GE to scale back Predix amid companywide restructure

Dive Brief:

GE is consolidating GE Digital, refocusing on its Power, Aviation and Healthcare segments and undergoing corporate restructuring, according to CEO John Flannery's presentation to investors on Monday. The announcement comes days after reports of the layoffs of salespeople and developers in GE Digital, along with cuts in its other businesses, reports Reuters.
GE will aim for more than $1 billion in Predix-powered revenue as it seeks to reduce costs for the platform by $400 million in 2018, according to the investor update. By prioritizing the market around GE business verticals — where the win rate is around twice as high as other markets — GE hopes to boost profitability.
The company's push for its industrial internet will predominantly focus on Predix applications and partner solutions across strategic installed and non-strategic installed bases of customer focus. Around 10% of remaining focus will fall to adjacent industrials and vertical-specific solutions.

Dive Insight:

The 125-year-old company is in the midst of scaling its business to the digital future to avoid facing disruption and irrelevancy.

John Flannery took the helm at GE in August after 15 years of serving in top executive positions across GE's divisions, according to his LinkedIn. Four months into the job, he is overseeing a broad reorientation of corporate structure and business focus with a fresh leadership team, approximately 40% of which joined in June or later.

GE has landed many major partnerships with other industry powerhouses. In September, the company entered into a multi-year partnership with Dell Technologies for IT infrastructure sourcing. About a month later, GE and Apple announced a collaboration to take Predix mobile through an iOS software development kit.

Nevertheless, the company has struggled to meet benchmarks in its digital department. GE Digital underperformed on expected revenue in 2017 and was partially liable for the 25% drop in the company's share price. The cloud-based Predix platform was expected to reach $15 billion by 2020 under former CEO Jeff Immelt, but analysts have since scaled back these numbers.

There are still many kinks to work out on Predix, and consolidating its scope will hopefully allow the company to improve the platform's applications in core business areas. But reported cuts of developers working on the software already, and speculation of more to come, does not bode well for GE Digital.

The company has about 295,000 employees, and GE Digital employs about 13,000, according to Reuters. An across-the-board cut of even 5% would result in job losses of 14,750 and 650, respectively. Layoffs tend to be a first move for companies looking to cut costs quickly, and GE may be in for a rocky start to 2018 as the restructuring sets in.