Giampiero Soncini, managing director of Oceanly, is a seasoned maritime IT salesperson. Writing for Splash today he warns of clear similarities between today’s shipping tech scene and the dot-com bubble at the start of the century.
In 1998 and 1999, at the onset of what became known as the dot.com bubble an incredible frenzy caught the shipping industry: it was called e-commerce . In the space of less than two years, 143 companies (and probably more: I stopped counting) were created, all of them with the intention of providing an e-market place, the likes of Amazon, to the shipping community. At that time, I was VP South Europe for SpecTec, and we were stock-listed on the Oslo Stock Exchange. SpecTec had just come out from a very difficult situation, courtesy of the previous management, who almost killed the group and saw me working 100 hours a week for two years, seven days a week, without any holiday or weekend ever. Also because of this, I was watching with disbelief the almost daily birth of one IT company after the other, all dedicated to one niche topic, e-commerce, of a niche market, shipping. The frenzy, which saw some companies one week old, without staff or products, receiving multimillion dollar evaluations, stopped as any bubble always stops, with the internet crash of March 2000. Of the 143 companies, basically one survived, ShipServ.
Fully 23 years later, I am witnessing the same scenario, with the decarbonisation frenzy: even here, I have stopped counting the number of companies being created, proposing the same niche solutions to the same niche market of 23 years ago; for sure, there are well over 60 companies now claiming to provide solutions for fuel and emission monitoring, route planning and so on.
The shipping market is not only small, it is also not economically generous
The way it’ll end up is written in the first paragraph of this article: 90% of them will disappear. The lucky ones maybe will merge, maybe will be acquired, but the onslaught is inevitable. The reason is simple: there is simply no market for more than five, maybe eight such companies. Why? Because the shipping market is small, very small.
UNCTAD in 2023 lists 105,000 ships above 100 gt; less than half of them would probably need any software onboard. These 40,000 to 50,000 ships are owned by probably not more than 3,000 shipping companies having more than 20 ships. If you look at the container market, only 30 companies handle 94.5% of all containers. So, lots of sellers for few buyers. You can guess who’s the winner in such a situation.
Moreover, these shipping companies are located in 35 countries around the world. If we apply some difficult mathematical algorithms: 3,000 companies divided by 60 suppliers divided by 35 countries equals 1.5 customer per supplier per country. If I want to be pessimistic, I can reach numbers as low as 0.75 of a customer per IT supplier, per country. And one has to plan to sell in 35 countries. To top all this up, building software in shipping is long, difficult, complicated, and expensive.
I can hear the howling, but prove me wrong. I have been selling in the IT market for 35 years, and I have sold software in 43 countries, from Russia to Libya, from Argentina to New Zealand, from China to Cyprus; I know how difficult this market is. And the shipping market is not only small: it is, to be diplomatic, not economically generous.
Shipowners are seldom really interested in IT, which remains at the fringe of maritime activities. Big suppliers (Oracle, SAP, ISF and many more) have tried to enter the market, and have quickly run away because of the sheer discrepancy between the efforts needed to create maritime software, and the payback.
Because of all this, when I read that NautilusLab received $48.5m in financing, that StormGeo was purchased by AlfaLaval for $360m, or Eniram bought for €40m by Wartsila, or ZeroNorth’s recent merger with AlphaOri, I ask myself: what do they know, that I don’t? Or better: what don’t they know, that I do?
I really enjoyed this contribution. I’m delighted that someone has said this. Gianpiero Soncini says what needs to be said about this waste of naive capital.
In the many efforts to reduce GHG levels with various fuels, wind, solar, etc. and to make meaningful comparisons of each “solution”, a full life-cycle analysis of emitted GHG must be performed. Without taking into account all emitted GHG from the full life-cycle of the various alternatives to include mining, processing, manufacturing, actual usage and recycling, the actual reduction of GHG will remain what it is today – meaningless and nothing but smoke and mirrors.
This makes me smile. Why, because it’s deja vu all over again! Maritime for all its 80% of world trade noise, is basically niche.
3000 owners, 66,000 ships, 1.5million seafarers. (1) Bottom line small market size.
Poorly regulated, fragmented owners demands and needs. (2) Bottom line Price driven with little impetus to change.
Multiple startups puffed up by idiotic investment. (3) Bottom line over supply of overvalued half baked products (not solutions)
There is some discussion about M&A being on the up.. WELL DUH!!! Nothing new here. Who remembers Iridium, Intelsat, SetFair, Level Seas and multiple other failed enterprises in maritimes deja vu. We’ve gone through a period of throwing money now we have to roll up a bunch, before we do it all over again.
What on earth does anyone expect, you have huge amounts of money poured into half assed ideas that don’t get off the ground.
Keep drinking the Kool Aid.
Two engine manufacturers, two/three radar manufacturers and similar numbers for any area of supply makes more sense, yet the software and technology business seems to think the more the merrier…. What’s maybe worse, virtually all “products” are only half a solution.. and BC’s keep throwing money at them.
Well said, Frank.
When I was having my brain improved at INSEAD, long ago, we were told that in any fully mature market (US white goods were cited) there will be three suppliers.