GE buys ServiceMax in $915M cloud deal

GE Digital announced today it was buying ServiceMax, a cloud-based field service management company, for $915 million. GE Ventures had been an investor in the company as part of the $82 million Series F round in 2015.

The two companies have more in common than you might think. GE is building the Predix Platform, on top of which it hopes companies will build applications that take advantage of sensor data coming off of Internet of Things-connected devices. GE has made a huge bet on the Industrial Internet of Things, using data on huge machines like MRI machines, wind turbines and airplane engines to give customers the data they need to proactively maintain these mega systems.

In fact, when I spoke to Athani Krishnaprasad, co-founder and chief innovation officer at ServiceMax recently, we talked about a future vision where sensors on IoT devices fed information to companies, allowing them to build entirely new business models. In Krishnaprasad's vision for his company, a hospital would subscribe to an MRI machine instead of buying it and pay for guaranteed up time instead of the physical hardware.

It would be up to the vendor to proactively monitor the device and keep it up and running. Data coming from sensors would let the company know when a part was about to break or that it was time for regular maintenance. He called this "outcome-based services."

"Analyzing the data to change business process to gain efficiencies or service customers better is a big win," Krishnaprasad explained.

And as GE transforms from a company simply selling those big machines to one that fits so well with ServiceMax's future world view, the two companies coming together makes so much sense.

"This acquisition builds upon our ongoing efforts to enhance our overall technology stack around the Predix platform and advance our Industrial Internet vision," Bill Ruh, GE Digital CEO said in a statement. "Improved productivity is critical for the Industrial Internet and digitizing field services is a cornerstone of a successful digital industrial strategy," he added.

ServiceMax CEO Dave Yarnold says this move gives his company resources he couldn't imagine, and he still gets to run it as a separate entity within the larger organization. "Bill [Ruh] wants to run this as a separate business and really invest it. We want to build an operating system for the service economy. To be able to accelerate that and work with one of the best companies in the world and increase investment in the marketing and the product, it allows us to accelerate that vision - and I'm excited about taking that forward.

ServiceMax has raised over $200 million since it was founded in 2007. It would seem on its face, that getting $915 million for the company is a pretty decent return for its investors.

Featured Image: ServiceMax

General Electric's US$915 million acquisition of field service management company ServiceMax on Monday should help enterprises combine what GE does for industrial products and assets with more tools for those who work on them.

GE Digital, the division that's buying ServiceMax, sells software and services for connecting industrial assets and products in the field, then collecting and analyzing data about them. ServiceMax has a cloud-based platform for tasks like scheduling maintenance calls and making sure the right technician is on each job with the right part.

That service management system will get smarter when GE Digital adds its analytics and insights, the companies said. Using its cloud-based industrial internet platform, Predix, GE Digital plans to develop more applications for service delivery. The buyout will also bring ServiceMax into new industries, they said.

"This acquisition builds upon our ongoing efforts to enhance our overall technology stack around the Predix platform and advance our Industrial Internet vision," GE Digital CEO Bill Ruh said in a press release.

Predix began as an internal tool that GE used to glean insights from data coming in from systems the company made, such as jet engines. Now, GE Digital sells it as a kind of operating system for the internet of things for others to take advantage of their own industrial data.

Combining intelligence about industrial assets in the field with software to manage the servicing of those assets should be a natural fit and a boon to efficiency. ServiceMax is 10 years old and a big player in its field, with customers including companies in manufacturing, retail, energy, aerospace, and other businesses. GE itself says it has been a big user of ServiceMax internally.

The latest acquisition dovetails with GE Digital's recent purchase of Meridium, a provider of asset performance management tools, which also will be integrated into Predix.

The ServiceMax acquisition comes just a day before GE's Minds + Machines conference in San Francisco, where the company will give an update on Predix and the ecosystem of developers around it. On Monday, GE Digital announced a program to help independent software vendors use Predix as the foundation for new applications.

The acquisition is expected to close in January.

General Electric Co. agreed to buy ServiceMax, a cloud-based software company, for $915 million to expand its digital operations and enhance equipment maintenance.

The deal will help GE automate and digitize the servicing of heavy-duty machinery, the Boston-based company said Monday in a statement. GE expects the acquisition to close in January.

"It's no secret our services revenue is the bulk of our earnings and is a key part of what makes us successful," Bill Ruh, chief executive officer of GE Digital, said in an interview. "We're moving away from where it's all on paper to where it's all becoming fully automated. Services are becoming a key part of the digital economy."

GE is investing in software operations and attempting to position itself as a "digital industrial" company that makes equipment outfitted with sensors to improve productivity. CEO Jeffrey Immelt has sold off most finance and consumer businesses while focusing on industries such as energy and aviation.

GE Digital, established last year and based on the outskirts of Silicon Valley, may become a $15 billion business by 2020, the company has said. GE has developed an operating system called Predix to help run industrial equipment more reliably and efficiently.

"The addition of ServiceMax better positions GE Digital to accelerate the commercialization of Predix applications by combining GE's industrial portfolio and domain expertise with ServiceMax's field service expertise," Deane Dray, an analyst at RBC Capital Markets, said in a note.

Siemens Deal

German rival Siemens AG also has been expanding its digital presence. The engineering company on Monday agreed to buy U.S. software maker Mentor Graphics Corp. for $4.5 billion.

ServiceMax provides field-service management software to remotely track equipment maintenance, create work orders and manage repair schedules. The Pleasanton, California-based company had raised more than $200 million from investors including GE's venture arm.

GE considered developing its own ability to automate and digitize servicing, but opted to buy ServiceMax after using its products over the last two years, Ruh said. Industrial servicing, including maintenance and upgrades of previously sold equipment, could be a $1 trillion global market over the next 10 years, and digitizing the process could account for a significant percentage of that, Ruh said.

"This is a large opportunity," he said.

Shopping Spree

The acquisition of ServiceMax extends a recent shopping spree for GE, including a tie-up between the oil division and Baker Hughes Inc., deals in the 3-D printer market and the purchase of a maker of wind-turbine blades.

ServiceMax also complements other moves GE has made to fill out its digital business, Ruh said. The company in September paid $495 million for Meridium Inc., a software developer focused on asset performance management, or the monitoring of equipment.

GE will continue to look for "tuck-in" acquisitions for the digital business, he said. "These things fit together as a string of pearls."

Morgan Stanley was the financial adviser for ServiceMax and Gundersen Dettmer LLP served as legal counsel, according to the statement. King & Spalding LLP was legal counsel for GE Digital.

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SAN RAMON, Calif. - November 14, 2016 - GE Digital (NYSE: GE) today announced it has acquired ServiceMax, a leader in cloud-based field service management (FSM) solutions, for $915 million. The acquisition provides GE Digital with enhanced capabilities to advance its Industrial Internet vision, enabling customers to immediately gain more value from their assets and find greater efficiency in their field service processes.

Service has always been a core part of GE's strategy and capability and was an early target for the company's work in analytics and productivity. GE has invested in the build out of digital twins for industrial assets. In addition the company has accelerated productivity improvements through digitizing service processes. The ServiceMax product offering was an essential element to driving GE internal productivity. With this acquisition GE plans to add analytics and insights into the ServiceMax logistics, workforce optimization and deployment models. GE estimates there is a market-wide opportunity to improve service productivity by $25 billion through the use of analytical tools.

ServiceMax's platform provides a full suite of applications, including inventory and parts logistics, scheduling and workforce optimization, and work order management. As a result of this transaction, customers will be able to access these offerings from a modern rapid application development cloud and field-ready mobile platform that combines the strength of GE's deep domain expertise and advanced industrial portfolio with ServiceMax's field service expertise. The company plans to leverage the Predix platform to further the development of additional industrial applications focused on service delivery.

"This acquisition builds upon our ongoing efforts to enhance our overall technology stack around the Predix platform and advance our Industrial Internet vision," said Bill Ruh, CEO, GE Digital. "Improved productivity is critical for the Industrial Internet and digitizing field services is a cornerstone of a successful digital industrial strategy. This transaction, along with our previous acquisitions of Wurldtech and Meridium, is directly aligned with our strategy to drive growth both inorganically and organically by building the capabilities to support the digital industrial transformation through Predix, APM and the Digital Thread."

The addition of ServiceMax's complementary capabilities and highly-talented team better positions GE Digital to develop and accelerate the commercialization of Predix applications, delivering service products through a single, robust platform. This platform will address the service needs of enterprises across the entire service delivery process and provide the critical expertise and technologies needed to accelerate GE Digital's existing services solution roadmaps. Coupled with the recent acquisition of Meridium, GE Digital will now provide a full suite of applications centered on driving comprehensive asset management for the Industrial Internet.

In addition, this transaction brings to GE Digital an immediate vertical customer base as well as significant recognition in the market and enhances GE Digital's ability to commercialize its field services solutions. ServiceMax will have access to new verticals and will be able to utilize GE Digital's scale and comprehensive Predix platform to enhance and strengthen their offerings for customers.

Dave Yarnold, CEO, ServiceMax, said, "The transaction will help position ServiceMax to reach its next phase of growth by having access to GE's broad and advanced industrial portfolio, deep domain expertise and substantial customer footprint. We look forward to benefitting from GE's experience, capabilities and resources as we expand into new markets while continuing to deliver the best tools to help customers maximize productivity and efficiency."

Acquisitions are part of the GE Digital strategy to accelerate efforts in leading the Industrial Internet. The company will provide an update on their strategy and demonstrate progress at their flagship Minds and Machines event November 15-16 in San Francisco.

The acquisition of ServiceMax is expected to close in January, subject to customary closing conditions, including receipt of applicable regulatory approvals.

Morgan Stanley acted as exclusive financial advisor to ServiceMax with Gundersen Dettmer LLP serving as legal counsel for ServiceMax. King & Spalding, LLP served as legal counsel for GE Digital.

ABOUT GE DIGITAL
GE Digital connects streams of machine data to powerful analytics, providing Industrial companies with valuable insights to manage assets and operations more efficiently. World-class talent and software capabilities driving big gains in productivity, availability and longevity. For more information, visit the website at www.ge.com/digital.

ServiceMax is a leading industry provider of field service management software - an estimated $25 billion market worldwide. The company continues to reimagine and create solutions for the 20 million people globally who install, maintain, and repair machines across dozens of industries as the leading provider of complete end-to-end mobile and cloud-based technology for the sector. ServiceMax goes to every length -- from joining technicians on service calls to publishing the industry's leading online publication -- to help customers discover untapped innovation, unleash new revenue streams, drive efficiency, and most importantly delight their end-customer. To learn more, please visit www.ServiceMax.com.

Amy Sarosiek

GE Digital

+1 224 239 6028

Michael Busselen

ServiceMax

+1 925 965 7850

Emergence is proud to announce the acquisition of ServiceMax by GE. We were very fortunate to have partnered with the amazing team at ServiceMax as the lead investor from the beginning and wanted to share some of the key milestones along the way. ServiceMax was recently recognized as the leader in the Gartner Magic Quadrant for field service management and one of 25 companies selected as the "Next $1 Billion" company by Forbes.

Emergence has been pursuing an investment thesis around the mobile enterprise for many years now. The basic thesis is that new SaaS applications, enabled by mobile devices, would empower the 80% of the global workforce of deskless workers with new productivity tools and applications. We also believe cloud platforms offered by Salesforce, and now others like Amazon, Google and Microsoft, enable new companies to get to market faster and more capital efficiently. ServiceMax combined these two major trends and took advantage of both mobile and cloud platforms to transform the way field service was delivered for some of the largest and most successful industrial companies in the world.

In 2008, ServiceMax (then called Maxplore) won the first Force.com developer contest, sponsored and judged by Emergence Capital in partnership with Salesforce. Emergence led a $2 million Series A investment, partnering with founders Athani Krishna, Hari Subramanian and Sam Mukherjee and joined the Board as the first investor. With the support of the founders, we were able to attract the former VP Global Sales at SuccessFactors (another Emergence portfolio company), Dave Yarnold, to join the company as CEO. Dave worked closely with the founders to build a world class team and an enterprise product and services offering. ServiceMax went on to raise over $200 million in six rounds of equity financings from Emergence and a great set of co-investors and strategic partners including Salesforce, PTC and GE. Dave and team brought the enterprise DNA that allowed the company to close deals with some of the largest industrial companies in the world such as GE, Siemens, Schneider Electric, Pitney Bowes and Tyco among many others.

The company enjoyed six straight years of compounding 100% growth and became the acknowledged leader in the industry. When GE explained their vision for GE Digital and their transformation from an industrial to a digital company, ServiceMax seemed like a natural fit for their bold ambitions. Like most great M&A outcomes, we were not looking for a buyer when GE expressed interest. We built and funded ServiceMax with the intention of growing a successful independent, public company. GE made a compelling case for the potential of the combined companies to accelerate impact and we soon came to terms on a great outcome for GE, for management and for shareholders.

A huge congrats to Dave, Athani, Hari, Scott, Rick and the entire ServiceMax team that made it all happen. Nothing makes us happier at Emergence than helping founders turn their dreams into reality and building leaders in their industry. It makes it extra special to work with great leaders like Dave Yarnold now for the second time building a billion + SaaS business together. We are so proud of the eight year journey with ServiceMax and look forward to seeing their tremendous impact now as part of GE Digital.