Water 2.0: Key Takeaways from Esri’s 2019 Water GIS Conference

In early February, I joined over five hundred water industry personnel convening in Nashville, Tennessee for the 2019 Esri Water GIS Conference. Over the course of the three-day event, Esri representatives, solutions providers in the Esri partner network, and utility clients showcased the role of geographic information system (GIS)-based technology in enabling advanced asset management, enhanced operational efficiency, network intelligence, and digital transformation in the U.S. municipal water and wastewater sectors.

This conference raised important questions about:
-The role of GIS in the adoption of digital water technologies
-Vendor strategies in an evolving municipal water landscape
-The significance of a holistic view of water management for the utility of the future

Key takeaways from the conference include:

Esri looms large as key gatekeeper for software providers across utility tiers and solutions segments. The global market for water GIS solutions features a diverse range of competitors– Bentley Systems, Hexagon Geospatial, and General Electric’s Smallworld– but Esri reigns supreme in the U.S. with an estimated 90% market share of the municipal utilities market. The Redlands, California-based company has so far successfully fended off attempts by the likes of Google and AutoCAD to enter the GIS space. Integration with Esri’s ArcGIS platform is thus considered a competitive advantage and product differentiator for rival digital water solutions providers, such as water AI players Fracta and Voda.ai, and enterprise asset management software firms Cityworks and Lucity.

Little drops add up. Esri generates nearly 50% its U.S. water revenues from utilities serving fewer than 50,000 customer connections, which puts the firm in a unique position. Digital water market vendor strategies are often top-heavy, revolving around the 400+ largest urban municipalities and investor-owned utilities. Esri’s digital peers, more broadly speaking, struggle to adapt their offerings to the financial and technical constraints inherent to small and medium-sized operators. Esri, which has the luxury of decades of development since 1969, has overcome this barrier.

“Parallel GIS and SCADA market trends will structure and elevate competition within the U.S. digital water space, shaping R&D spend, M&A, and partnership activity moving forward.

GIS, SCADA battle on the horizon over high-value water analytics market. For ArcGIS utility users, GIS has served as the cornerstone of their digital transformation, providing a common language for bridging operational planning silos, interfacing with contractors and customers, and turning discrete network data into actionable insights. However, diversified industrials like Schneider Electric, Rockwell, GE Digital, and Siemens are jockeying to serve similar roles in water and wastewater. They are leveraging their positions as the dominant producers of water automation and control hardware and software to market next-generation supervisory control and data acquisition (SCADA) and industrial Internet of Things (IIoT) platforms to utilities. Much like Esri and its partner network, these industrial players and their partners and portfolio companies offer suites of advanced asset monitoring and management, network intelligence, and operational optimization tools to facilitate digital transformation within the water space.

Exhibit: Platform Convergence for Municipal Utilities

• Is the future of U.S. digital water vertical or linear? The SCADA market has traditionally focused on vertical assets– treatment plants and pump stations– but falling prices for monitoring and control instrumentation is enabling SCADA systems’ deployment further outward into utilities’ linear distribution and collection networks. Esri’s new ArcGIS Indoors and Utility Network solutions, meanwhile, reflect a strategic effort to bring the firm’s linear asset-centric GIS tools inside utilities’ vertical assets. These parallel trends will structure and elevate competition within the U.S. digital water space, shaping R&D spend, M&A, and partnership activity moving forward.
• The utility fieldworker plays a central role in achieving digital transformation. Esri and its partners, like Trimble, Cityworks, and Lucity, showcased numerous mobile and back-office tools for planning and executing field workflows. Bluefield estimates that labor costs will account for US$258 billion (or 28%) of water and wastewater utilities’ projected US$872 billion in total operating expenditures over the next decade, and fieldworkers can constitute as much as 70% to 80% of utility workforces. Thus, optimizing workorder planning and fieldwork processes via digital solutions can generate significant savings in labor time and costs for cash-strapped municipal utilities. Meanwhile, digitizing fieldworker knowledge can help utilities to cope with high retirement rates and staff training costs as the water industry confronts an aging workforce.
  
  GIS, SCADA, and advanced asset management continue to shape the digital water landscape. Bluefield will be here along the way to track key trends, market shifts, and company strategies through our Digital Water insight service.