A heads up to General Electric's tech-geek pitchman Owen: You may have to share the stage.
The Owen ads, which feature a recent GE digital hire talking up his opportunity to transform the way the world works, are the public centerpiece of the $280 billion company's push to transform itself into a software powerhouse. The scale of GE's investment and its success so far in making software a legitimate business has helped set it apart at a time when just about every industrial company is talking tech. Turns out, though, GE isn’t the only one with big ambitions.
Honeywell is reportedly on the verge of acquiring JDA Software, a private equity-owned developer of supply-chain and warehouse management software. The purchase price will be about $3 billion, including JDA's hefty debt load, according to the Wall Street Journal. Just last month, Honeywell agreed to buy warehouse-automation software and robotic arms maker Intelligrated for $1.5 billion.
Both deals are a play on the growing demand for more efficient fulfillment and warehousing operations as companies embrace the boom in e-commerce and strive to compete with the speedy, low-cost delivery offerings promulgated by Amazon. The internet giant created a giant hole in the warehouse-automation industry when it acquired robot-maker Kiva in 2012 and took the technology in-house. Honeywell, an $89 billion company, has got the heft and now a decent stable of technology to become a go-to option for major retailers not named Amazon.
It's more of a niche move than what Jeff Immelt is trying to do at GE; he wants the company's Predix software platform (essentially an operating system akin to Google's Android) to become the backbone of the entire industrial world. But both companies are still trying to achieve the same fundamental goal of creating stand-alone software capabilities that can function as a business in and of itself. You have to wonder if, in the end, Honeywell's more focused approach will actually wind up being more effective. It's certainly easier to execute.
It remains to be seen how comfortable manufacturing companies will be in handing over their data-management operations to a sometime-rival like GE. For now, that doesn't seem to be much of a problem, but when you're dealing with such a significant industrial internet market opportunity (GE puts it at about $225 billion by 2020), there is also the question of eventual competition from more traditional software companies.
GE's aggressive ambitions have sparked some skepticism among investors. One put the odds of GE achieving the $15 billion of digital revenue it's targeted for 2020 at less than 50 percent. Honeywell's goals are a little easier to envision. Darius Adamczyk -- who will replace long-time Honeywell CEO Dave Cote next year -- has said he wants to boost stand-alone software sales to as much as 10 percent of the company's revenue (about $5 billion) over the next five years.
For now, both companies are in a bit of a show-me stage with their digital efforts. But at the very least, GE isn't alone in the spotlight.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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