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Wednesday, April 24, 2013

Pivotal’s Audacious Plan

Pivotal, an ambitious creation of the data storage giant EMC and its hefty affiliate VMware, on Wednesday said it would make cloud-based industrial software applications faster than anyone has before, and announced it had the means to do so â€" a $105 million investment from General Electric.

That values Pivotal, which became independent of EMC on April 1, at roughly $1 billion, about eight months before the company is expected to have a single product.

If Pivotal succeeds, it will go against the technology industry’s lousy record of making a successful company that starts out big. Give management points for a big vision, at least.

“We’re convinced there is an opportunity here as big as data storage was for EMC, or server virtualization was for VMware,” said Paul Maritz, a longtime Microsoft veteran who ran VMware for four years.

EMC has a market capitalization of $47 billion. It owns about 80 percent of VMware, which it bought in 2004 for $635 million, and then partly offered to the public. VMware is valued at $32 billion.

The opportunity is to remake the way industrial companies make software, in a world in which millions of sensor-enabled cars, turbines, and household objects have sensor-enabled telemetry, or data about a thing’s place and status. Mr. Maritz said software needs to be made the way it is at consumer Web companies like Google and Facebook, where applications are created in days or weeks, compared with months, even years, in big business.

“Soon everything will have telemetry, and to service jet engines in real time you need Google-type processing and analysis,” he said. “Cellphone companies will want to see if a radio tower is overcrowded, and then do what airlines do - kick off the lowest-value customer.”

At present, enterprise software that even tries to do this is “abominable,” he added. “These are NASA-scale problems we will be working on.”

His observation about the level of connectivity affecting everything in business is an increasingly common one in Silicon Valley. On Tuesday, Salesforce.com, the biggest maker of online software, said it would remake its company for a world dominated by mobile computing, clouds and social networks.

Along with GE, Ford and AT&T have been building up their presence in the valley to learn more about connected systems. There are also about 80 startups in the valley working on big data products of one form or another, and many are talking with big business.

Pivotal has 1,250 employees, mostly from earlier acquisitions by both EMC and VMware. It includes software for building cloud computing systems; data storage, management and analysis software; tools for outside developers to make applications; and services by experts in both software manufacture and data analytics.

This sounds somewhat like the kind of cloud-based services increasingly offered by Amazon Web Services, Google and Microsoft. These companies lack aspects of the business software creation capability, but VMware has been particularly nervous about AWS.

At a conference in Las Vegas in February, Pat Gelsinger, VMware’s president, lashed out at Amazon for stealing its business by enabling companies to move their data and computing jobs to AWS.

Mary Camarata, a spokeswoman for AWS, declined to comment. “We obsess on our customers instead,” she said.

General Electric has been increasingly vocal about the need to build businesses for the so-called “Internet of Things,” with a greater awareness of what its power systems, engines and medical devices are doing.

“Machine-to-machine communications over the Internet will change the way we do business,” said William Ruh, the vice president of GE’s software and analytics division. With the Pivotal investment, he said, “we’re going to learn a lot about infrastructure and software.” He added, “Industrial data is very different from consumer data too, and we’ll help Pivotal understand the requirements.”

Part of the difficulty will be in learning how to make software that is highly reliable, something largely unknown on the consumer Internet. If something goes wrong on Twitter, a “fail whale” appears; on a jet engine in midflight, lives may be threatened.

If successful, Pivotal may be the first tech company to make a lasting mark without passing through a small startup phase. Companies that were big at the start and didn’t make it include @Home, a high speed cable provider backed by several cable companies; Taligent, a creation of IBM and Apple to battle Microsoft; and Symbian, a mobile operating system that at one point was backed by Nokia, Motorola, Sony Ericsson, and Samsung.

Mr. Maritz said he was clear about the challenge. “We’ll lose people,” he said. “We’ll have to have a clear vision, and make hard choices. Building a successful culture is an elusive thing, based on actions and not words.”