Instant Analysis: GE Brings Its Predix Industrial Software to Microsoft's Cloud

Image source: Microsoft

What happened?

General Electric (GE 0.03%) and Microsoft (MSFT 2.50%) partnered together this week to bring GE's Industrial Internet software, called Predix, to Microsoft's Azure cloud network. 

Predix is one of GE's major investments in the Internet of Things, and it allows companies to manage and analyze industrial equipment (jet engines, factory machines, etc.) to improve their efficiency and reduce downtime. 

"Bringing Predix to Azure means those same customers will now have access to additional capabilities such as natural language technology, artificial intelligence, advanced data visualization and enterprise application integration," Microsoft and GE said in a press release.

The companies said Predix will also be integrated with Microsoft's Azure IoT Suite, Cortana Intelligence Suite, Office 365, and other services, so that Predix customers can access industrial data in their business software. 

A developer preview will be available toward the end of the year with a commercial release in the second quarter of 2017. 

Does it matter to shareholders?

Predix already runs on several cloud platforms, so the news is less important for GE investors. There is a slight benefit in that not all cloud services have the geographic reach Microsoft has -- the company's Azure servers have 20 geographical locations. Amazon.com's AWS, a major competitor to Azure, is located in 13 locations right now but has several more coming.

But this news is much more important for Microsoft. The company made just $500 million in cloud-related revenue in 2015, according to Morgan Stanley, and it wants to improve that number. Adding Predix to Azure allows Microsoft to better compete with Amazon, but there's still a huge gap between Microsoft's hundreds of millions in cloud revenue and Amazon's nearly $8 billion in AWS revenue in 2015.

Gartner estimates the public cloud computing market is worth $204 billion right now and will grow by 16.5% this year. Microsoft is looking to partnerships like this new one with GE to help the company grab more of the cloud market as it moves away from legacy businesses. However, it's going to take much more than adding Predix to Azure to make that happen. Investors should be looking for more cloud partnerships in the future to ensure Microsoft can keep up with Amazon's dominant revenue position in the cloud space.