GE's "Industrial Internet" Is Making Machines Smarter

Imagine that your dishwasher was like an obnoxious Facebook friend, and constantly told you about every detail of its day with a never-ending stream of status updates. Sounds dull, but a dishwasher obsessed with telling you how it was doing could actually let you know when it needed maintenance before it broke down, as well as how to fix it, saving you valuable time and money. In a nutshell, that's how General Electric plans to boost global GDP by $10 trillion-$15 trillion over the next 20 years. It's called the Industrial Internet, and on Wednesday GE doubled down on the initiative, announcing new partners and new products in its bid to create a global network of smart, responsive machines.

The idea behind the so-called Industrial Internet is simple: The more data we have about our machines, the more efficiently we can use them. General Electric, with products in fields as diverse as aviation, wind energy, rail transportation, medical diagnostics, and oil and gas production, has estimated that inefficiencies in the way industrial machines are used cost hundreds of billions of dollars a year. The culprit behind these losses is primarily unpredictable maintenance: Because machine operators don't know exactly when a system will break down, they have to waste time inspecting systems that are perfectly healthy, and they have to waste time repairing broken systems that could have been kept in working order through more timely maintenance. GE envisions a world in which all machines are outfitted with sensors so that they know when they need maintenance, and have the networked communication capabilities to tell their owners what's wrong and how to fix it. With perfect data about our machines, there's no reason they shouldn't operate at perfect efficiency. 

On Wednesday, GE took big steps toward making this world a reality. Not only did GE more than double the number of Industrial Internet applications it offers to customers, it also brought some big tech and communications companies onboard to make its vision a reality. When GE announced the initiative last year, the project was almost entirely in-house and immediate financial results were modest; it has generated under $300 million in revenue so far in 2013, compared to company-wide revenue of about $70 billion.

Telecommunications provider AT&T will provide data gathering and remote monitoring for GE's Industrial Internet over its wireless network, a highly lucrative proposition that propelled the stock higher in Wednesday's trading. It's not hard to see why: If the Industrial Internet is as successful as General Electric hopes, every machine it produces, from wind turbines to ovens, will be sending rich data over a wireless network constantly, and that would truly be a windfall for a wireless carrier.

GE also announced a partnership with Intel , which will be providing the sensors that give GE the critical ground-level data on how well machines are functioning. An ongoing relationship with Cisco Systems will be deepened, giving GE customers access to the impressive data processing and analysis powers of Cisco.

Put together, buyers of GE industrial equipment will have data on their machines collected by Intel sensors that are communicated instantly via AT&T networks to servers where Cisco Systems programs will analyze the data in real time for efficiency and potential maintenance problems. That's an impressive suite of applications and services that allows customers to optimize their industrial assets. General Electric believes that by 2020, it will be boosting the world economy by as much as $15 trillion a year. This kind of initiative and those kinds of figures make me happy to be a GE stockholder.

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Fool contributor Daniel Ferry owns shares of General Electric Company. The Motley Fool recommends Cisco Systems and Intel. The Motley Fool owns shares of General Electric Company and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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