The Geospatial Growth Engine

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The Geospatial Growth Engine

December 05, 2012
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    BCG’s David Potere first learned about the potency of geospatial data and technology during his time in the U.S. Navy, hunting for mines. He is now an expert principal in the firm’s Boston office and global lead for the GeoAnalytics team, which he launched.

    It could be the largest industry that no one has heard of. Consumers, businesses, and government agencies all rely on its services every day—local searching, online mapping, customer targeting, logistics and routing, urban planning, and disaster response are just some of the common applications and activities that it enables. Still, few people know its name.

    The geospatial services industry is big and growing fast—and so is its economic impact, according to a BCG study that was commissioned and recently profiled by Google. The industry provides the technology, expertise, tools, and data that connect consumers, businesses, and governments on a common, coordinated digital map. David Potere, an expert principal in BCG’s Boston office and global lead of the firm’s GeoAnalytics team, discusses the reach and ramifications of geospatial services.

    How big is this industry? What is its economic impact?

    Geospatial services—which includes data providers, location-enabled device manufacturers, app developers, experts, and educators—generated approximately $73 billion in revenues in 2011 and accounts for at least 500,000 jobs—more than the U.S. airline industry. These are high-quality, high-paying jobs for software engineers, scientists, educators, surveyors, urban planners, traffic engineers, and experts in logistics and operations.

    As BCG detailed in research earlier this year, we estimate that in the U.S., geospatial services help generate some $1.6 trillion of revenue across the economy and save $1.4 trillion in costs annually. They are also part of the daily jobs of 5.3 million U.S. workers. Once U.S. consumers are informed about what these services are, they place a direct value on geospatial services of $37 billion a year—proof of the many ways geo-based applications and location-enabled devices have become central to our daily lives.

    Why have we never heard of geospatial services?

    This technology has been critical for defense, intelligence, and other government applications for more than 30 years. In 2000, President Clinton opened the GPS constellation for commercial use, and the first commercial, high-resolution imagery satellite achieved orbit. With the surge in mobile and smart devices that began mid-decade, all of the ingredients came together for geoservices to take off. Today the industry is increasingly providing a common, up-to-date, digital map of our world, allowing consumers, businesses, and governments to make place-based decisions and plans.

    For anyone with a smartphone, the consumer uses of geospatial services are easy to grasp: navigation and local search, for example. How are businesses deploying these services?

    Business use falls primarily into three areas: logistics functions, such as transportation and warehousing; sales and marketing; and strategic decision-making—such as determining where to locate a store or distribution facility. According to BCG’s recent research, more than half of U.S. companies use web-based mapping services, more than one-third use geo-enabled devices, and nearly one-third credit local search services for helping them attract customers. Fully 40 percent cited geo-services as an important component of American competitive advantage. In sector after sector—from retail to health care and from construction to agriculture—significant percentages of companies acknowledge that geoservices generate revenues or cut costs—or both.

    One global logistics and delivery company, for example, captures data on more than 200 aspects of its U.S. truck-fleet operations and then uses the data to help reduce its fuel consumption, emissions, and maintenance costs. In 2011, the company saved the equivalent of 528,000 gallons of fuel. Similar gains are possible in the air: geospatial services are helping U.S. airlines make real-time adjustments to routes, with the potential to reduce airplanes’ fuel consumption by up to 2.5 percent—representing billions of dollars in annual savings.

    Where else are these services having an impact?

    In the last two years, our team at BCG has identified nearly 200 instances in which location-aware analytics have made a critical difference to companies and governments. Examples include optimizing fiber optic deployment for major telcos, targeting consumers for new auto model launches, and combating malaria. India provides just one example of the global impact. Our research shows that geospatial services deliver efficiency gains throughout the Indian economy equivalent to approximately US$40 billion in revenue and approximately US$70 billion in cost savings annually. Some 8 million to 9 million Indian employees use geospatial services in their daily work. The Indian ecosystem of geospatial services generates annual revenues of almost US$3 billion and provides jobs for 135,000 people.

    What does the future hold?

    In emerging markets, geospatial services are still expensive, and the principal users are defense agencies, regional governments, and large enterprises. But that’s changing fast as Internet access expands in many of these markets, driven by the increased penetration of mobile devices and smartphones.

    In the U.S. and in other developed markets, a high-growth stage will continue for the next five years or more. In time, geospatial services will be integrated seamlessly into core business processes, and consumers will view them as an essential part of everyday life, much like basic computing and Internet access are seen today.

    It is important to note, however, that a strong geospatial services industry in the U.S. requires continued support across several dimensions. Chief among these is support for geospatial education and training; talent is in short supply, and the industry needs access to skilled labor as demand continues to grow. Government investment in the collection of geospatial data is also key, since U.S. satellites and the U.S. Census feed the rest of the industry. Equally important are clear open-data policies, common standards for the exchange of geospatial information, and effective national infrastructures, so that investments in data collection flow to users.

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