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When GE unveiled its GE Digital organization in 2015, the industrial giant was at the forefront of a new industrial IoT revolution and quickly became a poster child for digital transformation.
That future is a lot hazier now that GE Digital has been spun off into a separate organization and has sold ServiceMax. Both moves were announced by GE in December 2018. GE acquired the field service management provider in 2016 for almost $1 billion, labeling it a GE Digital company with the intent of integrating its field and asset service capabilities into GE's Predix platform, which was marketed as the hub for industrial IoT (IIoT) data.
GE Digital, the Predix platform and ServiceMax may be victims of self-inflicted problems, according to industry experts. But they also say the Predix platform and ServiceMax may be better off in the long run.
GE Digital problems were self-inflicted
Establishing GE Digital was an ambitious undertaking for the industrial giant. Doing so not only made headlines, but it also made GE a closely watched example of digital transformation in action. But the move was beset by management problems and a lack of leadership focus from the outset, according to Josh Greenbaum, principal analyst at Enterprise Applications Consulting, who worked with GE Digital when the initiative was conceived.
"GE Digital was a classic attempt by an industrial company to graft software DNA into the genome -- and that usually doesn't work," Greenbaum said. "One of the problems -- and you can point to senior leadership -- was that while GE Digital had this mandate on the public side to create an industrial IoT platform standard and push that out to the global economy, the real story was that they struggled and failed to make it a standard -- even inside of GE."
Indeed, GE was unsuccessful at persuading its own industrial divisions to adopt the Predix platform, according to Greenbaum.
"The real battleground -- and the one that didn't pan out -- was trying to get these big divisions to look at the underlying Predix platform and say, 'That's where we're going to go and we'll be behind you,'" Greenbaum said. "But structurally what was happening was [GE] itself was not ready for the [industrial transformation]."
Build it yourself, a costly mistake
But being too early to the party wasn't GE's only misstep. The company also made some serious miscalculations when it organized its digital unit and developed the Predix platform, according to Paul Miller, a Forrester research analyst who follows the industrial market.
One of the biggest mistakes GE made was attempting to build and host an IIoT platform in its own data centers. The investment was costly and, ultimately, didn't make sense in a world of hyperscale cloud providers.
Josh Greenbaumprincipal analyst, Enterprise Applications Consulting
"All of the major IIoT platforms [including Siemens, Bosch and Hitachi] now run on AWS, Azure, Google, Alibaba and so on. So they're recognizing that the cloud providers know how to put up data centers around the world and they shouldn't worry about that," he said. "So there's that sort of repositioning and reimaging going on."
Still, Miller called the original intent of the Predix platform a good one that can still bring value to manufacturers.
"Broadly, the idea that you have to wrap digital services around an industrial product to deliver value and be competitive is absolutely right," he said.
Spinning off GE Digital into a separate organization may breathe new life into the Predix platform, according to Miller. GE Digital may now be able to operate more nimbly, like a software company, and attract new investors and customers from outside of GE. However, Miller believes that its success depends on GE Digital appointing a strong CEO with a clear vision of the company's future.
"There are big hills to climb, but they are not unclimbable," he said. "There are good assets and people in GE Digital. There are good customer relationships with GE customers. There's a lot of strength to build upon, but they have to build upon it fast and with a very clear direction [for] where they are going. Because this has been dragging on for a while, and that's been the nagging doubt all this time: Is GE serious about this stuff? Yes, they are. But the fact that people keep asking that question is worrying. They are serious, but they need to prove it."
Separation may be good for ServiceMax, too
GE's sale of ServiceMax may also turn out to be a good thing for ServiceMax. The sale distances the field service management provider from GE's troubles, according to Greenbaum.
"It's the aftermath of a long series of bad decisions and market myopia on the part of GE," he said. "There's so much collateral damage when a company like that falls apart that ServiceMax may be lucky in a way that they got out with their brand intact because there's going to be more destruction than resurrection by the time this GE story is done."
GE's vision of integrating the ServiceMax field and asset service capabilities into the Predix digital asset management model was another good idea that was hindered by mismanagement, according to Greenbaum. GE operates more like a large government bureaucracy than a nimble and innovative Silicon Valley technology company, making software development, which relies on a quick and iterative approach, difficult.
"[ServiceMax integration with Predix] looked good on paper in the sense that you're going to do this service asset management stuff -- you're going to have a super intelligent process that will be driven by the data analysis that you get out of Predix," Greenbaum said. "But they didn't know how to execute this stuff. A company that big and that old school really lacked the entrepreneurial talent to think this way."
Many of the integrations between ServiceMax and Predix will continue with ServiceMax as a separate company, and Spencer Gisser, research associate with VDC Research who follows field service management platforms, echoes what other analysts have said: The separation from GE may turn out to be a good thing for both ServiceMax and Predix.
"The Predix platform might now be more easily available to other field service management providers now that there's no longer this competitive awkwardness," Gisser said. "When GE Digital held both Predix and ServiceMax, that set up a little bit of a hazard. Opening up Predix to other field service management organizations inadvertently ends up competing with ServiceMax."
Gisser agrees that ServiceMax may also come out ahead because its platform flourished under the heavy investment it received when it was wholly owned by GE.
"ServiceMax has done very well. They are an extremely competitive player in the field and asset service management market," he said. "ServiceMax has a lot of significant competitive advantages, and they've spent a lot in terms of time and energy in upgrading the platform over the last couple years."