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Value-Centric Market Forging Geospatial Alliances

January 15, 2015

 

Technology innovations and increasing access to geospatial information have triggered tremendous business opportunities leading to the industrialisation and mainstreaming of geospatial technology, while compelling businesses to align, re-align and consolidate

 

Having had the privilege of meeting many of you round the year on multiple occasions and deliberating on the past, present and future fabric of the geospatial industry, I herewith pen down my own learnings and perspectives.

 

The year 2014 has brought in a watershed change in the geospatial industry, paving the way for an innovative, mature, meaningful, and value-based business direction. The year has seen leading players going on a quest to find a common playing field, with specialised expertise coming together to enhance winning combinations, expand horizons, and explore opportunities in an ever-growing but more competitive and complex market driven society.

 

Leaving behind misconstrued and narrow individual impressions, C-level executives of traditionally competing companies got courteous and exchanged business cards, designing a blueprint for converging and leveraging their respective capabilities. Being a believer of greater interaction and a facilitator of opportunities for industry leaders to shake hands, I foresee immense value in a co-competitive approach. I made the first of such efforts by inviting industry leaders for a breakfast brainstorming session in Amsterdam on 24th April 2012, and have subsequently been advocating the expanding scope of converging workflows involving companies having competing legacies. I must admit that C-level executives do see value in converging strengths and are driven more by a futuristic view of business. Encouraged by the need to bring together major stakeholders questing for geospatial arth (Sanskrit for value, purpose) under one umbrella, we have endeavoured to organise an exclusive executive session at ‘GeoQuest’, to be held in Goa this February.

Though the transformation towards this convergence may appear to be sudden, the determinants of change have been germinating for the last one decade. In fact, the term ‘geospatial’ itself could be considered a binding force for the integration and convergence of several independent yet interdependent technologies like imaging, surveying, scanning, GIS and 3D modelling.

 

Disruptive Change

The year 2005/06 saw a disruptive wave, when Google and Microsoft jumped into the geospatial ocean, extending its shores and making spatial information available at an affordable bandwidth and computing infrastructure, encouraging ‘people’ to play and communicate in geospatial language. Decades of effort by OGC to develop international standards and interoperability science came in very handy to facilitate the ‘mashing up’ of geospatial language with those of several industries like design, construction, banking, insurance, energy, water and transportation. Very soon, the geospatial community began two-way communication, wherein a consumer of information became a contributor as well through web and mobile platforms and especially in times of emergency situations, allowing geospatial platforms to become live and dynamic so as to provide spatial perspective and analytics to save lives and manage disasters.

The expanding user base brought in tremendous opportunities for innovation in terms of convergence and integration of geospatial technology with several mainstream disciplines of engineering, information technology, telecommunication, and data analytics. Several players, who until that time were just observers, suddenly found an opportunity to enter the geospatial industry, bringing along domain knowledge, financial capital, business leadership, and extensive outreach, initiating the process of industrialisation and mainstreaming of geospatial technology.

 

Industrialisation forcing consolidation
This industrialisation led to the evolution of geospatial workflows and their embedment to create solutions for government and business enterprises. While this has enlarged the scope of geospatial technology, it has compelled businesses to re-align and consolidate. The past five years witnessed four different and successful strategies for consolidation (Figure 1).

 

  

The first level of consolidation has been followed by geospatial players by restructuring geoprocessing through acquisition, merger, and assimilation of majority of geospatial and market resources. The Hexagon group (with limited affinity to core geospatial) first followed a strategy of acquiring major technology companies like Leica, Novatel, and Intergraph. It further acquired domain specific companies to integrate restructured geospatial workflows. However, Trimble followed a slightly different strategy of acquiring closely connected technology companies driven by an integral set of workflow objectives and technology affinities.

 

The second level of consolidation was driven by IT majors who included geospatial capabilities within the larger IT architecture, offering seamless webbased user interface although with different business drivers and objectives. Under this, the first category of IT majors includes Google and Microsoft and their motivation to add and offer geospatial content to their respective business offerings, creating geospatial content-driven IT platforms. The second category includes Oracle and SAP, whose prime motive was spatial enablement of databases. IBM, and to some extent Esri (along with its partners), falls in the third category, which was driven by Data Analytics and Business Process Platforms.

A phase of (ad)venturing into business- oriented but cautious partnerships through a combination of the above two models is an alternative consolidation model. The alliance of Autodesk with Topcon, FARO and Pitney Bowes, along with an open approach towards IT majors, is one such example. Similarly, Esri is entering into partnerships with SAP, IBM, and a host of content and hardware companies to provide better solutions to its user base.
 

"Autodesk and Topcon have been dating each other for some time; however, their bond can be strengthened further if Esri and DigitalGlobe join the alliance"

 

The fourth level of consolidation primarily concerns the public sector stakeholders who are responsible for and mandated to provide authoritative and quality geospatial information to governments and citizens. The increasing use and need for high quality, updated and authoritative geospatial content is putting enormous pressure and greater responsibility on national geospatial information agencies to transform themselves.

 

In this context, the productisation of national geospatial information infrastructure is seen as an emerging model at national, regional and global levels. Initiatives such as United Nations Global Geospatial Information Management (UN-GGIM), European INSPIRE, and National Spatial Data Infrastructures are going through the test of time. Fostering alliances with fellow thematic geospatial data agencies and private sector data producing agencies like Google, Microsoft, Navteq and TomTom are the key instruments for the successful realisation of national geospatial platforms. Understanding the requirements of public and industry user domains and restructuring geospatial data, along with open policies and open standards, is an important part of this productisation.

 

Solution-centric approach defining partnerships
What has been driving the constant evolution of workflows? While there could be multiple reasons, I believe that it is the overall process of industrialisation and productisation that is triggering constant alignment and re-alignment. The geospatial industry is moving up the value chain by moving away from a product-centric approach and embracing a solution-centric approach and demonstrating higher returns on investments for the users.

 

A comprehensive view of the geospatial technology fabric, as shown in Figure 2, organises companies according to their strengths and offerings. The figure does not rate the companies but indicates technology offerings and coverage of the companies. For example, surveying is primarily driven by hardware tools, but there is a role for software companies to complement these tools through software offerings. Trimble, Topcon and Hexagon offer the entire range of surveying solutions while Autodesk, Esri and Bentley provide software solutions. This creates scope for partnerships.

 

 

 Market perceives Hexagon and Esri as hardcore competitors; however, in my opinion, Hexagon competes with Esri only for 5% of its market share. Hexagon’s geospatial software business can be estimated between USD 100 to 150 million, as against its projected annual turnover of USD 3.5 billion for 2014 (around 5%). Given the fact that Esri’s revenue ranges between USD 1.2 billion and USD 1.5 billion, there clearly lies an opportunity for both Hexagon and Esri to leverage each other’s market outreach beyond the collective USD 5 billion, while offering value- based geospatial solutions workflows and letting Hexagon Geospatial compete for its own market share. Ola Rollen, CEO of Hexagon, took a bold and forward-looking step last June when he first separated the software and solutions groups and subsequently allowed the Intergraph solutions division to use any available competing software (including Esri) while delivering solutions to users.

 

Autodesk and Topcon have been dating each other for some time; however, their bond can be strengthened further if Esri and DigitalGlobe join the alliance. Though both Autodesk and Esri are in the software business and compete for their 5% of market share, Esri’s strength in urban planning and GIS could be very valuably harnessed by Autodesk’s offerings in design and building information modelling, supplemented by Topcon’s solutions in scanning, GNSS and machine control, and finally supplemented by the monitoring capability of DigitalGlobe for large infrastructure projects. Several such combinations and alliances could help leverage a larger market outreach while offering rich geospatial value and utility to customers.

 

Content bottleneck
However, all this still misses out a key component — qualitative, authentic, current, high resolution and dynamic ‘geospatial content’ that would make the entire ecosystem functional, relevant and useful. Despite several global and national initiatives, both in the private and public domains, geospatial content remains a big bottleneck in the overall maturity of this industry. On the one hand, there is a flood of content for general consumers but, on the other hand, there is a definite paucity of geospatial content for professionals and businesses, often resulting in technology failure.

 

Geospatial companies like Esri, Hexagon, Trimble, and Pitney Bowes have been investing in content development and working towards offering content as part of their technology offerings. On the other hand, Google and Microsoft have volumes of content and are offering their technology along with content platforms. National, regional, and global geospatial infrastructures are mandated to serve quality geospatial data to governments, businesses and citizens and also evolve policies and regulations to facilitate conduct of the industries’ organised geospatial data business. Most government agencies are heavily challenged by an ever growing data demand and complex regulatory constraints, making it tougher to live up to market expectations. This is leaving more responsibility on the private sector to build and collaborate for content platforms to appropriately harness the overall momentum and opportunities offered by the market.

 

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