Geospatial industry has witnessed several acquisitions, mergers and integrations in the past few years. What is your view about the changing landscape of geospatial industry in recent times?IN AN EXCLUSIVE WITH GEOSPATIAL WORLD, STEVEN W BERGLUND, PRESIDENT AND CEO OF TRIMBLE, GETS CANDID ON THE CONSOLIDATION TREND IN GEOSPATIAL INDUSTRY WHILE SHARING TRIMBLE’S PERSONALITY AS A COMPANY AND ITS STRATEGY FOR EMERGING MARKETS
Steven W Berglund
President and CEO
Geospatial industry has witnessed several acquisitions, mergers and integrations in the past few years. What is your view about the changing landscape of geospatial industry in recent times?
The current activity is part of a much longer trend. If you look back 15-20 years, there were significantly more participants in what was widely defined as the geospatial world. Since then there have been a significant number of participants who have been consolidated. I don’t think the recent acquisitions represent a new trend. It’s part of an underlying trend.
To add value in the geospatial industry, participants need to provide a wide range of capabilities. To be credible, a supplier of solutions is required to make significant investments, certainly at a level higher than was required 15-20 years ago. At that time the landscape was largely dominated by companies with mechanical and optical capabilities producing total stations and other optical products. Today, we have GNSS, laser scanning and other technologies playing a much more significant role. The expanded range of technologies in the market today is significantly larger and requires more integration and software content.
While an acquisition gives boost to a company’s product portfolio, it also brings with it several challenges. Can you discuss the challenges a company faces while integrating an acquired company to the parent company?
If you look at Trimble’s offerings in geospatial technology, we are comfortably placed. Trimble has made more than 50 acquisitions in the last 10 years, although not all of them have been in the geospatial segment. The extension of Trimble’s capabilities in the geospatial industry, and its acquisition programme, really began with the acquisition of Spectra Precision Group in 2000. Spectra Precision had already acquired a number of entities and was already a sizable company by then. Acquisition has been a constant activity within Trimble. The challenges of a successful acquisition programme come down to the fundamental questions of – does it make strategic sense, does the combination create complementing value, and does it create value to the user. If the answer to any of these questions is no, the underlying premise of an acquisition is in doubt.
Beyond the fundamental strategy, there will be issues of execution revolving around bringing together different cultures and different capabilities. Resolving these always involve a level of nuance and risk. The acquisition activity in the industry over the last five years has, in general, been driven by complementing solutions where two different technologies or two different capabilities have been brought together, which, at least on paper, have the potential to create value in terms of new abilities and solutions. An acquisition that simply represents a consolidation of similar capabilities is in the highest risk category. Bringing together two companies that have more or less similar products with overlapping distribution raises the possibility of significant problems in the short term.
Trimble is also expanding its geospatial footprint through acquisitions, the latest being Definiens’ Earth Sciences business. How is it capitalising on these moves?
It depends on the reason for buying. In the case of Definiens, the rationale for making the acquisition was to deepen and broaden our technological capability, to be able to use imagery more productively and extract information from those images. Definiens is based in Munich where we already have a technical centre that was created from the acquisition of Terrasat, a GPS software company acquired many years ago. We now have the ability to bring them together and create a stronger technical centre in Munich. But the concept behind Definiens is that it has technology that is potentially applicable in a number of Trimble businesses, not just geospatial. So, we see it as a core capability. Historically, they have their own sales division and this will continue. Our real strategic purpose with Definiens is to create a new technological platform and an environment where Definiens is working with and for a number of different Trimble divisions. It is an opportunity to deepen our technology base.
Trimble has products related to the entire spectrum of geospatial technologies – right from data capture, positioning to control systems. Aerial cameras and GIS software are left out. Will Trimble move in that direction as well?
In general, yes. The principle will be to go to the market place to understand what we should do. If we have users who believe we are not bringing them any new capabilities, we will seek out certain companies to bring them comprehensive solutions. Not answering the question specifically, I will reiterate that we will be driven by our view of the market place and will build our capabilities either through internal development or acquisition. The cameras aspect could be handled in any number of ways. Our idea is to provide solutions to the customer, whether we are providing every element of a solution or not is a matter of practical determination. There are actually some appropriate alliances that will enable us to bring additional solutions to the customer.
Of late, Trimble is being more solution- centric. This requires localisation and building of local capacities. Is it feasible for a global company like Trimble to achieve this?
The challenge is-to be both global in terms of bringing global scale to a problem, and to be able to access the best solution anywhere in the world but bring it to an individual market situation in a way that is relevant to that market. If you look at work processes, the requirements within an international market are different and one needs to have a bit of a split personality to address this challenge. We need to reconcile the need to act globally to take the advantage of scale with the need to be humble enough to operate effectively at the local level. Our strategy for some time has been to seek out opportunities to localise – either through acquisitions, through partnerships or even by establishing local development centres.
If you look at the map of Trimble, today we are located in 23 countries. This geographically dispersed footprint is really driven by the idea that we need to be ‘in’ the significant markets, not just have a strong market presence but also have development capabilities there, driven by the idea of localising our products. We think less in terms of ‘customisation’ and more in terms of ‘configuration’ for the national market – which is leveraging a strong global platform capability and being able to add a layer of functionality that is very much targeted to the local market. Most of the time, this is done through software, although in some cases such as India, we will consider the hardware side of it as well. Localisation has been a part of our fundamental strategy for at least five years or longer.
Government is a major user as well as policy maker. How receptive world governments are to a new geospatial awakening?
The level of government support varies widely across the world, and, in some cases, varies within countries, depending on the relative role of State and local government versus the national government. Technology often evolves more rapidly than policy. There are exceptions. For example, in China, there is a general recognition of the contribution of geospatial capability. And as a result, promoting geospatial infrastructure development is very much in line with the national policy. The Chinese government has been relatively aggressive in applying geospatial concepts and has been active in implementing GNSS infrastructure networks, predominately at the municipal level.
In terms of enabling geospatial growth and benefits to the economy from its use, governments can provide a constructive and stable environment to allow industry and its customers to realise the potential of geospatial technologies in applications that solve real world problems. For this reason, we are engaged with government agencies in terms of education as well as technology application and use. At the same time, government agencies at any level have a clear picture of all possibilities in the region, as the environment tends to change from State to State.
India has just started geospatial industry association, to educate and help in lobbying with the government to create a better policy environment. Do you think such initiatives help the industry?
Anything done to raise the local consciousness is a good thing. Policy is going to be a challenging issue during the next 10-20 years, from the perspective of the very definition of geospatial. Since technology evolves rapidly, the most effective approach is to be a credible information resource to government as they shape the policy environment. An industry association of colleagues and competitors who reach consensus on the merits of a policy position can be extremely effective.
Some analysts talk about billions, or even trillions, of sensors operating on a worldwide basis, collecting bits of information and each piece of information will essentially have a geo-reference assigned to it. Whatever the ultimate number, with so many stationary and mobile sensors above and on the ground, GNSS enabled cell phones etc, huge amount of rich data will be available in real time. The question is how to use data and how to make sense of all the data available. In terms of government policies, the policy that allows or creates the environment for use of information and perhaps puts the boundary constraints in terms of what is private, personal and public, is needed.
The world is looking to Asia, especially China and India, as a business destination. What are Trimble’s plans for Asia and other parts of the world?
The fundamental core of Trimble’s strategy is the concept of internationalisation, which certainly includes Asia. The obvious examples are China and India. Beyond Asia, Africa is now a growing market for Trimble. There has been a significant amount of infrastructure development in Africa, beyond just South Africa. We have opened an office in Nairobi, Kenya, to be able to position ourselves better in the African market. Emerging countries such as Brazil are also of major interest to us. These emerging countries will prove to be more dynamic markets than the traditional Trimble market countries such as the U.S. or the Western European countries. We have aggressively reallocated resources available from our traditional markets. For example, five years ago, Trimble had perhaps 10 employees in India, now we have 225. As part of the consideration around reallocating resources, our corporate mindshare has become more focused on where our spending and other activities should take place. We are engaging in significantly more dialogue time within Trimble on how to address these markets.
In India, a significant amount of activity is directed towards employing people in development. It is the same in China. It is a major direction of the company to direct ourselves towards international market and this requires a bit of change of attitude. We acknowledge in all humility that we are not experts in Indian market or in the Chinese market. But our first directive is to engage with the market, be prepared to make some mistakes and learn from those mistakes, recover and readjust and do better the next time. There is lot of intellectual experimentation happening in some of these markets. The conventional research and analysis may not suit these markets unlike other more traditional business cultures. In some cases, we have to be as entrepreneurial as the societies in which we are operating in.
Apart from being great destinations for business, China can help in manufacturing and India can help in software development. Is Trimble looking at such proposition?
I think it is a two-dimensional challenge. One is the market opportunity, to capture the opportunity in these countries. We don’t want to approach these markets from the perspective of a traditional exporter. We are not simply bringing products and solutions that worked elsewhere into these countries. We want to look at these markets in their own context, develop solutions for the markets in terms of that context, and by doing that achieve the appropriate level of familiarity of those markets while continuing to learn from the market and developing the right solution. On one hand, we look at them as unique opportunities, and on the other we want to leverage what we learn from these markets into other international markets.
Brazil is a great market and is preparing itself for 2014 FIFA World Cup and 2016 Olympics with huge infrastructure investments. Do you have any specific plans for Brazilian market?
We are participating as actively as we can. I think Brazil has been an interesting case. For the size of economy and the growth its economy is registering, Brazil has probably been underinvested in infrastructure development. There has been a change in its environment in the past one or two years, perhaps due, in part, to the international attention. As a result the country is allocating more resources into infrastructure development. I don’t know if these early signs represent a true trend but without a doubt I can compare it to the relative consciousness that India and China are bringing to geospatial.
You hold number one position in Brazil. But one challenge here is the double taxation. Do you have some local partnership to help reduce the product pricing there?
We have reacted to the high tariffs in Brazil by beginning to manufacture agricultural products inside Brazil. The economics for doing that are naturally sub-scale and not optimal visa- vis pricing to the Brazilian customer. In principle, we believe the answer that best serves our customers is to enable us to make optimal sourcing decisions worldwide without the higher costs that invariably come with high tariffs and other trade restrictions. We will, of course, comply with national policy but in general we will prefer to apply our resources to local R&D and local innovation rather less than optimal manufacturing operations. This would accelerate market development and build local capabilities.
You recently talked about Trimble entering the consumer market. What plans do you have in this direction?
It is not likely that you will see Trimble actively pursuing consumer markets. We will continue to focus on markets where we will have the ability to grow significantly as a company over time serving businesses, government agencies and professionals. I think trying to maintain a mixed culture is difficult and I believe we will stay focused on where we are and refine our proficiencies. There could be a few instances that could make us become a more consumer-oriented company but as a matter of strategy, that is not a priority. We will become a significantly larger company, adding value to businesses, with a focus on productivity and quality. That is our personality as a company.