Finding Success in the “Everything” Vertical

During the next decade, our industry will send well more than 3,000 Low- and Medium-Earth Orbit (LEO/MEO) satellites into orbit, in dozens of new constellations promising revolutionary communications, Earth Observation (EO), and sensing data-collection services. By the time these satellites reach orbit, the launch and manufacturing segments of our industry will have been paid billions of dollars by operators who are then tasked to sell those services, alongside a smaller, more consolidated re-seller network, at competitive prices. So, who’s buying in 2019 and who will be buying in 2029?

There are a seemingly infinite number of ways to categorize the end-user, as well as an infinite number of analysis articles that aim to identify “hot” markets for existing technologies. The easy approach for this kind of industry analysis used to be: pick out a handful of these markets; throw out a few favorable stats; and hope you’re right (or hope that nobody remembers when you’re wrong). But, this approach has been made obsolete by the fact that there’s now a very concise (and terrifying) answer to the question: What are the hot new vertical markets for commercial satellite service providers? The answer is: “all of them.”

Deloitte, the largest and most versatile global consulting and tax auditing firm, employs more than 330,000 people all over the world, who work with every single industry in every single category imaginable. They figured out that the “all of them” answer applied to pretty much all software-based providers and industries more than a decade ago. Jeff Matthews, Deloitte’s specialist leader in space, spent the last two years proving that the answer works for the commercial satellite providers, as well. Why does it work?

“If you are a space-based service provider right now, you are also, essentially, a software company,” says Matthews. “Everything you’re doing is defined by software — whether by the software-defined network services you’re offering, or by the operating software on your specific satellite, or by your end-user platform.” Every satellite operator is a software company, with clients that are more likely ingesting satellite data in the same way that they are ingesting data from other software platforms.

Why are all of the enterprise verticals considered potential hot markets for the software-defined satellite service providers? Because global consulting firms like Deloitte are starting to notice that there is one very distinct service that sparks interest from clients in all of their enterprise (as well as government, commercial, and civil space) categories — data fusion.

More specifically, a seamless, interoperable fusion of data derived from commercial telecommunications satellites powering Internet of Things (IoT) networks and commercial imaging and sensing satellites, and integrated with the customer’s existing data sets, interfaces, and applications.

Data fusion has changed the way investors assess the value of potential space company investments and divvy up commercial satellite industry categories. Two Sigma Ventures Investor Kyra Durko agrees that space-based data creates a massive diversification of service offerings across multiple industries that is too large to place in a single vertical.

“[In our assessment] we divide this part of our landscape into pure data and analytics plays, and companies providing infrastructure to support and improve these offerings,” she says. “Data and analytics companies are capitalizing on multiple areas of innovation. A single satellite launched today can have at least double the bandwidth of existing satellites. Satellites currently in orbit often have sensors that were tested for months, if not years, before being launched into space over a decade ago. As satellite constellations are launched quickly and cheaply with more powerful sensors on board, new, more comprehensive and frequently updated datasets are coming online. At the same time, advancements in machine-learning and computer vision are being deployed onto sensors themselves to analyze the massive data feeds to decide which data is worth the cost of sending it back to Earth.”

Matthews agrees with Durko’s diagnosis. Deloitte has been tracking disruptive technologies such as server-less ops, intelligent interfaces, Artificial Intelligence (AI) and Machine Learning (ML) for the past decade. The firm found that these technologies were becoming so relevant and lucrative in the space sector, that they started including a “space industry-specific addendum” to their annual reports to clients. This, combined with the world’s heightened awareness that it is entering a new space age of manned space exploration and commercial space tourism, is inspiring nearly all of Deloitte’s clients to ask the question: “How do I strategically leverage space, and what does that look like?”

“When these enterprise clients come to us with this question, we try to convey the value that space already brings to their organizations, and the potential value provided by Data-as-a-Service (DaaS) offerings,” says Matthews. “There is tremendous value for satellite service providers to answer questions like, ‘How do I take the data off of an Earth Observation remote sensing satellite, or off of an IoT device powered by a seamless satellite network, and actually integrate it into my organization in a usable manner? How do I overlay other operational data with the data derived from that image and do that seamlessly?’ If commercial entities can answer those questions, then nearly all of our enterprise clients would see space as a disruptive tool — providing greater competitive advantage, a faster time to market, better connectivity to their workforces, fleets, and other connected devices.”

These enterprise clients aren’t all large corporations, says Matthews. They also include small- and medium-sized businesses, who, given the capabilities and the technologies available today, can easily afford to pay for space-based services that save time, money, and make the workforce better at their jobs.

The dominance of IoT in the globally connected user ecosystem, combined with the emergence of 5G creates a vast playing field of potential customers looking to “move up the stack” in terms of what they offer to their own customers. “We view the space environment itself as a disruptor purely because of its power to put disruptive technologies in in the hands of more enterprise users looking to secure their futures in the age of Industry 4.0. Space-based services become a necessity,” says Matthews. “If I’m managing a fleet, or globally diverse assets, improved connectivity over satellite allows me to monitor anything around the world so that I can get real-time insights and data pulled right off of my IoT devices, even in the most remote and disconnected regions. I cannot express how huge of a turning point this is for a lot of companies in our end-user category. 5G rollout and adoption is only going to strengthen the business case for acquiring space-based assets.”

While opportunities to capitalize on disruptive technologies often fall to opportunistic and new entrants with a knack for timing, Durko suggests that the more established satellite service providers may have the advantage due to the costs of market entry and experimentation. “The need for real-time access and constant location monitoring requires startups to launch large constellations to offer the most attractive customer solutions, but this takes time and significant investment,” she says. “Costs for businesses to experiment remain high, as many data providers still require minimum orders and restrict customization of datasets.”

But, the window for established entities won’t remain open forever, as Durko notes that dynamics will likely shift out as cost continues to drop and new business models emerge.

Besides CapEx, what’s standing between established commercial satellite providers and this vault of new enterprise segment customers seeking integrated data? Why does this kind of assessment feel new, yet simultaneously palpable? Matthews believes that the answers are, in order: traditional satellite companies, including global operators, must now get much closer to their customers; and that this is a very difficult change to make. Yet, the distance between commercial space companies and end-users is absolutely closing. As it closes, it starts changing the paradigm and the approach in which new customers purchase technologies.

Adapting to new customer purchasing paradigms is much easier said than done, especially when most of these customers don’t even know that your long-standing commercial space company exists. “In order to capitalize, space companies need to invest in more effective and efficient customer discovery, and engage with those customers as early as possible,” says Matthews. “A lot of these new companies looking to derive value from space are not necessarily ‘space companies.’ Some of them aren’t even aware of the impact that space-based technologies — everything from GPS, to position, navigation, and timing, to satellite telecommunications, to the global demand for streaming video services — are already making on their businesses.”

Durko hints that if established commercial data providers fail to update their customer outreach strategies in order to secure new business now, they may soon be forced to by the continuous change in the industry’s supply and demand dynamics. “Satellites are suffering from oversupply problems, expected to be exacerbated by even more launches and high throughput satellites reaching orbit in the next several years,” says Durko. “There is now ample space data available, but business use cases are still being discovered and tested. As a result, satellites are launching with as low as 40 to 50 percent of their sensor capacity filled, versus historical capacity around 70 percent. Some more skeptical individuals might question whether there is a bubble.”

Analysts and consultants like Durko and Matthews offer similar advice to commercial satellite service providers looking to connect directly with new customers: focus on the intuitive and complementary nature of your DaaS; explain packaging and interoperability as standard features; and highlight the fact that seamless global data networks are impossible without satellites. “Seamlessness impacts purchasing decisions,” says Matthews. “The more traditional tech companies are offering virtualized applications that are enabling other companies that are used to buying Software-as-a-Service (SaaS) or Infrastructure-as-a-Service (IaaS) platforms to start looking at where they can use space as a competitive positioning point, and as a service. Most of them don’t know that they don’t have to own a space asset in order to derive the value of space.” VS

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