Representative End User Clients
Representative Automation Clients
Representative Software Clients
I've had that question at the back of my mind for a while, and GE's announcement from last week just served to bring it into focus. To recap, GE announced that its Predix industrial IoT platform would be available in the cloud. It will also be positioned more as a Platform-as-a-Service (PaaS) solution. To date, Predix has been positioned more as an internal platform for use by other GE business units.
But, long-term, does it make sense for GE - or IBM, or SAP, for that matter - to be in the cloud business...? I'm not sure that it does. (IBM's Bluemix I've written about here. My colleague Peter Reynolds wrote about SAP's IIoT cloud here.). Michael Porter wrote his research on generic strategies over 30 years ago. That model has weathered the test of time well - even allowing for the tremendous advantage that the internet can bring with the network effect.
So, assuming that Porter's three generic strategies will hold for the cloud business, we have Amazon and Google duking it out for the cost leadership strategy. By building massive cloud infrastructures, these providers aim to gain economies of scale and hence be the lowest cost provider. Those lower costs translate (at least in part) to lower costs for their customers. That leaves the focus strategy and the differentiation strategy. We could debate that Microsoft is pursuing the differentiation strategy. At any rate, the company seems to be making inroads best where it already has strong enterprise relationships. Although not a sizable cloud player compared to some of the others mentioned, Rackspace is clearly taking this approach.
That leaves the focus strategy. From a cloud perspective, GE Predix, IBM's Internet of Things on Bluemix, and SAP's HANA cloud platform for the Internet of Things are all pursuing this strategy. For example, GE clearly noted that it's own Predix cloud would be specialized for connectivity to industrial devices, and capturing and managing the data types typically generated by these machines.
But is that specialization enough...? Even when pursuing a focus strategy, cost is still often a major factor for customers making a purchase decision unless the solution offered is a unique fit. So does it make sense for GE, IBM, SAP and others with industrial applications in their sights to build and maintain their own cloud? Or, will it make sense in the long term to buy basic cloud services as a commodity and then wrap their own Industrial IoT-specifc services around that? I think that it might. SAP HANA already runs on AWS and Microsoft Azure, for example. And as this Fortune article acknowledges, while Predix applications must be deployed on GE's cloud, they may be developed and tested on AWS.
One reason I often give clients for using the cloud is simply to outsource low-value activities so that your organization's talent can focus on where they really add the most value. And that same argument applies to vendors, just as it does to technology users. Once you accept that, it's just a question of deciding where you really add the most value...
(Full disclosure: GE, SAP and IBM are all ARC Advisory clients)
But, long-term, does it make sense for GE - or IBM, or SAP, for that matter - to be in the cloud business...? I'm not sure that it does. (IBM's Bluemix I've written about here. My colleague Peter Reynolds wrote about SAP's IIoT cloud here.). Michael Porter wrote his research on generic strategies over 30 years ago. That model has weathered the test of time well - even allowing for the tremendous advantage that the internet can bring with the network effect.
So, assuming that Porter's three generic strategies will hold for the cloud business, we have Amazon and Google duking it out for the cost leadership strategy. By building massive cloud infrastructures, these providers aim to gain economies of scale and hence be the lowest cost provider. Those lower costs translate (at least in part) to lower costs for their customers. That leaves the focus strategy and the differentiation strategy. We could debate that Microsoft is pursuing the differentiation strategy. At any rate, the company seems to be making inroads best where it already has strong enterprise relationships. Although not a sizable cloud player compared to some of the others mentioned, Rackspace is clearly taking this approach.
That leaves the focus strategy. From a cloud perspective, GE Predix, IBM's Internet of Things on Bluemix, and SAP's HANA cloud platform for the Internet of Things are all pursuing this strategy. For example, GE clearly noted that it's own Predix cloud would be specialized for connectivity to industrial devices, and capturing and managing the data types typically generated by these machines.
But is that specialization enough...? Even when pursuing a focus strategy, cost is still often a major factor for customers making a purchase decision unless the solution offered is a unique fit. So does it make sense for GE, IBM, SAP and others with industrial applications in their sights to build and maintain their own cloud? Or, will it make sense in the long term to buy basic cloud services as a commodity and then wrap their own Industrial IoT-specifc services around that? I think that it might. SAP HANA already runs on AWS and Microsoft Azure, for example. And as this Fortune article acknowledges, while Predix applications must be deployed on GE's cloud, they may be developed and tested on AWS.
One reason I often give clients for using the cloud is simply to outsource low-value activities so that your organization's talent can focus on where they really add the most value. And that same argument applies to vendors, just as it does to technology users. Once you accept that, it's just a question of deciding where you really add the most value...
(Full disclosure: GE, SAP and IBM are all ARC Advisory clients)