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November 17, 2011 6:00 am
General Electric plans to hire hundreds of IT workers over the next two years and establish a new software centre in an effort to stake a claim in the emerging market for tools to handle the ever growing quantities of electronic data.
The facility in San Ramon, near San Francisco in California, is already under construction and GE expects to take on about 400 staff, ranging from software engineers to marketing experts, by the time the centre is running at full speed in 2013.
The investment represents an interesting gambit for an industrial conglomerate that is perhaps best known for its commercial and industrial products such as aircraft engines, medical scanners and light bulbs.
GE already generates about $2.5bn of its $150bn or so in annual revenues from software sales and employs about 5,000 software professionals scattered throughout its medical, energy and transportation divisions.
The move highlights the growing commercial interest in tools that can make sense of what has become a flood of data generated by everything from industrial equipment stuffed with sensors to consumer products such as refrigerators that are linked to the internet and “smart grid”.
Earlier this year, the McKinsey Global Institute, the research arm of the management consultancy, described “big data” as the “next frontier” that had the potential to trigger a leap in productivity and efficiency in both the public and private sectors.
McKinsey argued that better use of data could unlock $300bn of value annually in the US healthcare sector alone, reducing national healthcare expenditures by about 8 per cent, and help cut costs and boost the profit margins of other industries and sectors.
Bill Ruh, a vice-president with GE and the man selected to lead the initiative, argues that the marketplace for software and tools to channel and use data is still in its formative stages, giving GE a chance to grab a niche.
“Lots of people are piloting things. No one knows what the business models are going to be. The killer applications haven’t worked themselves out yet … GE is seeing this happen and has begun to realise that it can be at the forefront of this,” Mr Ruh said.
As GE attempts to expand its software presence, it will bump up against competitors such as IBM, SAP and other companies whose dominance of the market for business IT systems gives them a strong platform to pitch new analytical products and services.
Already this year large software companies have made a string of acquisitions to bulk up their data-crunching capabilities. In August, for example, Hewlett-Packard agreed to purchase Autonomy, a maker of search software that makes sense of complex, unstructured information, for about $11bn.
Mr Ruh argues that GE’s role as a maker of intelligent products and its deep experience in sectors such as aviation and energy will give it a powerful advantage when it comes to designing useful algorithms and selling analytical software.
“There will be a lot of new tools, but by themselves tools don’t do anything,” Mr Ruh said. “If you really want to analyse the performance of an engine to know when is the optimal time to repair it, you need to leverage the experience of our 300,000-strong workforce.”
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