On a fairly routine basis, I get calls from venture capitalists or individuals from the private equity market, as well as people from the mainstream media, who ask for my opinion on the size of the geospatial technology market. I very honestly tell them I've heard numbers varying by orders of magnitude, which is not what they want to hear. I explain to them that most of the companies in our technology sector are private and it is difficult to get a true picture of the revenue being generated, even when these companies report their yearly performance. They simply are not subject to the same rigors as public companies. So we turn to one of the few marketing research companies following geospatial technology: Daratech.
Over the past few years, I've been critical of Daratech's assessment of the geospatial technology market. I felt its numbers were only estimates of the market and should have included certain components, such as data supplied as a service to Web mapping applications. In addition, I believe the company has not adequately assessed the location-based services marketplace, which accounts for a good portion of the data revenue, and other companies that are new entrants such as Netezza, Mark Logic and others.
But a most peculiar assessment by Daratech recently caught my attention. Last year's report from Daratech ranked Bentley Systems as the number two player in geospatial. Actually, Bentley has occupied the number two position since Daratech's 2006 report. More surprisingly, Bentley was ranked higher than Autodesk with which it could be appropriately compared since the two companies compete directly in the geotechnical and civil engineering software solution market.
However, when you get under the covers of the 2009 report, discrepancies appear to emerge. In that year, Bentley reported that its gross revenues were approximately $460 million in an annual report that it shared with customers as well as the public. This included all lines of software: geospatial, MicroStation, civil engineering, plant design, etc. In Bentley's report, it published a graph that sourced Daratech's 2009 geospatial software market research, indicating Bentley's position in the $2.2 billion software market. Bentley's take was approximately $450 million. This means that Daratech included nearly all of Bentley's revenue as being related to geospatial. To me, this is a huge red flag, because Daratech would then need to do the same for Intergraph and Autodesk. As per the Daratech report, Intergraph was cited to have revenues of $200 million and Autodesk, $250 million for traditional GIS software sales.
To explore these discrepancies, I first contacted Bentley for a response. Chris Barron, Bentley's vice president of corporate marketing said, "In the Daratech report cited, Daratech took into consideration that all of our V8i offerings having inherent geo-coordination capabilities, based on the geo-coordination features that are built into MicroStation V8i. Therefore, any building, plant, road or bridge created with V8i has geospatial characteristics which allow it (and all of its associated documents) to be accurately geo-located. By virtue of these geospatial capabilities in all of Bentley's V8i generation products, Daratech chose to include all those revenues in their calculations."
Charles Foundyller, Daratech's president and CEO and author of the report, explained the approach: "The short answer is that we distinguish between the ‘Traditional GIS' market and the ‘Geospatial' market. In our taxonomy, Geospatial, a superset of Traditional GIS, includes, among other things, something we call geo-enabled engineering. Geo-enabled engineering applications have location awareness built into them and are able to interoperate with GIS systems. Many of Bentley's applications do just that and so do some of Autodesk's and some of Intergraph's. Actually, it's a very exciting development. For example, if your plant design system is location aware and can place and orient your plant and all its components on maps that are understood by a GIS system, you can get quick answers to geo-relational queries related to your proposed design. These might be... what will be under the pollution cloud you may cause if you place your smokestack in a particular corner of the plant... where can your workforce live; and so on."
When I spoke further with Foundyller, he mentioned that much of Autodesk's revenues are from the sale of mechanical CAD, CAE and solids modeling software, and media and entertainment products used to produce things like feature films, television programs and games. Of the remainder, not all interoperate with GIS systems or include a geo-referenced datum as Bentley's do; therefore Autodesk has a lower market share because it is not "geo-enabled." When pushed about incorporating Autodesk's rather large client base of AutoCAD mapping applications users, Foundyller pointed out that market numbers are about annual sales, not the size of a user base, and it is hard to account for the mark-up of Autodesk's indirect channel sales. Therefore it's difficult to be confident in the accuracy of Autodesk's market share in terms what end-users actually pay for Autodesk products.
Even so, there is still a problem. Bentley's graphic in its annual report shows Daratech's "GIS/Geospatial Marketing" as $2.2 billion. Foundyller said in our conversation that the Geospatial/Geo-enabled market is around $5.2 billion. So, which is it? According to Daratech's press release issued August 20, 2009, Bentley was indeed included in the broader GIS/Geospatial market. According to Foundyller's definition, it seems most appropriate for Bentley to be included in the broader "Geo-enabled" market. So, the Bentley report was mislabeled. However, again, according to Daratech's own press release, Intergraph had just under $450 million in the broader Geospatial/Geo-enabled market. So, it appeared that some of Intergraph's AEC and plant design solutions were included in the report. Autodesk barely notched some gains when its other software was included. The assumption would be that neither Intergraph nor Autodesk can provide a geo-referenced foundation for its AEC and plant design solutions. Bentley, therefore, has made a strategic move to geo-enable its entire software suite. As such, it appears that Daratech has taken Bentley's definition of the geospatial market and applied that to how other companies develop geospatial software solutions.
According to Foundyller, he based much of the report on interviews with vendors. So, when Bentley reported that all of its software - AEC, plant and GIS - were geo-enabled, Foundyller took Bentley's word for it. Likewise with its revenue results. I find this approach to be less rigorous than expected, but let's give everyone the benefit of the doubt. If this is the best that we have to go on for our market research in the geospatial marketplace, we had better understand how the numbers are counted. Unfortunately, the majority of companies in the survey are private and sales figures provided to market research firms are estimates. Some of these numbers are proprietary and these companies are under no obligation to share them publicly. This is where we are as an industry and that is not likely to change. Larger companies like Hexagon (now the parent company of Intergraph) and Autodesk may not reveal sales of geospatial software applications in a manner necessary for a complete understanding of the market.
Strangely, though, neither Intergraph nor Autodesk disputed how Bentley was represented in the Daratech report, the approach Daratech used or the final numbers provided in its 2009 report, according to Foundyller. As companies that should have expected to dominate this industry, Intergraph and Autodesk seemed not to notice. Both companies had the opportunity to review the results and Daratech's approach, according to Foundyller. Are they ambivalent to the results?
In a follow-up conversation with Foundyller, he reported that he has begun to review the research approach he takes in compiling the numbers and the way he characterizes Bentley's revenues. Revisions have been made to the 2010 report.