January 20, 2004

BitWyse's Business Model

In our analysis, growth in adoption of terrestrial laser scanning is predicated on the emergence of strong, independent providers of point-cloud management software. To grow and prosper, these companies need some degree of cooperation from other software developers, especially design system vendors, in integrating laser scan data with the design process.But for design system providers, partnering with point-cloud software companies is conflicted. On the one hand, customers are asking for it, and most vendors appear to have concluded that partnering will be more efficient than developing this specialized capability internally. But on the
other hand, allowing point-cloud software companies to gain access and influence with customers is worrying for many, especially given the risk that point-cloud vendors’ technologies and business models could eventually conflict with those of the design system vendor. Our research indicates that these issues are being wrestled with by point-cloud management software companies and design system vendors alike.

One company in the thick of this is BitWyse Solutions, Inc., whose LASERGen existing-conditions management software is gaining wide recognition, most recently from ENR. Many contractors and owners using design systems not currently integrated with LASERGen report pushing their vendor to work with BitWyse. However, in addition to LASERGen, BitWyse offers a suite of design and data management software that makes the situation somewhat conflicted. Despite these challenges, our research shows that LASERGen is succeeding with customers. The software is being used not only with CAD systems it is integrated with, but also in some cases where customers have devised
workarounds for systems not currently open to LASERGen. How is BitWyse managing this balancing act, and are there lessons for the industry?
LASERGen – BitWyse’s breakout product

The product that put BitWyse in the limelight is LASERGen, its software for managing existing-conditions data. LASERGen lets designers and engineers create photorealistic 3D models from laser scan data, and manage interactions between existing-conditions data and new design for applications such as interference management, fabrication management and construction management, all using typical desktop computers. Many practitioners we interviewed report that LASERGen is creating substantial business value by helping reduce errors and field rework in capital projects, shortening schedules and lowering direct project costs.

Practitioners report that one of LASERGen’s most important capabilities is to let them start working with existing-conditions datasets in their CAD environment almost immediately after the data is captured, without the penalties in time and accuracy of manually processing the point-cloud data beforehand – no need to decimate or segment the data, or convert it to CAD models. In addition to avoiding the time, cost and error penalties of modeling in CAD, according to practitioners, LASERGen saves training time and project cost by letting operators use the familiar view control commands of their CAD system. Also critical is the software’s ability to efficiently handle very large scan datasets on typical desktop computers, such as those containing from hundreds of millions to billions of points produced by phase-based scanners.What does LASERGen really do?

Two technological capabilities are key to what LASERGen does. First, it automatically creates volumetric models from point-cloud data without requiring the user to trace over or re-model the point cloud using CAD objects. This conversion to volumetric models enables the laser scan data to interact with geometry created in a CAD system, for purposes such as interference management, fabrication management, and construction sequencing.

Second, LASERGen enables the volumetric model to be displayed, navigated and interrogated within a CAD session using the CAD system’s view control and measurement utilities. In essence it does this
by intercepting view control commands in the CAD environment, and interlacing these commands with its own view calls. The benefit of this approach is to save users hours or days of training time and cost
compared with point-cloud management products that require operators to learn a new user interface. BitWyse reports that a normal LASERGen training session for users trained in 3D MicroStation or PDS is about 4 hours.

How does BitWyse president Mark Klusza differentiate LASERGen? “The real value of managing this data is the ability to use it,” he says. “Displaying it is just part of the process. The problem in the past was that you could not use the data in the current work environment, and users had to manage data in two separate worlds” – the point-cloud management software, and the CAD software. “What BitWyse has been able to do is bring the two worlds together, providing the user with the ability to view, manage and really just use the data in the day-to-day work process.”

“The essence is that we have products today that work,” says Klusza. “We’re not talking about futures.”

LASERGen is currently integrated into Bentley’s MicroStation, and thus works with Intergraph’s PDS as well, which uses MicroStation as its graphics platform. A version of LASERGen that will run inside AutoCAD is currently under development. Development tools used in BitWyse software products include Octree Corporation’s voxel engine, SGI’s OpenGL, Microsoft Corporation’s Visual C++, Borland Software Corporation’s Borland Builder and others.Technology and business model could make LASERGen a de facto standard

In the existing-conditions management market, LASERGen has gained a position that will not be easy to displace. Its strength is built on its proven performance record and reinforced by BitWyse’s relationships with scanner manufacturers, which serve to proliferate data in BitWyse format as well as sales of LASERGen software. Too, its software-only business model gives it an advantage over some of its best-resourced software rivals who are also in the scanner hardware business – we believe BitWyse’s numerous partnerships with scanner manufacturers will be difficult if not impossible for those competitors to duplicate.

As a software-only company, BitWyse developed LASERGen to manage data from a wide range of laser scanners, and publishes its data format. Its philosophy is to give customers freedom to choose the best instrument for the project, or to mix instruments as needed for optimal project execution. This business model, and the marked success of LASERGen with practitioners, has led growing numbers of scanner manufacturers to support BitWyse’s data format and to offer LASERGen bundled with their scanners.

“I think our real strength here,” says Klusza, “is that we have agreements with almost all the scanner companies to provide them with registration and management tools for laser data. If our software comes on board the scanner, it puts us in a strong position to manage the data, whereas others have to get the data exported from us. If you take into consideration the size of the laser data and then the requirement to maintain two sets of data, if you’re not working with our software, it becomes very difficult. As our software is being shipped on a majority of the scanners in the world, we have a very good position in the market that will not be easy or cheap to address.”

Another element of BitWyse’s model is its LASERGen Certified Service Provider (CSP) program. Here, BitWyse trains and certifies third-party providers of laser scanning services in the integration and use of
LASERGen. CSP partners help clients execute laser scanning projects and ensure data is captured and registered correctly. The aim of the CSP program is to make laser scanning technology in general, and BitWyse products in particular, more readily available to owners and contractors that lack laser scanners or laser scanning experience. This aspect of BitWyse’s model is new and promising, but somewhat unproven thus far.

Klusza adds, “We prefer the term ‘existing conditions’ over ‘point cloud.’ What we are doing is managing existing-conditions assets. I have always felt that ‘point cloud’ sends the message that it is an unorganized data set, which is not the case. But the real issue here – asset management – is not about the points. If something better were to come along, we would also be able to manage this.”Subscription licensing promotes revenue stability, visibility, growth

BitWyse provides its software as a subscription instead of a perpetual license. In this, it resembles two other highly successful software companies – Dassault Systèmes S.A. and Bentley Systems, Incorporated.

With subscription license models – in effect, software leasing – customers pay a fee to use the software for a given time period, typically one year, and receive maintenance and upgrades for that time. At the end of the subscription term, in order to continue using the software, the customer renews its subscription for an additional term at the same rate (or higher, if prices have been increased).

By contrast, in a perpetual-license model, customers pay a large up-front fee to obtain the software and often a year of maintenance and upgrades, then pay much lesser amounts for maintenance and
upgrades in subsequent years. Should they elect to discontinue maintenance, they continue to have the right to use the software.

For software providers, subscription license models strengthen revenue visibility and stability, and make it easier to achieve year-over-year revenue growth for any product with reasonable renewal rates. To grow revenues from perpetual-license models, roughly speaking a company must first sell new perpetual licenses equal in value to the prior year before showing growth. But with subscription models, generating growth requires comparatively fewer new sales, providing that a reasonable
percentage of existing customers renew. Furthering the robustness of BitWyse’s model is that some customers have made multi-year commitments.

Subscription licenses can also be harder to displace by competitors charging high up-front perpetual license fees.

One of BitWyse’s strengths is that it adopted its subscription license model early. For an established business, transitioning from perpetual-license sales to subscription sales can be painful. Because annual subscription fees are generally lower than up-front perpetual license fees for comparable products, revenue growth takes a hit while the transition is underway. The financial reports of electronics design automation providers Cadence and Synopsys showed this effect when
they made this transition. Bentley likewise moved most of its customers to its subscription program, but as a privately held company could do this out of the spotlight of public quarterly financial disclosure.Flexible licensing lowers the cost of getting customers to use other BitWyse products

A second important aspect of BitWyse’s model is that customers who subscribe to any of its products have the flexibility to use other BitWyse software as the need arises.

What BitWyse calls its Pliant Subscription Plan gives customers corporate-wide access to all BitWyse products through a single flexible license of subscription “points.” Under the subscription plan, a customer subscribes to one license of annual subscription “points,” which are paid for is determined by the client’s need, and can be adjusted monthly or quarterly to meet changing project demands.

The power of this model is that clients who buy LASERGen, for example, automatically receive all its other applications as well. After using LASERGen to manage creation of new piping, the need may well arise to use other BitWyse applications to manage the data created.Managing spatial data throughout the project matrix – conflict vs. opportunity

Although LASERGen has become BitWyse’s best-known product, it is part of a suite of tools for managing existing-conditions data. Others include Scene Manager, Project Notebook and AccuSpool. Together, BitWyse’s intention with these products is to make existing-conditions data accessible from 3D, 2D and non-graphical working environments as required, so that the information is readily available not just to engineers but to any worker who needs it. Further, BitWyse offers a suite of plant design and information management applications – 2D design, 3D modeling, drawing generation, project management, document management, visualization and design review.

To help these products gain a foothold in the market, BitWyse built a model tailored to selling at the level of individual plants. It kept sales costs low, and implemented a flexible license program to give
customers corporate-wide access to any of its tools through a single subscription. Thus, once BitWyse sells one or two seats of a particular application to a customer, barriers to adoption of other BitWyse tools by that customer are low. The appeal is to customers driven by project schedules and workloads who need to access specific functionality rapidly, without making large investments or waiting through long implementations.

Of course, these are precisely the kind of offerings that create the potential for conflict with the design and data management vendors that BitWyse needs to partner with. Today, this is manageable. Tomorrow…?

This material is excerpted from Spar Point’s just-released publication
Capturing Existing Conditions with Terrestrial Laser Scanning: A Report on Opportunities, Challenges and Best Practices for Owners, Operators, Engineering/Construction Contractors and Surveyors of Built Assets and Civil Infrastructure

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