Geo Week News

March 30, 2015

"Software Eats Hardware" - Ralph Rio of ARC Advisory

“The 3D scanning market is rapidly changing with technology innovation, growing user adoption, and many other factors,” said Ralph Rio of the ARC Advisory Group in the opening moments of his keynote. Over the next **[fill in]** minutes, he updated a room of 3D insiders (including manufacturers and providers) “on the major industry trends for business planning purposes, competitive intelligence, and strategic development.”

Growth Trends
Many of those trends touched on the great deal of growth ARC is predicting for the industry in the future. They predict an 11.2% compounded annual growth rate continuing over the next few years.

Rio identified one side effect of that growth that may be unexpected. He explained that medium-range scanners (scanners effective out to about 30m) are maturing so quickly that traditional surveying methods are no longer cost competitive. “3D scanning is the most cost-effective way to capture existing conditions,” he said. “It is less labor intensive and provides workflow automation for CAD systems.” Mobile and airborne scanners, he added (less controversially), are also contributing to the growth of the mid-range scanning market.

While exploring the growth of the industry in global markets, Rio identified Asia’s fast urbanization as a driver for the 3D industry. (In the process, he justified the decision of many 3D-imaging firms to extend operations to Asia.) He cited China as an example, as the country “plans to move 250 million of its rural population to the cities. This rapid urbanization is creating demand for construction and infrastructure improvement.”

Which industries are seeing the most growth? Rio explained that the engineering, business services, and oil & gas sectors will see high growth rates, he said, while the government sector won’t be so fertile due to budget cuts.

Lower costs, he warned, will continue driving growth until they don’t anymore. A scanner which might have cost more than $200k in the ’90s can now be purchased for under $30k, he noted. “On one hand, this has enabled the technology for a wider variety of users and verticals. However, the large increase in unit sales is paired with a correspondingly lower revenue growth.”

For now, he said, price erosion is a growth driver. “But the scale may tip the other way in the future.”

As-Is, not As-Built
Perhaps the most timely part of Rio’s presentation was a discussion of “regular updates to the point cloud,” which he says helps plant design professionals to communicate with IT or management, who often have difficulty understanding the effects and benefits of a change.

An emerging application area, Rio explained, is technology that facilitates and automates the process of keeping a point cloud current. “This would provide a record of what was done. After the cement is poured, for example, the record could be used to verify that the work was done as specified. Some are also considering using the updated point cloud to determine progress payments.”

The main point, he said, is that the industry should recognize the growing popularity of these business practices and develop software to automate it. “Attempting to do it manually would be fragile and unsustainable. Automating this is non-trivial, but vital to expand the use” of the 3D-imaging products and services sold by the members of the audience.

Software Eats Hardware
Rio continued to stress the importance of software and closed by making a provocative point. He explained how the market will be changed by newer technologies “cannibalizing” older ones, and challenged the audience to keep their companies on the correct side of that equation. How? By using software to re-create as many functions as possible, just as the smartphone has made all the hardware on the following slide obsolete by recreating their functionality with apps.

“You cannot stand still,” he said. “While software grows, devices go away. If you make devices, look into software solutions that add value to your devices. Look around your device and use software to eat other devices — before they eat you.”

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