GE 2011 Annual Report Download - page 9

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We are building mutually profi table
relationships with our customers. Our
service business has a $147 billion
backlog and will generate $45 billion in
revenue in 2012. Service is a strength
for GE because we understand our
products and the ways in which
they are used. When we do well, our
customers benefi t. And we’re continuing
to do everything we can to increase
their productivity and help them
optimize their assets. That is why last
year we invested so heavily in
analytics, controls, monitoring and
diagnostics integration. And we are
building a new software center of
excellence in California.
I don’t see GE as a software company.
However, we will lead in the productivity
of our installed products and their
ecosystems. This will require leadership
of the “Industrial Internet,” making
infrastructure systems more intelligent.
This will show up in more profi table
Contractual Service Agreements (CSAs)
and a software business that could
double to $5 billion in the next few years.
Here is how it could work. The GE90 is
the world’s most powerful engine; it
powers the Boeing 777. Each engine has
17 sensors. These sensors constantly
take complete performance data from
the engine. From this data, we can
build sophisticated analytics that can
avoid unplanned outages, provide
repair data in real time, increase fuel
performance and optimize fl eet
performance. This analytical capability,
applied with domain expertise across
our large fl eet of engines, could save
billions for our customers.
Relationships are also a critical part of
what differentiates the smaller, more
focused GE Capital. We decided from a
strategic standpoint that we should
concentrate on the industries and
sectors where we have a strong com-
petitive advantage versus banks.
That’s the way we think about the
portfolio. Last year we helped launch a
center at The Ohio State University that
is dedicated to the middle market, the
segment that consists of companies
ranging in revenues from $10 million to
$1 billion, including almost 200,000
businesses in the U.S. We have great
origination capability, industry domain
expertise and relationships in that
segment, all of which will fuel GE Capital’s
recovery and growth.
Deep relationships are a competitive
advantage at GE. They are long-term,
and they start at the top. Our leaders
spend a lot of time in the market with
our customers. I chair our Service and
Commercial Councils so that I can
relate to our leaders, follow the metrics
and understand competition. We must
execute for our customers.
We aim to grow margins. Our margins
were about 15% in 2011; we expect
to drive them up by 50 basis points
next year. We are near the top of all
industrial companies, but we can get
even better.
It begins with the way we think about
our cost structure. In the last generation,
GE and our industrial peers began a
long-term trend to outsource our supply
==
GE90 ANALYTICS BENEFIT
90,000
fl ight records analyzed
~200
parameters per
fl ight record
~18MM
parameters per
month
Enhances asset utilization
Increases system performance
Drives strong alignment with
customers
Facilitates securing of long-term
service agreements
Provides additional revenue
streams
THE POWER OF THE INDUSTRIAL INTERNET
Advanced Analytics drives strong alignment with customers
GE 2011 ANNUAL REPORT 7