By Jesse Berst

 

Noted venture capitalist Marc Andreesen wrote recently in the Wall Street Journal that "software is eating the world." Value is migrating rapidly from hardware toward software. And it is doing so in industries that were previously impervious. Thanks to a new generation of low-cost sensors, software can now get data from infrastructure such as roadways, grids and water networks. And once it has the data, it can perform analytics to amazing effect.

The Industrial Internet has hit the tipping point

General Electric has seen the change that is coming and is pivoting its entire business to respond. I got an inside look when I flew to San Francisco to moderate a panel at a glitzy event GE put on to announce its new corporate theme: the Industrial Internet.

Others may use different names such as machine-to-machine (M2M) or the Internet of Things (IoT). But all of them are referring to the same phenomenon. Sensors embedded in equipment send back data. Software then performs the analytics that allows companies to go from diagnostic to prognostic, from historical to predictive, from reactive to proactive, from repairing to preventing.

As GE CEO Jeff Immelt told the crowd: "We have entered a new era. GE is no longer a hardware company that has a bit of software where needed." As he travels around, Immelt makes it a point to ask customers where GE should invest its money. "10 years ago they were asking for better gadgets. Now, they are asking for better analytics." (In the photo at right, Immelt speaks at the event launching GE's formal foray into the Industrial Internet.)

Big, big money at stake

No wonder GE and its allies are so excited about the potential. For instance, improving the fuel efficiency of the world's power plants by a measly 1% would generate $66 billion in savings each year, GE estimates.

Immelt told the story of watching from backstage at a conference as the founder of Twitter fielded questions. "Everybody wanted to know how Twitter was going to monetize. But in the Industrial Internet you don't have to wonder where the money is. There are enormous, obvious opportunities everywhere."

GE's next steps

Let me tell you what GE is doing next before I explain the implications for utilities. Immelt says the new formula for success is domain expertise + analytics + ecosystem. GE is actively at work in all three domains. It has:

·         5,000 software engineers at work already

·         Opened a new software engineering facility in the Bay Area to tap into Silicon Valley talent

·         Launched more than 20 new industrial-scale software platforms in major industries such as energy, airline, rail and healthcare

·         Launched a series of challenges that open up big data sets to researchers and entrepreneurs

·         Reached out aggressively to partner with software and services companies and to give them access to GE customers if they will develop new software and analytics solutions