Almost 14 years ago, ESRI purchased a Dallas-based LBS company called Chrona Software. Chrona's owner, Bill McNeil, became manager of ESRI's newly formed BusinessMAP group. Hal Reid, independent consultant with Hmmm Resources, interviewed McNeil about his background and his insight into the LBS market and where he thinks it is going.
Hal Reid (HR): How did you end up in what became the LBS marketplace?
ACT was also based in Dallas and I was fortunate enough to make a deal with Pat Sullivan, ACT's president. He agreed to put a product brochure in each copy of ACT shipped if I developed a mapping program that would map (geocode) contacts from the ACT database. I then flew to New Hampshire and struck an agreement with GDT, now Tele Atlas, to license its data on a test market basis. I worked with a local developer and one in the U.K. When we were finished MapLinx was launched, then sold to Merit Technologies, and it ramped up to over $5 million in annual sales.
HR: When did ESRI enter the picture?
BM: I sold MapLinx to Merit, worked there for a couple years, then went back out on my own. In the spring of '95, with six young Russian developers, I started another mapping company called Chrona Software. At the time the Department of Commerce offered SABIT or Special American Business Internship Training program. I'm not sure this is still available now but back then the U.S. government funded technology training for Eastern European scientists and engineers. We qualified for the program and with this aid we were able to fund the start-up phase of Chrona.
HR: What did you and your Russian developers build and when did you bring the product to market?
BM: We built a desktop CRM mapping application that geocoded contact databases like ACT and GoldMine. At the beginning the product was limited to rendering a dot or thematically color-coded map but it also included basic territory design features. The program was never released under the Chrona brand because ESRI purchased my company before the launch.
HR: So when did you release your first product under the ESRI label?
BM: We launched BusinessMAP 1.0 in February of '96. Although we developed software for the CRM market that had features similar to today's "LBS" apps, we never referred to BusinessMAP as an LBS solution. In my memory that acronym didn't become popular until the 2000s.
HR: Now that you've left ESRI what are your plans?
BM: I've enjoyed my tenure at ESRI but I want to become an entrepreneur again. Despite the current economic conditions I think this is a great time to develop LBS applications.
HR: Where do you see the LBS market going?
BM: If you step back and historically look at different industries there are many similarities to the current GIS market. Prior to the end of World War II most of the non-commuter public transportation was carried by rail. After the war most people moved to air travel. Many economists and historians feel train companies lost the business because they defined their market as rail transportation rather than the broader transportation market.
This is exactly what is happening now with the traditional GIS companies. They are retrenching and defining their market as GIS not LBS. This would certainly seem to make sense given the fact that few LBS companies are financially successful. Many LBS start-ups can't even give away their software.
The fact is, just as rail companies couldn't transition to air travel, established GIS concerns won't be able to transition to LBS, even if they want to. Their costly infrastructure, slow product development cycle, distribution network and expensive products just don't fit the LBS model.
HR: So where do you see us going from here? On one hand, you say established GIS can't afford to move into the LBS world, yet you point out that few LBS companies are profitable.
BM: Unfortunately there are a couple of things that don't bode well for the GIS guys. For one, traditional GIS markets are becoming saturated. Most large corporations and government entities already use GIS. These are not high growth markets compared with commercial GIS.
Secondly, competition is becoming brutal. Virtual Earth, Google, MapQuest and the others don't have the same revenue model. Much of their income is advertising based. Carriers like T-Mobile, Version and AT&T will also exert competitive pressure, as will the handset makers like RIM and Nokia.
Third, distribution is changing to an SaaS environment. Future software will be Web accessed, subscription based. This is already taking place with companies like Salesforce.com, Intuit and Apple's app store. In other words, you don't need a large distribution network to effectively compete; even small start-ups can succeed with the right software and funding.
Fourth, some existing GIS companies are either in complete denial or don't recognize the threat. Even if they understand the problem, it's difficult to introduce new, less expensive solutions that cannibalize established revenue producing product lines.
Finally, LBS is hot again and despite sparse revenue models, hundreds of LBS start-ups are in play. Surprisingly some of these have been funded and a few will actually prosper. Many of those that succeed will do so because they crossed the line and developed GIS applications. In other words, companies that have staying power will pull business from the less nimble, high priced, established GIS companies. This is the perfect time to offer less expensive GIS solutions. Government agencies and private organizations alike are looking to save money.
HR: You don't see a future for established GIS companies?
BM: Sure, they will persevere by supporting their installed base but they won't be as dominate. New companies with faster development cycles and less expensive solutions will also become major GIS players. This will be especially true in the commercial GIS space.
HR: Are you including ESRI in this mix?
BM: I really can't comment specifically on ESRI. I can say it was a great company to work for: good benefits, treat their employees well, and a stable career type company with few layoffs. A very different environment from the venture-funded, high risk/reward situation start-ups are faced with today.
HR: Do you see any killer apps or disruptive technology changing the landscape for the industry?
BM: Not really. You might think, with their deeper pockets, GIS companies would be in a better position to research innovative solutions, but the fact is disruptive technologies don't usually come from within the industry they disrupt. I believe the process will be more evolutionary than disruptive, with some LBS companies ultimately becoming major GIS players.
HR: What do you think the industry will look like in, say, 10 years?
BM: As you know, GIS is a horizontal technology that cuts across many disciplines. Traditional GIS is well established in oil, gas, electric, pipeline, water/waste water, telecommunication and forest industries, just to name a few. There will be growth in these areas but not compared with the real upside potential of the commercial sector. Stuff like building sales and service territories, site analysis, real estate, insurance and banking have the potential of becoming much bigger than the existing GIS market.
I also see the market as much more fragmented. The landscape has changed significantly over the last decade and barriers to entry have changed and moved. Producing a mapping program 10 years ago not only required code development but also licensing expensive spatial data, manufacturing DVDs, designing and printing boxes/instruction manuals and paying assembly costs. This was capital intensive compared to today's scenario. Now anybody with a kitchen table, computer, developer skills and funding can build and market world class GIS applications. Google, Microsoft and MapQuest all have APIs that enable programmers to access their base maps and, if they're willing to endure advertisements, inexpensively host their application. These sites even offer shopping carts so developers don't need to worry about the payment process.
Lowering of these development, publishing and distribution barriers has made it easier and profitable to serve small niche markets, for those who get there first. There are, however, natural market forces at work and when some fences come down, others go up. Nothing has gone up faster than the cost of getting search engine recognition. There is no correlation between quality, useful applications and their ability to rank on the results page of Google or Yahoo. Bottom line, if your site doesn't serve a unique niche market, have lots of quality content with quality links and have promotional funding, your app probably won't get ranked high enough for people to find you. And, if they can't find you, you're not in business - no matter how great the app.
HR: Do you envision having a role in this process?
BM: Yes, I'm developing a Web-based subscription (www.texmobile.com) to serve the market now that ESRI is retiring BusinessMAP.