GE customers. Predix orders increased by 150% in 2017, and 2018 revenues were forecast to double to $1 billion. Most importantly, Predix has proved it can deliver significant ROI.

Given Predix’s current success, why should GE choose to cede control of at least part of the Predix business? There is, of course, a wider context. The GE business has suffered and Predix lost its driving force when CEO Jeff Immelt resigned in August 2017. Immelt had ambitious plans for Predix and invested billions into its development. There is no doubt GE must reorganize its business; however, given the digital transformation of its customers and their need for a platform like Predix, wider issues may have forced GE’s arm.

Lessons Should Be Learned

GE’s digital problems underscore how difficult the IIoT market can be for a traditional hardware maker that tries to go deep with digital tools in a crowded market.

My advice to others? Focus on what your customers want and not what you want your customers to have. Only do what you can do well and only tell your customers you can do something well when you know you can do it well.