Winning GE’s headquarters takes some sting out of EMC sell-off

General Electric Head_DiNa

You lose some, you win some.

Even as Dell Inc. of Texas devours homegrown data storage giant EMC Corp., Massachusetts has a new technology titan to call its own. This one makes locomotives and jet engines instead of server computers, but never mind. General Electric Co.’s move to Boston is the biggest boost to the region’s high-tech economy in decades.

Forget GE’s famed washing machines and dryers. GE still makes them, but only because the Justice Department last month blocked a proposed sale of the business to Sweden’s Electrolux.

Instead, think of the recent TV commercial where the geeky kid tells his parents that he’s landed a software job at GE, and the proud papa offers his son a sledgehammer. The ad’s lame, but it drives home the point. GE raked in $149 billion in revenue in fiscal 2014, and $4 billion of it came from software. That was just 2.6 percent of total revenue, but if it were a stand-alone company, GE’s software business would be one of the 10 biggest on earth.

And by 2020, GE expects annual software revenues to hit $20 billion.

That’s because the company is putting digital intelligence and communications systems into virtually everything it builds. GE calls it the Industrial Internet. It’s the heavy-duty version of the Internet of Things, where smart devices share information and try to meet our needs before we know what they are.

And if you’re building an Internet of Things company, where better than here? The very concept was born right across the river, at MIT. And with first-rate companies in robotics, data security, and the life sciences, Greater Boston is an ideal hub for the ultimate global network.

For consumers, the Internet of Things is all about cars that turn up your furnace when you’re still two miles from home, or washing machines that automatically order more soap from Amazon.com. The Industrial Internet applies the same thinking to the biggest, most complex machines that humans make, in a bid to make them vastly more efficient and reliable.

“The payoff is much bigger from those things than controlling the thermostat in your house,” said Stuart Madnick, professor of information technology at the MIT Sloan School of Management in Cambridge.

Think of a wind turbine for generating clean electricity. GE makes them, you know, and stuffs them with all kinds of sensors to measure windspeed, torque, vibration, acceleration — thousands of data points, captured second by second. It’s all pumped to a remote data center and studied, to fine-tune the turbine’s performance. GE found it can get 5 percent more power per turbine that way.

Or think about your next flight to Las Vegas. A GE jet engine can transmit a constant flow of data about temperatures, pressures and fuel consumption. This information could provide early warning of a mechanical defect long before it becomes a problem. Airlines can also use the data to save millions of dollars in fuel costs, by tweaking each plane’s speed and flight path.

Go down the list of GE products — locomotives, medical imaging, electric generators, oil and gas drilling systems — and apply the Industrial Internet to every one of them. The potential benefits easily run into billions of dollars.

So do the risks. GE is connecting the world’s most vital systems to notoriously insecure digital networks.

“They’re trying to do things that have never been done before,” frets Madnick. “With all these challenges, cybersecurity is last on the list.” He points to the hacker attack on the Ukrainian power grid last month, which left 80,000 people in the dark. “I think the worst is yet to come,” Madnick said.

GE is well aware of the risk. In 2014, it acquired Wurldtech, a Canadian company that specializes in locking down industrial networks. And in Greater Boston, home to companies like RSA Security, Rapid7, and Veracode, there’s a lot of world class data security talent a few T stops away.

Many of the world’s biggest companies share GE’s Industrial Internet vision. Most visible, perhaps, is IBM, which for years has been talking up software for “building a smarter planet.” But while IBM may know a lot more about software than GE, it’s largely lobotomized when it comes to heavy manufacturing. Big Blue still makes its classic mainframe computers, but that’s about it. Meanwhile, GE is building an empire of code-slinging, number-crunching brainiacs, but continues to purchase steel by the ton.

It appears that about 600 of the 800 GE personnel coming to town will be serious product geeks, working in markets where Boston already has plenty of muscle, like robotics and life sciences.The company will also host an incubator to co-develop new products with customers and local entrepreneurs. What’s next? A full fledged research and development lab? GE has certainly come to the right place.

And at the perfect moment, too. It’s too bad about EMC, but bringing GE to Boston is an excellent consolation prize. Now . . . what will it take to land Google?

Hiawatha Bray is a technology reporter for the Boston Globe. E-mail him at [email protected].
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