The year 2020 has a lot more to offer for the geospatial industry, especially since it is one of the enabling pillars of the Fourth Industrial Revolution. Though the industry as a whole may see a timely recovery, different segments would fare differently.
The year 2020 began “as usual”, but by the time people got out of the holiday mode and started to roll out their business plans, early indicators of a coronavirus spreading its wings beyond China began to feature in routine conversations. Within a fortnight, the threat became a lot more real, and became part of corporate discussions and board meetings. However, no one could imagine until the second half of February that the virus is going to alter all plans.
The business community responded quickly to safeguard its human assets and adjust its business plans, much before the political administration felt the need to do so. But despite the best of intent and technology at its disposal, the corporate world couldn’t anticipate and predict the likely consequences, leave apart recovery path and models. And today, uncertainty has become “most certain”, causing 24/7 fear and anxiety.
The geospatial industry and its leadership weren’t an exception, and their response was aligned to that of the mainstream IT industry. Though surveying operations and high-end data processing projects were stalled for a while, data, software, analytics and system integration companies continued their business operations and played a key role in supporting essential services. These companies also aided the authorities in monitoring and controlling the spread of the virus by adding the spatial element to the response at all levels — from individuals, local municipalities, provincial and federal governments to voluntary organizations.
“At every level of government and across society, geography has been essential for understanding and responding to the pandemic. The outcome is a new respect for geographic science and its application,” says Esri Founder & President Jack Dangermond. Explaining how and why geography matters so much in the current situation, Auren Hoffman, Founder and CEO, SafeGraph, says, “It’s a crisis in the physical world, unlike the virtual one in 2008. It needs a response from the physical world, and so geospatial data has been playing a critical role in the battle against COVID-19.”
Recovery models for geospatial industry
Economists and business analysts from around the world have been busy developing and altering models of recovery. In the last quarter, most experts concluded that normalcy is far away, and it’s almost impossible to predict what would constitute the “new normal”. According to them, an enterprise’s adaptability, and its ability to “leave behind” and “move forward” will hold the key to its survival and growth in the industry in the coming times. As Kanwar Chadha, Founder, SIRF, INOVI & AQuesT, puts it, “COVID-19 has changed the fundamentals of socio-economic behavior, and only the strong would survive, while the weak would perish.”
Alain De Taeye, Member of TomTom’s Management Board, feels that the world won’t be the same again. “This is the worst ever crisis since 1930s. A large number of companies would be out of business despite assistance from governments,” he says. Meanwhile, Juergen Dold, President, GSI at Hexagon AB, appears to be hopeful. He says, “Geospatial industry will have financial challenges in the short-term, but ‘valuable’ companies will carry on and become stronger, as we proceed towards recovery. Only in the night you can see stars.”
Data and analytics
Real-time geospatial/location data was in huge demand during the first quarter of this year. Most data companies didn’t feel the pinch, and a few in fact went on to add progressive numbers to their quarterly results. The trend mostly continued in the second quarter, except for a brief slowdown due to stringent lockdowns. The last few months have seen data platforms getting recognition globally, especially the geospatially enabled dashboards that helped in comprehending and predictive modeling of the virus spread. Timothy Petty, Assistant Secretary, Department of Interior, USA, says, “It’s a great time to be in the geospatial field. We are in the era of integration of information and analytics. The vocabulary has changed, and data is guiding what the state should do based on a map.”
Auren feels that there is a silver lining in this crisis. “We have been experiencing greater demand for near-real-time geospatial data from a host of business enterprises and local authorities. Moreover, our client profile is changing and new buyers are making fast decisions,” he says. Echoing similar views, Frank Pauli, CEO, Cyclomedia, says that “the relevance and consumption of geospatial solutions has increased, and we may see a temporary slowdown, but are heading for V-shaped recovery”.
Benefiting from the growing demand for data, companies like Maxar Technologies reported solid results in the second quarter. Maxar’s revenue increased from $412 million in 2019 to $439 million this year. Announcing the results, Daniel Jablonsky, the company’s CEO, said, “The demand has remained resilient in the current environment, as our customers continue to rely on us for important national security and commercial missions. We generated another quarter of solid revenue growth in Earth Intelligence, while Space Infrastructure returned to growth on the heels of recent diversified bookings from both civil and commercial customers.”
Similarly, announcing a “highly profitable” second quarter, Ola Rollen, President & CEO, Hexagon AB, said, “Despite a challenging backdrop, we reported a record second quarter operating margin of 25.3 % supported by continued growth in software. The shift in the business model towards software is clearly paying off, enabling us to be much more resilient in difficult times. Software-focused businesses have grown, with Safety & Infrastructure recording 14% organic growth, supported by strong demand in public safety and geospatial mapping solutions.”
The demand for geospatial data has been gaining momentum consistently, but it has also brought forward some of the associated challenges with regard to its ease of use, structures, standards, integration, authenticity, currency and security. These are issues that are quite relevant, especially when it comes to the market’s engagement with the Digital Twin segment. The combination can generate tremendous business opportunities. Experts argue that collaborative business models towards delivering enterprise solutions in partnership with the mainstream IT and engineering industries would in a way shape the future of the geospatial industry. According to Bryn Fosburgh, Senior Vice President, Trimble, “COVID-19 has brought with it an absoluteness in terms of collaboration.”
Geospatial data and software platforms powered by Machine Learning, automation and analytics are likely to witness a V-shaped recovery. However, there may be different experiences and challenges depending on the solutions addressing different market segments. For instance, companies focusing on core segments of the economy such as construction, utilities, mobility, healthcare and insurance would witness a smooth ride, whereas entertainment, retail, travel and tourism would have to make a detour.
Surveying and mapping
Surveying and mapping has traditionally been a steady segment of the geospatial industry. With fieldwork dominating operations, the segment did witness disruption in the aftermath of COVID-19. However, after one quarter of lull, the surveyors are back to work — especially those supporting construction and infrastructure projects — as these are fundamental to economic recovery. The infrastructure industry too has been investing in adoption of digital workflows and connected construction solutions for a while now, but as Bryn says, “COVID-19 has proven to be an accelerator in the digital transformation of the construction industry. Digital construction technologies, including geospatial, BIM, and Digital Twin, has enabled virtual collaborations, refining the way construction workflows are conducted.”
Juergen says the usage of geospatial tools is growing, and so is the awareness around them. “Since buying and delivery process is disrupted temporarily, we may not see a V-shaped recovery, but in all likelihood, surveying and mapping market will recover soon.” His arguments hint at a U-shaped recovery for the sector.
The quarterly results of some equipment companies suggest that the sector may not witness a quick recovery, but will bounce back in due course of time. While the revenue of surveying majors in Q2 (April-June) is still in the negative zone (ranging from 10-40%), things are marginally better than Q1 (Jan-Mar) — after the economies have started reopening.
Topcon Positioning and Smart Infrastructure reported a revenue of $137 million and $61 million, respectively, from April to June, seeing a drop of 21% and 10%, as compared to the same period last year. However, a closer look indicates that the month of May marked the beginning of recovery, while June was similar to last year. Construction, infrastructure, and agriculture markets continue to do well for companies in this sector.
Similarly, Trimble Inc posted a quarterly revenue of $733.6 million, down by 14%, as compared to 2019, even as the geospatial revenue declined by 12%. Rob Painter, Trimble’s President & CEO, said, “The resilience of the Trimble team, the quality of our Connect & Scale 2025 strategy, and the strength of our financial model enabled us to perform despite difficult circumstances.”
FARO Technologies, on the other hand, has been experiencing rough weather since the beginning of the pandemic. The company reported a 40% decline in revenue in the second quarter, down to $60.6 million from $93.5 million in the same period last year. But Michael Burger, President & CEO of FARO Technologies, was hopeful of a recovery. “While the discretionary capital nature of our markets limits our visibility towards the timing of a recovery, we remain confident the actions we are taking will drive a meaningful increase in growth and profitability in the years ahead,” he said.
Geospatial knowledge infrastructure: Vast scope for PPPs
Since surveying and mapping serve as the foundation of geospatial knowledge infrastructure, which is critical for Digital Twin models, the market prospects appear quite positive. Even though restrictions caused by COVID-19 have challenged traditional methods of surveying and mapping, drone and aerial surveying, high resolution satellite imaging, processing automation, Cloud-based analytics and delivery models offer innovative alternatives to fulfil the growing demand. Growth in surveying and mapping has been largely driven by the construction and infrastructure industry.
It is worth noting that the pandemic has generated awareness about geospatial information and its valuable role in the digital age at the highest level of political and administrative leadership. While national mapping organizations have been busy providing authentic and reliable geospatial information, challenges associated with monitoring and maintaining physical distancing of 2 meters has seen growing recognition for the need to have augmenting vertical and horizontal positioning accuracies of devices — further emphasizing on strengthening ground-based positioning infrastructure.
Given the fact that geospatial knowledge and positioning infrastructure is being recognized as a critical element, it’s quite likely that we will see significant investments from both public and private sector stakeholders in this field. In fact, this may boost the trend of public-private partnerships, especially in developing countries that are in dire need to strengthen their national geospatial information infrastructure.
The year 2020 has a lot more to offer for the geospatial industry, especially since it is one of the enabling pillars of the Fourth Industrial Revolution. Though the industry as a whole may see a timely recovery, different segments would experience different recovery models. It is noteworthy that the equipment companies having added software capabilities to their portfolios have fared better than pure hardware companies, clearly indicating a trend driven by a combination of data and analytics.
Going forward, it may not be a cake walk, but we are set to witness a major transformation in terms of composition, stakeholdings, workflows, processes, applications, value propositions, skillsets, policies, code of conduct, business models, ownership, and probably the leadership too. In all likelihood, this would wipe out a certain segment of industry, while creating new business opportunities.