Moves by Schneider Electric, GE Highlight Importance of Software in Industrial Future

Electrical manufacturers are putting themselves at the forefront of the integration of digital capabilities into the industrial space. Growing and acquiring new capabilities in this market is an increasingly important value to the companies, as was evident over the past several weeks from a couple of events.

Schneider Electric took another shot at courting UK-based industrial software company Aveva, reviving and refining an offer that Aveva rebuffed six months ago after due diligence uncovered serious integration challenges. Aveva again entertained the offer and chose to pass, but the interest from Schneider demonstrates how important software has become.

Schneider has been focusing a lot of attention on its Struxureware industrial software platform and the courtship of Aveva was a chance to add a prominent and established offering to that mix, particularly in the energy and marine markets. Schneider bought another UK industrial software company, Invensys, in 2014.

The reason for the excitement about industrial software is becoming clearer with time. The potential market is huge and the potential for improving efficiency in manufacturing operations around the world may be even bigger. And to sweeten the allure: GE’s early experience has seen operating margins on this business run above 30%.

GE is looking to put itself at the forefront of this movement with the creation of ventures such as its Silicon Valley-based GE Digital, which hosted a large investor presentation event this week at its division headquarters in San Ramon, Calif.

GE has invested $1 billion in building its Predix platform and now has some years of experience using it in its production facilities. GE Digital CEO Bill Ruh says that GE is on target to bring in $6 billion in digital revenues this year and that the number could grow to $15 billion by 2020. But he stressed that this is just the beginning, adding that by 2020 the total market for industrial software and applications will be larger than the consumer internet, reaching $225 billion.

Based on Predix, GE hopes to establish itself as a top-10 software company in the same league as Oracle or SAP, providing the foundational operating system for managing machines on the plant floor. GE opened Predix to outside developers earlier this year, allowing the creation of non-GE applications. The company also has agreements with technology giants such as Intel Corp. and Cisco to bolster development of cloud capabilities, apps and other aspects of the Predix system.

Among the concepts highlighted in the string of GE executive presentations, the company is developing a “digital twin” for each physical product – not a model of the design but of the individual device – to enable Predix algorithms evolved through machine learning to support advanced types of asset performance management. For example, being able to monitor and anticipate service needs of an individual device and schedule it during planned downtime.

The Predix platform and its applications have been in use at GE over the past five years producing an estimated productivity boost of $500 million in 2016, said Jim Fowler, GE CIO. For one example, the system has allowed GE in at least one case to cut the time it takes to move from finished design of a new product to production from two weeks to an hour and a half, Fowler said.