GIS: An Enterprise Software Market in Transition

GIS: An Enterprise Software Market in Transition By Clint Reiser.  
Earlier this summer I began analyzing changes within the geospatial information systems (GIS) market to update ARC’s GIS Worldwide Outlook Study. As I engaged in this process, I looked at what has occurred over the last couple years and the recent industry trends to get a handle on where things may go in the future. I looked at both qualitative and quantitative market characteristics and also compared and contrasted these characteristics with those of other markets to uncover commonalities between them.
Many enterprise software markets have matured considerably, and as a result, suppliers have been forced to adapt to the competitive environment by finding new ways of increasing revenues. This has been achieved through refined customer focus, product differentiation, and the integration of product offerings into a more comprehensive solution. GIS currently exhibits many qualities that are characteristic of a maturing enterprise technology market.  Most notably, there are a limited number of suppliers that continue to have a pure-play “GIS centric” strategy and an increasing number of suppliers focused on supporting certain industries or enabling specific business processes. To these suppliers, GIS is a now an element that supports a broader industry focused or business process focused value proposition.  For example, Telvent acquired Miner & Miner to expand the value proposition of its existing SCADA and DMS solutions; and GE Energy acquired Smallworld to complement its SCADA, DMS, and other network management offerings. The Pitney Bowes acquisition of MapInfo transitioned the role of GIS from a tool for geospatial analysis and “location intelligence” to a technology that “helps corporations and government agencies to acquire, serve and grow customer/citizen relationships.”
The transition of GIS to a supporting role in a supplier strategy can also be seen in how GIS suppliers are organizing their operations. Autodesk recently moved GIS from its Platform Solutions business unit to its Architectural, Engineering, and Construction (AEC) business.  This adjustment clearly illustrates a change in perspective about GIS from that of a platform to a technology that supports industry (AEC) business processes.  However, Hexagon’s recent acquisition of Intergraph is counter to the industry trend.  Prior to the acquisition, Intergraph had realigned its business to be more vertically focused on the industries of security, government, and infrastructure (SG&I). Through business unit realignment, GIS became more closely tied with computer aided dispatch technology to provide comprehensive solutions to these industries.  Hexagon’s stated strategy after the Intergraph acquisition is now more horizontally focused on providing “dedicated measurement systems” to SG&I as well as numerous other industries such as railroads, civil engineering, and city planning.
So what does this history mean for the future of the GIS market and the supplier landscape, and what does it mean to GIS customers? The GIS market is likely to continue to “drift apart,” meaning that supplier offerings will continue to become more differentiated, value propositions will become more targeted, and GIS will likely transition from a distinct software category to an element included in a diverse set of technology solutions. In an effort to maintain a coherent strategy, suppliers will center their product revisions, enhancements, and extensions on the needs of a particular set of customers with similar requirements. As this occurs, suppliers will need to maintain a focused strategy and make sure their offering isn’t “caught in the middle” between the requirements of two distinct market segments. Strategy changes can shift a supplier’s product development strategy leading to some products being improved and others being neglected. GIS customers that have requirements incidental to a supplier’s target customers run the risk of limited product support and enhancements in the future.   However, a change in strategy can also increase the likely hood of product improvements. For example, I believe that the Hexagon acquisition of Intergraph will increase investment in the GeoMedia product due to the synergies it has with the Leica product lines. 
It will be interesting to see if the GIS market will continue to evolve in the manner I have described. If the current trends continue, pure-play GIS providers will continue to merge with providers of complementary technology and GIS will take on the role of a supporting technology within a broader set of solutions that are focused on a well-defined customer segment.