Occasionally, we get very clear signs that significant change is in the air. When large sums of money unexpectedly change hands, people take notice that something interesting and perhaps unexpected is happening.
This morning, GE announced that they were investing $105m to take a significant stake in Pivotal, the new initiative jointly owned by EMC and VMware.
On one hand, we have GE: perhaps one of the best examples of an exceedingly well-run global corporation with a market cap of over $220B. On the other hand, we have Pivotal: a nascent analytics platform company formed from EMC and VMware assets, with an exceptional leader at the helm: Paul Maritz.
Why would a well-resourced and exceptional global corporation take a significant stake in what might appear to be a technology startup venture?
And what might this signal going forward?
I need to start with a disclaimer: I have no "inside knowledge" whatsoever in regards to this. Consider what follows only informed speculation on my part.
That being said, let's dive in ...
The first big idea in play is the "internet of things", or what GE calls the "machine internet".
The first wave of the internet was driven by people interacting with computers in new and different ways. We saw the seismic changes that occurred, and are still happening to this day.
The second wave is now upon us: machines talking to machines in new and different ways. Not to overstate the obvious, but there are many more machine sensors than people, and they don't get tired, enter into flame wars, embarrass themselves on Facebook, etc.
The result is data -- and lots of it. Incredibly rich, valuable and relatively new data sources that can be harnessed in ways that we can only begin to imagine.
Enter the second big idea -- big data analytics, or more specifically -- an opportunity to harvest and monetize all that data in exciting, novel and occasionally revolutionizing ways.
Early pioneers in this space had to basically roll their own platforms to do this work. It wasn't easy, but they persevered and are now starting to clearly reap the rewards. But not every potential beneficiary of big data analytics applications has the required resources to follow their path.
Which brings us to our third big idea: the compelling goal of Pivotal is to create an extensible and industrialized software platform that brings these capabilities to businesses and organizations everywhere.
It's one of those "we can change the world" missions. I, for one, am completely bought in.
Three big ideas: the internet of things, monetizing data through a new generation of big data analytics applications, and an industrial-strength platform to do it on.
If you follow Jeff Immelt (and you should), it is obvious that he is on a mission to completely reposition GE's business model for this new world.
It is not an experiment or a side show -- it's the core strategy of the company going forward. While only an exceptional leader can take on a challenge of this magnitude at GE scale -- he is clearly making progress.
Digging deeper, if you consider the core vertical industries where GE plays, it's not hard to be dazzled by the amazing transformational potential of big data analytics in each and every one of them. It is a tide that raises each and every boat in the GE harbor.
The GE leadership team clearly has the big data analytics bug. They're not the first, and they won't be the last.
Build, Buy or Partner?
While GE certainly has the resources to build their own software platforms, it's not one of their core competencies at present. I believe that GE would want to focus their energies on using and exploiting the technology, and not hand-crafting several million lines of code.
If today you went looking for products to buy to create the required platform capabilities, it'd be more of the same: you'd find bits and pieces here and there -- and you'd have to invest massively to create the required industrialized capabilities.
They're just not in the marketplace today -- that's one of the reasons Pivotal was formed.
That leaves you with a partnering option. Here again, your potential choices are limited to a handful of familiar names: perhaps IBM, Oracle, maybe Microsoft or an SI partner. And, of course, the new Pivotal venture.
Once you've selected your partner, you'll want to partner deep. Remember, GE is betting their future business model on having a platform that's capable of serving all their potential needs -- now, and into the future. Nothing says "partnership" quite like investing more than $100m to take a meaningful stake.
Laid out this way, it's not quite so surprising GE did what they did. It meets a strategic business requirement, and will probably turn out to be a smart balance sheet investment in its own right.
The Pivotal Impact
The analyst community was duly impressed by the announcement. John Furrier declared Pivotal the "new superpower". Steve Duplessie was unusually at a loss for words, except "Wow, wow, wow". And I'm sure there will be more responses along this line.
Not that Pivotal needed any more attention or focus -- they've got plenty of that already -- but this announcement took the buzz to a whole new level.
It's largely unprecedented model -- a large, strategic user of technology taking a sizable investment stake in the technology's provider vs. simply buying the product, or perhaps buying the provider.
Pivotal also gets a unique opportunity to closely partner with a very motivated and challenging customer without the usual inefficiencies associated with the traditional vendor/customer relationship. Both parties own a big stake in the successful outcome -- at the CEO level. Speaking solely as a technology vendor, that's a very valuable opportunity indeed.
But these are interesting times indeed.
And interesting times call for innovative approaches.