Here’s Why GE Shelved Plans to Build its Own Amazon-Like Cloud
Five years ago, then-General Electric CEO Jeff Immelt started pushing his much-discussed plan to transform GE from an industrial giant to a digital superpower. That proposal called for the company to build its own “industrial” cloud data centers to run software both for GE itself and for its large customers.
That game plan changed dramatically in the past year, as first noted in this recent Reuters story.
Wednesday, in an interview with Fortune at GE’s Boston headquarters, Bill Ruh, GE’s chief digital officer, acknowledged the change. “We pivoted,” he said.
Nearly a year ago, he said, GE (GE) decided to run Predix which manages manufacturing processes for things like building jet engines on Amazon data centers in the U.S., Japan, and Germany rather than building its own cloud data centers. The rationale is that this lets GE focus on its higher level software and leave the nuts-and-bolts infrastructure to a company—Amazon (AMZN)—that specializes in it.
The value in providing the basic computing, networking and storage building blocks for customers became too commoditized as Amazon Web Services, Microsoft, and Google (GOOG) rolled out more huge cloud data centers around the world. Those three companies each pour multiple billions of dollars annually into these projects.
Given the cost of competing with all that firepower, it can make more sense for other companies—even large Fortune 500 companies—to use those third-party data centers rather than trying to replicate them.
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Providing basic computing infrastructure is a “race to the bottom,” says Ganesh Bell, chief digital officer of GE Power, the corporate unit that sells to utilities and power companies. But, he added, “There is massive value in providing purpose-built software.” GE pitches Predix as just that sort of software that suits specific business needs. GE says major industrial customers, like utility giant Exelon, can use Predix to produce energy more efficiently
Amazon won’t have a monopoly on Predix, however. The software will be available to customers on Microsoft(MSFT) Azure cloud later this year, according to a GE spokeswoman. As to whether Predix will also run on Google or some other public cloud, Ruh said GE will always evaluate options and will respond to customer input.
Many other software makers that are expanding internationally or just want to save money on data center build-outs, have also decided to use someone else’s data centers.
Salesforce (CRM), Workday (WDAY), Box (BOX), and Tableau (DATA), for example, have all outsourced some data center work to Amazon, Microsoft, or IBM (IBM). But those software companies will continue to operate some of their own data centers as well.