GE Isn’t Grandfather’s Company in Silicon Valley Plant

(Corrects to show Yahoo! Inc. as Hadoop software’s developer in 32nd paragraph of story published April 16.)

More than a century after General Electric Co. (GE) built its first research laboratory in an upstate New York barn, it’s wooing Silicon Valley engineers in a bid to connect machines the way Facebook Inc. (FB) links people.

New hires are coming from Oracle Corp. (ORCL), SAP AG (SAP) and Symantec Corp. (SYMC) as well as Stanford University and the University of California, Berkeley, as GE persuades developers to forgo potential windfalls from initial public offerings to work for the last original member of the Dow Jones Industrial Average.

GE’s vision for the so-called industrial Internet is to build networks that harvest data from heavy equipment, boosting efficiency for commercial users such as railroads and airlines. The center of the effort is a $1 billion facility in San Ramon, California, that will be staffed with as many as 400 people. In the process, GE also aims to disprove the notion that older stalwarts can’t lure tech talent from younger, cooler startups.

“GE already has a brand, but when people take a step back they probably think about it as more related to an older company,” said Shannon Callahan, head of technical talent at venture capital firm Andreessen Horowitz. “But the magic about Silicon Valley is when you come out here and you’re building something new, you get the opportunity to brand it as something new.”

Bill Ruh came from Cisco Systems Inc. (CSCO) last year to lead the venture as a GE vice president and has been hiring ever since.

“They want to be in on the next big thing,” he said.

Industrial ‘Disruptor’

Technology enabling companies to remotely coordinate locomotive traffic and monitor wind turbines is “going to be a disruptor in these industries in a way that’s as unpredictable as it was in the consumer world,” Ruh said.

The field is known as “big data.” Just as information on millions of Facebook users is prized by advertisers, the details companies amass on their operations are deemed valuable in cutting costs and increasing profit. For Fairfield, Connecticut- based GE, it’s also a chance to see products in action.

The data venture is a new front in what Vice Chairman John Rice calls a global war for talent. GE, the world’s largest maker of medical imaging equipment and jet engines, must recruit against computer-services companies ranging from unprofitable startups to International Business Machines Corp. (IBM)

Companies as new as Google Inc. (GOOG), which went public in 2004, tussle for engineering talent with more recent businesses like Facebook that can dangle the prospect of pre-IPO equity before candidates. Facebook, which had 3,200 employees at the end of last year, said in December that it plans to add thousands more people in the coming months.

Recruitment Challenges

“Even a high-profile startup with great investors and a skyrocketing valuation has challenges recruiting the best people in the Valley, because it’s such a tight labor market here,” said Ashwin Navin, co-founder and chief executive officer of Flingo, a social-TV service. “I can only imagine whats it’s like if you’re a large multinational conglomerate without the same upside in your stock options.”

Without the lure of IPO riches, GE has to appeal to the desire of engineers and developers to work on cutting-edge projects, said Callahan, who is based in Menlo Park, California.

The software center’s location in San Ramon, in the East Bay region of Northern California, is also a selling point for recruiting people, many of whom have five to 15 years of professional experience and are attracted to the city’s relatively low cost of living and good schools, Ruh said in a telephone interview. These are people who have largely outgrown the dream of becoming wealthy in an IPO, he said.

Poaching From Cisco

GE’s hires include Jonathan Ballon as the software venture’s chief operating officer, and Chief Technology Officer Alok Batra, both from Cisco in nearby San Jose, according to the company. Chief Marketing Officer John Magee joined from Symantec earlier this year, while Andrew Crow, director of design, came from Razorfish, an online marketing business owned by Publicis Groupe.

Former Google and Oracle employees also are among the recruits, according to Ruh. He said hiring is about 25 percent complete, with about 100 people already on board as the business prepares to move into the renovated San Ramon facility in June.

While Ruh would not discuss compensation specifically, he said, “When you look at how we pay and the compensation packages, we are certainly -- if you put the IPO aside -- we’re very competitive in the market. A lot of people aren’t competitive in salary and bonuses because they say you’ll make it up on the IPO.”

Skills Shortfall

Sharoda Paul, 30, one of GE’s first hires for the initiative, has a doctorate in information sciences from Pennsylvania State University and was a National Science Foundation research fellow at the Palo Alto Research Center, formerly Xerox Parc, before joining GE late last year.

“There are a few motivations to get into software,” she said. “One is to IPO, and another is to have people really use your product.”

“We have a huge amount of resources and backing from GE that helps us take risks and innovate,” she added.

Callahan of Andreessen Horowitz is not surprised.

“Any company that’s doing something very innovative, very exciting, something that hasn’t really been accomplished before, will be able to attract talent,” she said. Bloomberg LP, the parent of Bloomberg News, is an investor in Andreessen Horowitz.

U.S. demand for skilled workers with the technical background and education to analyze big data will outpace supply by 140,000 to 190,000 jobs by 2018, according to a May 2011 study by McKinsey & Co. Employers will face an additional shortage of 1.5 million managers and analysts who can apply those findings to businesses, the report found.

Preventing Traffic Bottlenecks

GE’s research roots run deep, even if it’s a new arrival in big data. Founded by Thomas Edison in 1892, the company established its first laboratory eight years later in the barn of chief consulting engineer Charles Proteus Steinmetz.

GE is developing technologies to help minimize bottlenecks in train traffic and reduce air travel disruptions from unscheduled engine maintenance, Ruh said. That will enhance the service offerings that accounted for 45 percent of last year’s $94 billion of industrial revenue, according to GE.

Sensors on 6,400 GE wind turbines are already reporting data monitored in control centers in Salzbergen, Germany, and at the headquarters of its renewable energy business in Schenectady, New York.

Technicians can reset the turbines in case of a fault or dispatch crews for repairs, said Lindsay Theile, a spokeswoman. Analyzing the data ultimately may help GE devise more efficient and reliable designs.

‘Just Too Big’

“If I can begin to see that something is starting to deteriorate and get out there and fix it before it breaks, that’s a foundational change,” Ruh said. “I don’t care if it’s a wind turbine or a jet engine or a truck that’s out making deliveries, in the end what everybody wants is predictability.”

Calculating “a global, economy-wide number” for the potential market for technologies that aggregate and analyze such data isn’t possible, said Michael Chui, a senior fellow at McKinsey & Co. “It’s just too big.”

In health care alone, big-data solutions could save $300 billion annually in the U.S., Chui said. That’s an important business for GE, providing about 20 percent of the company’s industrial revenue.

IBM, the world’s biggest computers-services company, announced its push into big data in May 2010. Its initiatives include providing analytics to improve public safety, such as monitoring traffic patterns to pinpointing security breaches.

Splunk, Cloudera

Another aim: extending the lives of oil and gas fields by improving oil recovery through analytics. IBM is working with Vestas Wind Systems A/S, the largest maker of wind turbines, to find better locations for wind farms.

Newer entrants are jumping in as well. Splunk Inc. (SPLK), which may price its IPO on April 19, said its customer rolls exceeded 3,700 as of Jan. 31, with offerings to help companies monitor and analyze data to improve service, cut operations costs and reduce security risks. Cloudera Inc. is marketing a version of open-source analytical software called Hadoop, first developed at Yahoo! Inc. and now used by IBM and others.

GE is counting on its expertise making industrial equipment from gas-fired electrical turbines to diesel locomotives to give it an advantage over rivals focused on exclusively providing data solutions, Ruh said.

“If you don’t have deep expertise in how energy is distributed or generated, if you don’t understand how a power plant runs, you’re not really going to be able to build an analytical model and do much with it,” Ruh said. “We have deep insight into several very specific areas. And that’s where we’re staying focused.”

Innovation Pace

The pace of innovation is accelerating, threatening to leave latecomers at a disadvantage, according to Ping Li, a partner at Palo Alto, California-based Accel Partners, a venture capital firm that’s investing in big-data startups.

“The window of opportunity isn’t closed today, but if you’re not getting in right now, it’s hard to see how you can keep up with the pace of innovation,” Li said in a telephone interview. “These technologies are getting proliferated across geographies and sectors faster than anyone anticipated.”

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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