Tsunami or Merely “Big Wave”—How a Down IT Market Ripples Through GIS

By Joe Francica

I had a few conversations this week that lead me to believe that the downturn in spending for information technology, and by consequence GIS, has had several ripple effects.Dave Sonnen, spatial information industry analyst for International Data Corporation, spoke to me about two significant issues that are reshaping GIS.The first was that IDC believed that the 2001 revenue numbers for sales of software were fairly brutal - in the 1-5% range of growth...and then came 2002.For the first time, IDC saw flat to negative growth of software sales.And what are the consequences?

In the private sector, cost cutting was the watchword and that left precious little room in the budget for productivity software, like GIS, which you would think might help to cut costs.Yet, as we all know, the expense of training personnel and managing data are the hidden costs of GIS.In addition, inflated ROIs put forth by well-meaning, but often overzealous consultants were being questioned (see part 2 of our guest editorial by Marshall Payne below).The days of exaggerating the benefits of GIS "just aren't going to cut it anymore" said Sonnen.

In the public sector, the product-focused GIS companies retrenched and squeezed existing customers for sales, relying on a strategy that the cost of finding new business wasn't worth it or was costing too much.But the double whammy kicked in which saw government agencies pull back from contracts on technology because of a lack of existing tax revenue to support new purchases.Cities and counties were just trying to keep the garbage off the streets and the roads and utilities repaired.GIS? Who can afford it now?

So what to do? Offer grant programs to local governments that get them started and pray that you reap the benefits in follow-on sales and services later.That's what MapInfo is doing.The company announced yesterday their "e-Government Grant Program" that will "Assist Municipalities and Small State and Federal Agencies Helping to Streamline Communications and Improve Services with Businesses, Citizens and Other Government Agencies to Save Taxpayer Dollars."

And this brings to the forefront another issue.How many technology projects developed by public organizations are used to support business development in the private sector, perhaps used to spur community growth? The question was raised when I asked Sonnen about the gross numbers associated with GIS software sales to public vs.commercial (private) businesses. "The lines are beginning to blur," he said as some projects, such as for precision agriculture, tax assessment, and critical infrastructure planning, that are utilized more by businesses than by the public agencies that implement them.So, although the software revenue split is 70-30%, government to business, an argument is developing that a third market segment may be necessary to describe the GIS sales made to public organizations that support business applications.

So if the cause was a bursting of the technology spending bubble, and the effect was a requirement to better justify the return on investment for business productivity software after several years of over indulgence, what are the long term implications for how public or private organizations rationalize GIS technology purchases? [Or, is it the other way around; the cause being a more demanding management to better justify the ROI that resulted in the spending burst.]  Are these ripples merely choppy seas in a turbulent and testy IT market, or is it a tidal wave that will reshape the spatial information landscape? Write to me at .(JavaScript must be enabled to view this email address) ...your thoughts are appreciated and we'll have more to discuss on this issue in the near future as IDC is about to release what may be a seminal report on the spatial information management market.


Published Wednesday, June 11th, 2003

Written by Joe Francica



If you liked this article subscribe to our newsletter...stay informed on the latest geospatial technology

© 2016 Directions Media. All Rights Reserved.