GE’s Industrial Internet Software Is a ‘Baby Startup’ Says Report

July 8, 2016, 2:00 PM UTC
A General Electric turbine for Boeing 777 is on di
LE BOURGET, FRANCE: A General Electric turbine for Boeing 777 is on display at the firm's booth 22 June 2001at the 44th Paris-Le Bourget Air Show, scheduled from 16 to 24 June. AFP PHOTO FREDERICK FLORIN (Photo credit should read FREDERICK FLORIN/AFP/Getty Images)
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General Electric’s software that collects and analyzes data from network connected machines is “a fledgling startup,” has underdeveloped technology and lags in market penetration compared to its marketing, says a new report from an analyst at Lux Research.

The report is in stark contrast to GE’s communication efforts and major investment in the software, called Predix, which it has pitched as an important new opportunity for future growth for the company.

GE says claims in the report “are not based on fact or objective research,” and contain “numerous factual errors.”

GE’s Predix software extracts and crunches data from machines like jet engines and gas turbines. The data can be used to make the machines run more efficiently, saving GE’s customers money, time, and energy.

For example, coal plant operators can use the software to collect data from their equipment and to run the gear more efficiently or predict when certain parts might fail.

For more on the Internet of Things watch our video.

GE calls the software the “digital glue” for the “industrial Internet,” enabling infrastructure like power grids, buildings, energy generation gear, and manufacturing equipment to be controlled by computers and connected to wireless networks.

But the Lux Research report says that “Predix is not as fully developed as GE says it is,” and “has not been battle-tested at scale,” writes Isaac Brown, an analyst of Lux Research and the author of the new report. GE’s Predix software has a smaller market share than competitors like PTC, C3 IoT, Aeris, Autodesk’s SeeControl, Electric Imp, Cisco’s Jasper and Wyless, says Brown.

Brown alleges that core parts of GE’s technology relies on partnerships, like with industrial company PTC, instead of using GE’s own technology. These technologies include software that lets developers quickly assemble and deploy applications for connected machines, and software that connects machines to the cloud. Both of these features are important parts of connecting industrial machines to networks and collecting data. GE says the report mischaracterizes its relationship with, and reliance on, PTC.

One of the key issues that the report raises is that GE’s Predix software is just new and hasn’t yet had time to attract many customers. While GE has discussed the software’s potential for years and used it in-house, the company confirmed that it only introduced Predix to customers in its current form in February 2016.

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GE doesn’t break out revenue for Predix, but says its overall annual software sales, which includes sales of Predix, will grow from $5 billion in 2015 to $15 billion by 2020. Much of that growth is supposed to come from software for industrial applications as well as Predix, GE has said.

Customers of the Predix software include RasGas, Pitney Bowes, Exelon, Schindler, Lixil and Toshiba. The CTO of GE Software, Harel Kodesh, tells Fortune that the Predix software is on track to meet GE’s projections.

The rise of connected devices, commonly called the Internet of things, is supposed to grow into a huge industry over the coming years. Eventually most machines and many objects—from cars to street lights to factory equipment—will be connected with wireless connections, computing power and algorithms.

Brown says that Predix will need another three to five years to mature. In general, the Internet of things sector is still quite new and the technology is still only emerging.

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