Summary General Electric and Microsoft announced an expanded agreement that has the potential to benefit both firms immensely. Strong growth and high margins associated with the transition to a digital global economy will create significant opportunities for both businesses. General Electric, as a firm already focused on IIoT, has some of the greatest chances to benefit from this transition. *Taken from Microsoft For all its faults and shortcomings, one thing the management team at General Electric (NYSE:GE) has done well on is the transition the world is making from analog to digital. The latest proof of this came on July 16th when management announced an expanded partnership with software giant Microsoft (NASDAQ:MSFT) that's geared toward capitalizing on the shift of industrial firms from a largely non-digital existence to a digital one. To investors in General Electric who are unhappy with the firm's performance, this may seem like another empty promise, but there's no denying that the upside potential from this could be a game-changer for the conglomerate. Digital is the future Earlier this year, I wrote an article about GE Digital, the digital operations within General Electric. In that article, I highlighted the growth the business generated, with sales rising from $3.1 billion in 2015 to $4 billion last year and with more growth on the horizon apparent based on incoming orders. For anybody not familiar with GE Digital, I recommend you read that piece before proceeding further. The general conclusion I had from that piece was that, based on what data we have available, shareholders could realize significant value creation in the long run. Now, with General Electric's expanded relationship with Microsoft, that picture could look even better. You see, according to the agreement, the two businesses will work together in an effort to provide operational technology and information technology to help companies in their transition to a more digital world. As part of this process, General Electric will seek to "standardize" GE Digital Predix offerings on Microsoft Azure, a cloud computing service created by Microsoft that serves as a scalable platform geared toward assisting its customers with computing, networking, storage, database management, analytics, and more. A special focus, it seems, will be on integrating the system with Azure's "native cloud capabilities", which includes Azure IoT and Azure Data and Analytics.
