When I sat down with ServiceMax in September last year, I wrote that the company shouldn’t be underestimated. Its early focus on the concept of ‘servitization’ to enable companies to leverage IoT data to both drive efficiencies and/or generate new revenue streams, by turning products into utilities, was very prescient of market changes.
However, I don’t think anyone could have anticipated the news that came later that year, where it was announced that GE Digital, the industrial software arm of General Electric, would acquire ServiceMax for $915 million.
GE was already an investor in ServiceMax and also a customer, with both companies being advocates of the concept of ‘servitization’. When the acquisition was announced, we outlined how ServiceMax would form the core of GE Digital’s offerings for service transformation, sitting alongside the GE Predix Internet of Things platform and asset management.
The acquisition completed this week and we got the chance to sit down with ServiceMax CEO Dave Yarnold, who will be heading up the new service transformation division within GE Digital, to find out what the plans are for the company under its new ownership.
Whilst ServiceMax isn’t going to be physically moving out of its Pleasanton offices and into GE Digital’s offices in San Ramon, the plan now is to fully integrate the products and for Yarnold and his team to use the cloud of GE to expand the ServiceMax platform. He explained:
Now we can fully engage with the GE folks. We have been working internally with GE around the integrated product strategy. I’m very excited and bullish about the opportunity to build a much broader platform now. As you know, we have been trying to build, for want of a better phrase, an operating system for service.
I think that service is so core to industrial companies, as is the data now coming off the machines. That the ability to take the data, do analytics on that data, leverage digital twin data and merge that in with service operations – this is a must-have application for any industrial company. You’re leaving big, big money on the table if you don’t leverage these technologies to drive additional productivity.
So building out a broader product plan around a much broader industrial service platform, to me is very exciting and is something we are looking forward to jumping in. We are having our first product integrations this week. Based on what we have perceived about Predix and Meridium, we have been coming up with our own plan for how we start to build some bridges and how we come up with a joint solution.
A new focus
Whilst GE Digital itself is under two years old, General Electric itself is over a century old and brings with it a lot of clout, customers and opportunities for ServiceMax to take advantage of. For example, whilst ServiceMax has traditionally focused on field service and manufacturers of products, it now has the opportunity under GE Digital to push its platform into new types of customer that have a need for creating a servitization model.
I think as we start to look forward, we’re not only going to look at manufacturers, but also consumers of capital equipment. So people who use those assets and who have massive maintenance operations – how do we help them become more productive in their businesses?
These are some of GE’s more traditional customers – in the transportation business, in the energy business, in the healthcare business, in the oil and gas business. All of those are heavily capital intensive and they have massive maintenance operations. So I think for them to go and offer not only hardware equipment, but also solutions to help their customers become more productive and efficient in their maintenance operations, that’s big payback on trillions of dollars worth of equipment.
Yarnold said that these companies are typically operating fragmented and old technology, and that it’s an industry that is “even more neglected” than field service. This creates a big opportunity for ServiceMax, as Yarnold outlined that these industries are trying minimise trillions of dollars worth of cost.
GE Digital gives ServiceMax a direct channel into these organisations. Yarnold said:
I think it’s taking advantage of the brand and the distribution capabilities that they have and then integrating our product into the broader technology portfolio. I think those are the two primary things. I think one of the things that has been great about ServiceMax has been our affinity for the service community and having a passion for building a global service community. Having a company culture focused on that. Our customers have felt that from us.
We want to ensure that we get the best GE has to offer, but we also bring the passion for service and the service community into the GE realm. I don’t want that to get dissipated or diluted. So figuring out how to marry the cultures in a 1+1=3 kind of way.
Now you look at the expertise that we are going to bring in from all the folks within GE who live and breath this stuff. We can cherry pick the best talent from one of the best service companies in the world, bring them into the fold, and this an even more differentiated solution. And I absolutely plan to find those people that can become part of GE’s software company. This is going to be a magnet for the best talent within GE, I believe.
Shaping the market
As I’ve noted before, for some reason the concept of ‘servitization’ hasn’t seemed to catch on in the realm of enterprise software buzzword bingo and isn’t perceived to be as exciting as other areas of the technology market. My take on this is that this is because servitization can require (but not always) a company to see the big picture for their organisation – it sometimes requires a company to rethink how they do things. And that can be hard.
However, I wanted to get Yarnold’s take on where the market is going and how he perceives things developing. He agreed, but split the concept into two areas. The first being the efficiencies that can be gained, which should be a quick win for many companies. And then secondly, the shift from products to utilities/services, which can be more difficult.
It’s interesting how this space continues to be less sexy than selling to sales people or marketing people. It’s just less buzzy. The financial impact of it, the implications on the world economy, the magnitude of the players that we are working with and continue to work with – it should be a very sexy space. It should be something that every CEO or CFO of an industrial company should be focused on this. And with that focus makes it an attractive market. I love that no one is focused on it, because it remains a massive opportunity for us.
I think that the concept of servitization and truly transforming the business model, that’s big deal. And that’s going to take a while. The opportunity to leverage IoT and all the data, that’s going to take a while. The opportunity to take a look at your service operations and apply a tool and gain immediate financial benefits in terms of productivity and revenue gains, that’s a here and now. Really tangible. You can do that today.
Then you can work on the servitization move, you can work on the data coming off the machines as you evolve your install base. But there’s no reason you can’t start the basics. That’s where the frustration has come for me, that not everyone can see that opportunity.
Having this big megaphone and this huge brand, GE with all the respect that they bring, it’s going to help encourage CEOs and CFOs.
In terms of risks, or where Yarnold sees the greatest threat in terms of competition, the incumbent enterprise software vendors are still the greatest concern for ServiceMax. Yarnold said that they still have “significant sway with CIOs” and they all have large install bases. They have become the default for any enterprise play a CIO would want to make, and servitization is a big enterprise play. Yarnold said:
That has always been our number one competitor. And despite that we have built this amazing customer base. Having GE as a bigger presence in a lot of these companies, in different places, that’s going to be really interesting.
I’m not so worried about the market. The story has been great. If anything this is going to augment the story and we are going to have even more credibility. All of the results we have gotten with GE when they were a customer – I want them to tell us more about the productivity gains, they will start to share that, so our story will get better.
Our biggest challenge is that I just want to make sure that our team stays together, that this passion that we have for this space remains intact and that doesn’t dissipate. That’s my job, to continue to lead this team and make sure that we are well represented within GE Digital. And that everybody feels that.
I don’t think anyone foresaw the acquisition, but when you think about it, the marriage of GE Digital and ServiceMax is an incredibly savvy one. GE, as it did with Predix, is thinking ahead of the market and is recognising that enterprise buyers across a multiple number of industries are going to want to introduce service models into their organisation. If GE Digital and ServiceMax can get the integrations right and broaden the product platform in the right way, I think it could be a pretty formidable force in the market.
Image credit - Images sourced via author
Disclosure - ServiceMax is a diginomica premier partner at the time of writing.