This is a continuation of my previous post about GE (General Electric)'s next generation system based on Oracle - please read that before reading this if you haven't already done so. At the end of part 1, I said that in part 2 I would talk about the real reason why this product could be a significant jump forward for the utility industry, which really hasn't been highlighted in the GE announcements or in any of the commentary I've seen - and also why this same factor could be the reason that the product fails. And last but not least, I'll talk about some of the challenges which GE faces in positioning the new product with regard to the existing Smallworld products. So here we go ...
I think that the factor that could make this product a significant jump forward is that, as I understand it from contacts at GE, they are really trying to produce something that is an off the shelf product which can be configured rather than customized (the distinction being that configuration just involves setting certain parameters about how the application behaves, as opposed to customization which involves writing code). Now GE really didn't talk about this in their announcement, and this information comes from informal conversations, so it's possible this emphasis may not be as strong as I had inferred - but either way it is interesting to talk about the pros and cons of this approach.
Historically in the utility industry, the implementation of geospatial systems has involved buying a software product as a starting point (with GE, Intergraph and ESRI being the three primary vendors in the space), and then doing some customization (data modeling, further software development, etc) on top of that core product to meet each individual utility's specific requirements. This approach enables each utility to get a system which closely meets its specific requirements, but has drawbacks: apart from the additional cost for the initial customization, having many different custom systems makes support and upgrade procedures harder for vendor and user alike. All the major vendors have generally had a "starter system" or "template" for the customization, which reduces the cost of the initial implementation, but in general (in my experience) has not really helped in terms of simplifying ongoing support and upgrade issues, and thereby reducing ongoing cost of ownership. In the early 2000s, when Intergraph launched its G/Technology product, initially the intent was that it would be a completely off the shelf system, allowing some configuration but not customization. While many utilities liked the principle, nearly all wanted additional functionality in their systems (and of course typically different utilities wanted different additional functionality). So Intergraph ended up having to rearchitect their initial approach to allow the system to be customized in a more flexible way, which was not a trivial undertaking and probably cost them a few years in terms of getting a competitive version of G/Technology to market.
So it will be interesting to see if GE really does pursue the angle that this will be an "off the shelf solution". It is hard to be wishy-washy about this - if you say that you think it will meet many customer needs off the shelf but you can still customize it if you want, then you really don't address the ongoing cost of ownership issues associated with the complexity of supporting and upgrading all these different systems in the field (unless you put very strict constraints on the customization, and really constrain yourself to not modify APIs from one release to the next). If GE does take a truly off the shelf approach then this would differentiate the product in the market IF it was functionally rich enough - but the risk if the product is not functionally rich enough is that you won't be able to win business and it will set back your entry to the market until either you allow customization (which makes you less differentiated) or you add sufficient functionality that you can be competitive - either of which may take a significant amount of time.
This leads on to the challenges that GE faces in terms of positioning the new product versus the current Smallworld product. Now GE is specifically trying not to position this as a replacement for Smallworld, and is saying that it will continue to develop new functionality on both platforms. It's fine to say that, but obviously the challenge with this approach is that if you develop all functionality on two different platforms which don't support common code, you can only develop half as much new functionality with the same number of developers (well maybe a bit more than half as much, since some design work could be common across both platforms, but certainly you can do a lot less than you could do if you just focused on a single platform). So that really doesn't seem like a sustainable approach for a long period of time, unless GE is prepared to substantially increase the size of its development team, which I imagine would be hard for it to justify. GE is initially focusing the new product specifically on North American mid-size electric utilities, so migrating to the new product will not be an option yet for customers who do not fall into that category, which is a fairly large majority.
For those customers who are in a position to consider migration (the North American mid-size electric utilities - and presumably the segments addressed will expand over time), GE will face the classic challenges of any company going through a major technology upgrade (and which Intergraph went through - and is still going through - with the migration from its older FRAMME product to G/Technology, and ESRI from Arc/Info 7 to ArcGIS). One challenge is that with a product like Smallworld that is 16 years old and exceptionally customizable, most customers have very rich functionality which it is hard to replace with a product that has only been under development for a year or two. There will either be custom development necessary to replace custom functionality in the old system, or the customer will need to be persuaded to give up some existing functionality to get other benefits that can be obtained from the new architecture. This generally means that the migration from the old system to the new system is a large enough project that most organizations will take the opportunity to evaluate other systems on the market and decide whether to stay with the same vendor or switch to a new one. There has been little turnover in the utility market in recent years, so on the rare occasions that utilities do choose a new system, all the vendors are very hungry for those opportunities and pricing tends to be very competitive, especially since the three major systems are not highly differentiated these days. As I said, none of this part is unique to GE, it is the same situation that ESRI and Intergraph have gone through as they have been migrating their customers to newer technologies.
One other challenge GE may have is with the customers who are not yet addressed by the new product. It will presumably take several years before the new product is an option for all of them (I believe that GE is saying that they will have a beta out sometime this year, then a first release first half of next year, and unless it's different from all other software products it will probably need a second release before it's really ready for serious use, so suppose that arrives late 2008 or early 2009, then probably the product is not going to be expanding to substantial additional market segments until 2009 or 2010). Now by and large I think that the Smallworld customer base is still pretty happy, so maybe customers will be willing to continue, assuming that GE continues to invest in Smallworld as it says it will. But there is also the risk that some customers will decide that this all means that the writing is on the wall for the Smallworld products, even if they keep going for a few more years, so maybe they should just go out and look at Intergraph and ESRI, who are running on more mainstream architectures which are in production today.
One other challenge for GE as they try to address moving their larger customers to the new platform at some point in the future (assuming they do) will be how to provide the same level of scalability that Smallworld VMDS does - perhaps that's a topic for a future discussion.
So anyway, it will be interesting to see how all this pans out over the next few years. I wish the GE guys good luck with it - as I said before, the industry can use additional innovation and competition!
Showing posts with label Oracle. Show all posts
Showing posts with label Oracle. Show all posts
Thursday, June 28, 2007
Tuesday, June 26, 2007
Thoughts on GE's next generation system based on Oracle - part 1
A number of people have asked about my thoughts on GE's announcement back in March about a next generation system based on top of Oracle technology (note that in this post, GE stands for General Electric, not Google Earth!). This was covered by Joe Francica at All Points Blog under the title "Cutting out the GIS Middleman", by Susan Smith at GISCafe in an interview with Robert Laudati, and in an article by GE. Here are my thoughts ... (warning - this is a rather long post, in fact it was getting so long I have decided to split it into two parts, and the first part is still very long!).
I'll give a quick bit of history on Smallworld for all you "neo" people and those who haven't had any involvement with GIS in the utility industry. Smallworld is where I worked from 1992 to 2002, and during that time we grew from being a small startup in the UK to the global market leader in GIS for utilities and communications (according to Daratech), with revenues of around $100m. Smallworld was bought by General Electric in 2000. Smallworld introduced some radical new ideas in the early 1990s, many of which have now become common practice across the industry - I will talk more about some of these in the future, but Charlie Savage gives a good summary of his perspective here. In the 1990s, Smallworld had a clear technical lead in the utility industry, but in the early 2000s both ESRI and Intergraph introduced new systems (ArcInfo 8.0, now ArcGIS, and G/Technology), and the playing field is now much more even, with no clear leader, in my opinion. The Smallworld product remains very robust and scalable and has very rich functionality, but increasingly GE has been suffering in new sales situations because of the fact that Smallworld is based on its own proprietary language (Magik) and database (VMDS, Version Managed Datastore), while its two primary competitors have more modern and mainstream software architectures. Actually both Magik and VMDS still have some great technical strengths, especially the latter, but as geospatial technology has moved more into the mainstream, it has become increasingly hard to convince the market of the benefits of buying a "proprietary" solution, and in my opinion this has been the primary driver for GE to develop this new product set on top of Oracle.
The most obvious interesting thing about this announcement, which others have commented on also, is that it really reinforces the notion that geospatial technology is becoming absorbed into mainstream IT - many people have talked about this for a while, myself included. The way it was explained to me by someone from GE is that when they first sat down with Oracle to discuss collaboration on this project, they thought that there would be three layers of software: Oracle technology at the back end, a new "GIS" layer in the middle, and specific utility applications built on top of that. But when they looked at what Oracle now offers, including a map viewer, network model, version management (workspace management in Oracle terminology), etc, they concluded that there were really just two layers: Oracle, and the specific utility applications. I don't think this point is especially interesting to customers, actually: whether you regard the solution as 2 tiers or 3 tiers is a bit of an arbitrary distinction - in either case you need software from two vendors, Oracle and GE, and whether specific bits of functionality come from one or the other is not really significant. If GE reduces the cost of their software because they don't have to develop as much functionality themselves, then customers will be interested, but I haven't heard any discussion about that!
The reason this is interesting is from a general industry perspective, because it suggests that it will be harder to have a successful business which focuses purely on the middle "GIS" layer, without delivering applications on top of that which solve specific business problems. There are now many free or cheap options for drawing a map on a screen; you no longer need a specialized and expensive piece of software to do that. Companies like GE and Intergraph sell both geospatial platform software and vertical industry applications, and both are now putting more emphasis on the vertical applications where (in the right areas), they can still show high business value and therefore justify relatively high prices, and less emphasis on the basic geospatial capabilities, many of which are becoming commoditized. ESRI has of course focused heavily on delivering a horizontal GIS product, and has a large partner ecosystem which provides vertical applications on top of this. They have a very dominant position in this horizontal GIS space, and the fact that many of their traditional competitors are focusing more on vertical applications may mean that they can increase their hold there - but nevertheless they are seeing significant pressure on various parts of this space from Oracle, Google, Microsoft, Yahoo and open source solutions. So it will be interesting to see whether ESRI keeps its horizontal focus or also starts to move into more vertical solutions over time. There would be some challenges in this strategy, in particular the issue of potentially competing with its partners - though this is a common problem for platform software companies and is in many ways a natural evolution that many companies go through. We went through this at Smallworld, starting as a platform company with partners and then moving more into vertical applications, and Oracle is experiencing this also, especially with several of its recent acquisitions (more on that in a future post).
OK, so does this new architecture give GE a competitive advantage? Not really, in my opinion. The first major argument in favor of it is that all your data is stored in a standard relational database, which helps with integration, administration, security, etc (see my 1990 article which outlines these benefits - these concepts are not new!). The second major argument is that you can use standard development environments (Java-based, in this case). So GE addresses the concerns that the market today has about its existing "proprietary" solution - but both ESRI and Intergraph have provided solutions based on mainstream databases and development environments for a number of years, so these things will not be differentiators for GE - they are playing catch up in this regard. Oracle likes the fact that the solution is based purely on the Oracle stack - and so customers who have committed to the whole Oracle stack will also see that as an advantage. But on the other hand, customers focused on a Microsoft architecture either on the client or middle tier will see this approach as a disadvantage - and my general feeling is that more utilities probably fall into this category. Those who are not too religious about their IT strategy (probably the majority) will focus on the functionality provided by the main three vendors more than the system architecture.
So, in summary on part 1: I am pleased to see GE make this announcement, as I had personally pretty much written off the possibility of them investing in a "next generation" system. I am happy for the friends I still have at GE that there is investment in the future, and I think it will be good for the industry if GE can make this new product into a strong competitor to ESRI and Intergraph in the utility market - and if they can bring forward the strengths of the current Smallworld system then it will be. The announcement is interesting because it shows that you can now develop complex geospatial applications directly on top of Oracle without needing a traditional "GIS". While I think this is of somewhat academic interest to most customers, it is more significant in terms of what vendors in the geospatial industry will look like in future. I personally don't think that the market will see the new system architecture as a competitive advantage, except in situations where organizations have very strong Oracle religion - I think it will be seen as more of a catch up exercise by most people, which negates the perceived weakness of Smallworld's current "proprietary" architecture.
In part 2 I will talk about the real reason why this product could be a significant jump forward for the utility industry, which really hasn't been highlighted in the GE announcements or in any of the commentary I've seen. And I'll talk about why this same factor could be the reason that the product fails. And last but not least, I'll talk about some of the challenges which GE faces in positioning the new product with regard to the existing Smallworld products.
I'll give a quick bit of history on Smallworld for all you "neo" people and those who haven't had any involvement with GIS in the utility industry. Smallworld is where I worked from 1992 to 2002, and during that time we grew from being a small startup in the UK to the global market leader in GIS for utilities and communications (according to Daratech), with revenues of around $100m. Smallworld was bought by General Electric in 2000. Smallworld introduced some radical new ideas in the early 1990s, many of which have now become common practice across the industry - I will talk more about some of these in the future, but Charlie Savage gives a good summary of his perspective here. In the 1990s, Smallworld had a clear technical lead in the utility industry, but in the early 2000s both ESRI and Intergraph introduced new systems (ArcInfo 8.0, now ArcGIS, and G/Technology), and the playing field is now much more even, with no clear leader, in my opinion. The Smallworld product remains very robust and scalable and has very rich functionality, but increasingly GE has been suffering in new sales situations because of the fact that Smallworld is based on its own proprietary language (Magik) and database (VMDS, Version Managed Datastore), while its two primary competitors have more modern and mainstream software architectures. Actually both Magik and VMDS still have some great technical strengths, especially the latter, but as geospatial technology has moved more into the mainstream, it has become increasingly hard to convince the market of the benefits of buying a "proprietary" solution, and in my opinion this has been the primary driver for GE to develop this new product set on top of Oracle.
The most obvious interesting thing about this announcement, which others have commented on also, is that it really reinforces the notion that geospatial technology is becoming absorbed into mainstream IT - many people have talked about this for a while, myself included. The way it was explained to me by someone from GE is that when they first sat down with Oracle to discuss collaboration on this project, they thought that there would be three layers of software: Oracle technology at the back end, a new "GIS" layer in the middle, and specific utility applications built on top of that. But when they looked at what Oracle now offers, including a map viewer, network model, version management (workspace management in Oracle terminology), etc, they concluded that there were really just two layers: Oracle, and the specific utility applications. I don't think this point is especially interesting to customers, actually: whether you regard the solution as 2 tiers or 3 tiers is a bit of an arbitrary distinction - in either case you need software from two vendors, Oracle and GE, and whether specific bits of functionality come from one or the other is not really significant. If GE reduces the cost of their software because they don't have to develop as much functionality themselves, then customers will be interested, but I haven't heard any discussion about that!
The reason this is interesting is from a general industry perspective, because it suggests that it will be harder to have a successful business which focuses purely on the middle "GIS" layer, without delivering applications on top of that which solve specific business problems. There are now many free or cheap options for drawing a map on a screen; you no longer need a specialized and expensive piece of software to do that. Companies like GE and Intergraph sell both geospatial platform software and vertical industry applications, and both are now putting more emphasis on the vertical applications where (in the right areas), they can still show high business value and therefore justify relatively high prices, and less emphasis on the basic geospatial capabilities, many of which are becoming commoditized. ESRI has of course focused heavily on delivering a horizontal GIS product, and has a large partner ecosystem which provides vertical applications on top of this. They have a very dominant position in this horizontal GIS space, and the fact that many of their traditional competitors are focusing more on vertical applications may mean that they can increase their hold there - but nevertheless they are seeing significant pressure on various parts of this space from Oracle, Google, Microsoft, Yahoo and open source solutions. So it will be interesting to see whether ESRI keeps its horizontal focus or also starts to move into more vertical solutions over time. There would be some challenges in this strategy, in particular the issue of potentially competing with its partners - though this is a common problem for platform software companies and is in many ways a natural evolution that many companies go through. We went through this at Smallworld, starting as a platform company with partners and then moving more into vertical applications, and Oracle is experiencing this also, especially with several of its recent acquisitions (more on that in a future post).
OK, so does this new architecture give GE a competitive advantage? Not really, in my opinion. The first major argument in favor of it is that all your data is stored in a standard relational database, which helps with integration, administration, security, etc (see my 1990 article which outlines these benefits - these concepts are not new!). The second major argument is that you can use standard development environments (Java-based, in this case). So GE addresses the concerns that the market today has about its existing "proprietary" solution - but both ESRI and Intergraph have provided solutions based on mainstream databases and development environments for a number of years, so these things will not be differentiators for GE - they are playing catch up in this regard. Oracle likes the fact that the solution is based purely on the Oracle stack - and so customers who have committed to the whole Oracle stack will also see that as an advantage. But on the other hand, customers focused on a Microsoft architecture either on the client or middle tier will see this approach as a disadvantage - and my general feeling is that more utilities probably fall into this category. Those who are not too religious about their IT strategy (probably the majority) will focus on the functionality provided by the main three vendors more than the system architecture.
So, in summary on part 1: I am pleased to see GE make this announcement, as I had personally pretty much written off the possibility of them investing in a "next generation" system. I am happy for the friends I still have at GE that there is investment in the future, and I think it will be good for the industry if GE can make this new product into a strong competitor to ESRI and Intergraph in the utility market - and if they can bring forward the strengths of the current Smallworld system then it will be. The announcement is interesting because it shows that you can now develop complex geospatial applications directly on top of Oracle without needing a traditional "GIS". While I think this is of somewhat academic interest to most customers, it is more significant in terms of what vendors in the geospatial industry will look like in future. I personally don't think that the market will see the new system architecture as a competitive advantage, except in situations where organizations have very strong Oracle religion - I think it will be seen as more of a catch up exercise by most people, which negates the perceived weakness of Smallworld's current "proprietary" architecture.
In part 2 I will talk about the real reason why this product could be a significant jump forward for the utility industry, which really hasn't been highlighted in the GE announcements or in any of the commentary I've seen. And I'll talk about why this same factor could be the reason that the product fails. And last but not least, I'll talk about some of the challenges which GE faces in positioning the new product with regard to the existing Smallworld products.
Tuesday, June 12, 2007
Interesting points from ESRI customer survey
ESRI has published a lengthy pre-conference Q&A document on the user conference blog, which several people have commented on. One answer talked about results from their customer survey, and I thought this highlighted some interesting industry trends.
They said that 45% of customers have asked for tight integration with Google Earth and nearly 47% have asked for support for interoperability - so overall, 92% of ESRI customers are looking for integration with Google Earth (assuming that these two response categories were mutually exclusive, which seems to be the case from the context). For Virtual Earth the numbers were a little lower, 26% and 43%, so 69% in total. This is just reconfirmation of the trend we are all aware of that "serious" GIS users are interested in using Google and Microsoft as a means to distribute their data - but it's interesting to see hard numbers, and 92% is a resounding endorsement for Google. It's also interesting that the vote for Google is quite a bit higher than Microsoft. I think that in the consumer world and the blogosphere, Google has pretty clearly had a higher geospatial profile, but among "corporate" GIS users I have talked to, many have had a bit more of a leaning towards Microsoft, if only because their organizations tend to be doing business with Microsoft already. This survey goes against the subjective impression I had formed on that particular point (admittedly from a small sample size).
The other point that was interesting was that 80% of customers want ESRI to support or tightly integrate their technology with the upcoming Microsoft SQL Server spatial extension - this is a very high number, especially given that Oracle probably still has around 50% of the database market share (48.6% in 2005, according to Gartner). These two numbers don't directly correspond in that the ESRI number is based on number of customers, so is likely to more strongly reflect the interests of smaller organizations (assuming that there are a large number of small organizations responding), whereas the Gartner number is based on revenue so probably more influenced by large organizations. But nevertheless, a very strong statement about the level of interest in Microsoft SQL Server Spatial.
There is a separate statement that less than 19% of customers have asked for tight integration with Oracle Spatial - but unfortunately no comment on what percentage want "support" for Oracle Spatial (which is currently provided via what was ArcSDE, now part of ArcGIS Server), so no direct information on relative levels of interest in Oracle versus SQL Server. I have been thinking for a little while that Oracle Spatial is at an interesting juncture in terms of its position in the market, but I'll save my thoughts on that for a future post :) !
They said that 45% of customers have asked for tight integration with Google Earth and nearly 47% have asked for support for interoperability - so overall, 92% of ESRI customers are looking for integration with Google Earth (assuming that these two response categories were mutually exclusive, which seems to be the case from the context). For Virtual Earth the numbers were a little lower, 26% and 43%, so 69% in total. This is just reconfirmation of the trend we are all aware of that "serious" GIS users are interested in using Google and Microsoft as a means to distribute their data - but it's interesting to see hard numbers, and 92% is a resounding endorsement for Google. It's also interesting that the vote for Google is quite a bit higher than Microsoft. I think that in the consumer world and the blogosphere, Google has pretty clearly had a higher geospatial profile, but among "corporate" GIS users I have talked to, many have had a bit more of a leaning towards Microsoft, if only because their organizations tend to be doing business with Microsoft already. This survey goes against the subjective impression I had formed on that particular point (admittedly from a small sample size).
The other point that was interesting was that 80% of customers want ESRI to support or tightly integrate their technology with the upcoming Microsoft SQL Server spatial extension - this is a very high number, especially given that Oracle probably still has around 50% of the database market share (48.6% in 2005, according to Gartner). These two numbers don't directly correspond in that the ESRI number is based on number of customers, so is likely to more strongly reflect the interests of smaller organizations (assuming that there are a large number of small organizations responding), whereas the Gartner number is based on revenue so probably more influenced by large organizations. But nevertheless, a very strong statement about the level of interest in Microsoft SQL Server Spatial.
There is a separate statement that less than 19% of customers have asked for tight integration with Oracle Spatial - but unfortunately no comment on what percentage want "support" for Oracle Spatial (which is currently provided via what was ArcSDE, now part of ArcGIS Server), so no direct information on relative levels of interest in Oracle versus SQL Server. I have been thinking for a little while that Oracle Spatial is at an interesting juncture in terms of its position in the market, but I'll save my thoughts on that for a future post :) !
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