Some major consulting firms like Deloitte, Accenture, McKinsey, and EY announced the launch of their space practice offerings over the past few weeks and months (I used to work at PwC's Space Practice before).
But, what is their strategy when it comes to Earth observation?
If you have read my stuff before, you already know my thesis on the importance of having a customer-focused, solution-driven intermediary advisory layer in EO, with an objective, independent and holistic mindset.
newsletter.terrawatchspace.com/i/70709819/my-spiky-point-of-view-towards-an-intermediate-advisory-layer-in-earth-observation
But, how would this play out? Which layer of the EO value chain would these consulting companies want to position themselves in?
Using the simple “Build, Buy and Partner” framework, could play out in one of three ways:
1. Build EO Capabilities (in-house)
2. Buy EO Capabilities (M&A)
3. Partner for EO capabilities (incl. investments)
1. Build
Some will want to build their own in-house EO capabilities to add EO to their firm’s DNA and potentially differentiate from their competition. This might make sense as most of these firms have strong data science and in some cases, geospatial capabilities.
Companies might already do this on a case-by-case basis, depending on the problem needs - using EO whenever needed but without really having an EO strategy. Some might see enough customer needs and interest to go ahead and create an EO strategy within a specific vertical.
Most consulting firms want to build end-to-end EO-driven solutions for their customers, whose problems they know very well. At some point in the building process, they might decide to switch to a Buy strategy, but those who start with a Build model are intent on owning their work
2. Buy
The technology consulting firms that do not want to reinvent the wheel in EO go with a Buy strategy, which typically involves acquiring a company and then incorporating its technology into its core offering. Technology licensing would also fall under the Buy model.
Firms that see enough customer demand for EO-derived products and those that cannot afford to wait (in the fear of losing out) turn to a Buy model. This is only a way of gaining time and postponing 'Build' as most products would need to be integrated into the core offering.
A Buy approach is more likely to happen on a vertical-specific basis than on a company-wide horizontal basis, although the latter could signify a complete shift in the firm’s strategy. I expect quite a bit of M&A activity in this space for EO in the next 3-5 years!
3. Partner
This is the easiest, least risky option of the 3 because it is also the most obvious way for companies to test the waters for a strategy, particularly for consulting companies that are always eager to partner. Even though this comes with the added threat of wasted ...
... time and effort on both sides consulting firms have a lot to gain from the new revenue streams that EO-related partnerships might open up, while EO companies, which are desperate for customer traction, can start evaluating their product-market fit.
While we are yet to see much activity in EO from the large consulting firms, some of these partnerships are already in place. And I am confident we will more coming up, especially as the investment arms of these large firms start making investments into EO companies.
This is a summary of my thoughts from last week's @terrawatchspace newsletter. Subscribe to receive this directly to your inboxes every Monday!
newsletter.terrawatchspace.com/p/last-week-in-earth-observation-april-10