- Beyond an Internet of Things lies an Internet of Systems, tying the things together
- General Electric is focused on this market but may not be big enough to manage it
- Big tech is scaling for a reason and this is it
While a lot of people, including GE and IBM people, are talking about a nascent Internet of Things, the big prize will be putting these things together and creating an Internet of Systems.
GE makes jet engines, and a jet engine is a very big, expensive thing. Boeing BA makes airplanes, and airplanes are also very, very big things. But managing air traffic requires a system, and that is what all these companies, and others, are moving inexorably toward, system management that has computer control over all the things within its scope.
Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL) are both targeting the self-driving car market, but what makes that market compelling is the hope that it will improve the efficiency of the transportation system. That’s why Uber is so valuable, not because it can get you a cab, but because it turns all the cars under its control into a system.
I happen to think that GE is in a good position to move into this market. It has two main industrial sectors – energy and health care. It makes big, important components in both those markets, like turbines and CT scanners. Building computerized systems that run a utility or a hospital is a big, big job, and that’s why GE recently created a GE Digital unit to pursue that opportunity. A few years ago it funded VMware’s (NYSE:VMW) Pivotal Software, and took a 5% stake, in order to pursue that opportunity.
A system for health care or air travel or utility management or traffic control must have software and hardware in many things, it must have standards to manage the interaction of that software, and it must have security, as well as audit trails, built into it. It’s a huge contract that must be negotiated with governments, not just with other enterprises.
One of the key trends of the last half-decade has been the scaling of the biggest technology firms. Google is now worth $450 billion. Microsoft (NASDAQ:MSFT) is worth over $350 billion. Apple over $660 billion. Next to these, even the combined financial might of GE and IBM – about $400 billion – is barely competitive.
The financial requirements of the Internet of Systems can only be met by businesses that can look governments in the eye as equals, and that’s what big tech companies are becoming, the equals of governments around the world. It’s probably the biggest business game of the next decade, and GE may not yet be big enough to win it.