Making the maritime satcom market an easier sell for the bandwidth vendors

I caught up with Roger Adamson, chief executive of maritime marketing specialist Stark Moore McMillan just before Christmas after an extended bout of email and phone tag. It’s a testament to how in demand are his services these days.

Adamson has a wealth of experience maritime and satcoms experience, including stints with Rydex and Setfair among others. At last year’s Global VSAT Forum, Adamson was among those urging the VSAT vendors to take a reality check about the market they were addressing.

Not only could they (nor anyone else) view shipping as a homogenous group but Adamson suggested that to gain more ground in maritime, sellers would need to sell their product at a higher level than the IT department.

It seemed a good way to kick of the New Year by looking back a little and forward a little more and dig a little deeper into what he thinks are the big issues for the satcoms industry and what matters to buyers and sellers alike. Part one is below – part two follows.

Maritime Insight: I was interested to ask you about the issue of fragmentation in shipping that you mentioned at GVF last year. Does this mean there are barriers in the way of the future which seems to be coming at us: massive bandwidth, lots of choice and loads of solutions?

Roger Adamson: “Selling satcoms into maritime ought to be a quite straightforward proposition. If you were to say that they were 45,000 ships out there and an average fleet size of 10 vessels per fleet then you’re not talking more than a universe of 4,500 companies. In reality it is probably more like double that.”

“I think the bigger concern is the fact that there are too many players in the satcom market. If we’ve got 90 or 100 VSAT suppliers then it makes sense that you’re going to see some further consolidation taking place, because there isn’t the value in the market. In fact, it’s going to be inevitable.”

Maritime Insight: I guess the other issue is that the value of broadband solutions has changed. Installing VSAT was supposed to be about business communications and now it’s really about crew communications as the main driver. For many owners that’s part of the mix but won’t it be hard to sell a big expensive system when they get by using a Inmarsat L-band product?

RA: “There is certainly a market which will never go to VSAT. We’ve gone through the early adopters of the cruise market, the offshore oil and gas markets are big consumers and you’re starting to see VSAT in bigger numbers in the commercial shipping sector.  I can see sectors like the tanker markets becoming very receptive to that, any kind of tanker with large data transfer requirements.

“For them I can see adoption in relatively large numbers but when we talk about the bulk carrier and containership markets I think that’s going to be more of a struggle for the VSAT guys unless they can demonstrate a strong return on investment. Until that return on investment is actually defined clearly for the buyers they’re going to struggle to see the value proposition there.”

MI: That value proposition is key though isn’t it? The buying and selling of these systems has to change if it’s to really grow. It was mentioned a couple of times at the DigitalShip Athens event last year that shipping IT departments need to improve their understand the rest of the company and the shipping market, rather than letting people come in and sell them systems.

RA: “Certainly for an IT manager, buying VSAT means one less thing to justify every month in terms of why the airtime bill was twice what it was the month before. That fixed price element makes everybody’s life that much more simple.

“But I think there have probably been a number of those business cases put forward within shipowners and operators which have been turned down. You can imagine the conversation: People are saying OK, we’ve got this Inmarsat system in place and it’s costing us $1,000 a month and you’re telling me we need to move to this new thing and it’s $2,500? Give me the justification for that. But the IT guy isn’t best placed to give that justification because it’s not really in his job. Just having a bigger pipe doesn’t equate to two and a half times what they’re paying for comms.”

MI: That’s the buy side but what about the sell-side? How much work do they have to do to raise their game, particularly considering the tough times we are seeing for owners?

RA: “There needs to be a switch away from selling to the IT department on specifications and a start to selling to the ROI benefits into the senior management and board level. That will take a different kind of sales approach and probably a different sales team to what is currently in place within the supply side of the market.

“It’s very much a solution-orientated sale and it’s very much business process re-engineering, almost in the way that SAP sells in ERP and CRM solutions to big organisations.

“You need to be selling to somebody who has an overview of the entire business and can logically establish not just where savings can be made through the implementation of a broadband solution but where they can gain competitive advantage. And with all the best will in the world the IT department aren’t the people to do that, that’s very much board or operational level that has that overview and can see where the benefits are for them.”

MI: But why should owners be that interested in the new stuff that’s coming? Behind all the HTS and VSAT offerings coming to market over the next couple of years surely there’s actually a risk that given state of the market and the poor earnings being made that they’re going to see little incentive to make this investment and buy more airtime?

RA: “I think that comes back to the supply side of the market, understanding and demonstrating the return on investment and I think that’s the only way that this market is going to grow properly, unless we see dramatic price reductions.

“For the foreseeable future, megabits per second will be unusual unless you are in the offshore sector. Megabits or even half a megabit per ship is too costly. The only thing that would make that market jump instantly is if the HTS were on a comparable costs to the Inmarsat solutions, but logically that’s unlikely to be the case.

What about the big driver to ROI and higher spec satcoms solutions, the data avalanche that we hear so much about? The DPs, ISP and middleware vendors are convinced that owners want to use their own applications and devices onboard ship. To what extent and at what pace do you see that happening?

RA: “Seafarers are used to Inmarsat; traditionally an expensive narrowband service, so every piece of software that’s gone onto a ship until very recently has had a lot of time and a lot of money spent optimising it for the bandwidth.

“When you use software that is designed in that way, you’re never going to be pushing large volumes of operational data.  When we start getting into a situation where users start buying off the shelf software to run on the ship then we’re going to see more bandwidth consumed than we have done on shore but then we will run into issues like latency which means it doesn’t operate anywhere near as well as people would like it to.

“I remember in the early days with Rydex [which provided an optimised email solution], we concluded that the shipping sector would always want to optimise the amount of data that it sends between the ship and shore. I’m not sure that there is any other industry out there that has been so caught up in reducing the amount of data that is transmitted from point A to point B.”