by Alyssa A. Lappen
Forbes | Mar. 28, 1988
GENERAL ELECTRIC sold off its failing computer manufacturing line in 1970. It seemed to be headed for another computer disaster in 1983, when its time-sharing business began to crash.
GE’s Information Services division sold $500 million worth of computer time in 1983. Then, when computing power became cheaper to own, nobody needed time-sharing. “Our revenue base collapsed,” recalls Anthony Craig, 42, a former IBM veteran who now is president of GE Information Services.
But in the last five years General Electric has turned its dying timesharing operation into a high-tech messenger service. Today GE Information Services shuttles millions of electronic messages each day for its customers among all sorts of computers that speak in different dialects.
Think of it as a kind of electronic Federal Express. GE’s network is a local phone call away from customers in 70 countries who use it to do everything from managing corporate cash and sending interoffice memos to tracking railroad boxcars and sending clothing patterns to aparrel manufacturers in the Far East.
Though it rated only a few paragraphs in the parent company’s 1986 annual report, General Electric’s computerized business networking operation sold about $400 million worth of services last year, and earned 5.5% after taxes (although GE’s corporate tax rate is only 34%). This business is so young that some markets in which GE particpates have quadrupled in the space of a year.
The proliferation of cheap desktop computers from different manufacturers has made electronic communication among them impossibly complex, even for many head offices talking to their own branches. Enter GE with its intelligent computer network. Since GE’s system understands about 100 computer languages and protocols, your IBM personal computer can talk to one customer’s Honeywell, another’s DEC and a supplier’s Hewlett-Packard.
Benetton, the sportswear retailer, hooks 90% of its manufacturers and order agents around the world into an order entry system on GE’s network. Now Benetton gets orders from the U.S. within hours instead of the three to ten days it used to take when orders were sent by mail or telex.
Other retailers could use a similar hookup to cut their inventory substantially. Cutting inventory in an apparel store means more than cutting financing costs. It also means less money lost in markdowns at the end of a season, and not getting caught with inadequate stock. If all apparel retailers had electronic order entry, says Kurt Salmon Associates in Atlanta, they would collectively save up to $8 billion a year.
General Electric’s strategy is to stay a step ahead of the customer with technology. That means developing network software to solve specific business problems for all kinds of companies. Take Eurobond trading, for example. With up to ten brokers, banks and currency traders involved in a single overseas trade, a costly 40% of international securities transaction fail on the first try.
But Euro-clear System, a 2,260-member cooperative clearinghouse, transmits the instructions for 90% of its members’ $3 trillion in annual bond trades through GE’s network. The Euro-clear link replaces mail or telex for large or small traders, who punch the details of a transaction into Euro-clear’s network and get an automatic validation within seconds. Problem trades are spit back for corrections, virtually eliminating failures. Euro-clear may soon transfer funds this way as well.
In mid-1986 Chrysler Corp. decided to link all its 6,000 dealers to the home office on GE’s network using Quik-Comm, an electronic mail program. Now, Detroit Jeep/Eagle dealer Joe Ricci uses the network to communicate to Chrysler headquarters about everything from sales incentives to financing rates.
GE’s competitors in the international network applications business include McDonnell Douglas’ Tymnet, IBM, and British Telecom’s Dialcom. But none offers as many applications as General Electric. “I stay awake nights wondering who else has a service-based network on a global scale and industry expertise, and I come up dry,” says Craig. “GE is the fullest of the full-service value-added networks,” says David Taylor, a network market analyst at Stamford, Conn,’s Gartner Group.” And people want their hands held.”
General Electric’s notion of service includes its aim to keep the network available to its customers 99.85% of the time, and it meets this goal virtually every day of the year. It does this with constant attention to technical problems at Information Services’ Rockville, Md. headquarters and at the three computer centers in Rockville, Cleveland and Amsterdam in the Netherlands.
During a recently daily 8:30 a.m. network status meeting, the mood was glum as General Electric’s top network technicians learned that a fire in a Paris electric utility the previous night had cut power to GE’s computers, affecting dozens of French customers for 12 hours and slicing the network’s availability that day to only 99.54%.
GE uses 500 small computers around the globe to route traffic to and from its three mainframe computer centers and to reroute it automatically when lines go down. During traffic lulls the systems sends out test messages every few seconds, so GE often knows before its dozens of telephone and satellite carriers do when there are problems. The three computer centers also have two independent sources of utility power as well as backup batteries and diesel or gas turbine generators. Many of the 500 trafficking stations also have backup power, but if one station fails, customers can always dial up elsewhere on the system.
What’s next? GE’s Craig sees his network as a cheap, more efficient alternative to the telephone and facsimile machine. At Rockville empoloyees communicate with colleagues around the world via electronic mail. “The fact that electronic mail is 50 cents vs. five bucks for a call is not important,” Craig says. “What’s important is that the answer comes back in 20 minutes instead of a return phone call the next day. How do you put a value on that?”
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