What Do They Actually Do

‍ESRI is a geographic information system (GIS) provider for enterprises and governments. A GIS provider is a software platform used for the collection, analysis, management, and visualization of spatial or geographic data. Examples include transportation planning (drawing route and path to be taken), urban planning, environmental impact analysis, disaster management/mitigation, navigation, and much more.

Product Innovation

‍Prior to ESRI, spatial analysis and mapping were done manually or using a rudimentary set of tools. Cartographers manually created maps with pens, rulers and compasses on paper, starting from scratch for every revision. To combine different types of information (e.g., land use, population data, and infrastructure), planners would use transparent overlays, physically layering them on top of each other to visualize relationships. Sharing data and collaboration was virtually impossible, making the entire process inaccurate and slow.

Though ESRI started as a consulting firm, it revolutionized GIS software by offering a way not only to view geographic features but also complement them with datasets (for example, a city map could be overlaid with its sewage piping network and population density). ESRI automated the spatial analysis process, enabling use for a wide range of applications. Urban planners, environmental scientists, engineers, and businesses across sectors began using GIS for tasks ranging from land-use planning and natural resource management to infrastructure development, health care planning, and logistics. For example, telecom and network service operations must consider geographic data when designing and optimizing their complex networks and maintenance activities (population density, existing networks, terrain, etc.). The adaptability of ESRI’s technology to various disciplines was transformative, establishing GIS as an essential tool across industries.

ESRI has a product suite which starts with an on-prem offering, and recently has expanded to an online (SaaS) tiered version which is accessible to a broader range of users, including more elementary products. It set industry standards with formats (such as Shapefile) enabling collaboration and data sharing within and between organizations.

Scaling Magic Moment

‍There are several drivers behind ESRI’s rise and then dominance. ESRI began operating in the GIS space when the technology was still in its infancy. Benefiting from first-to-market advantage, ESRI worked closely with stakeholders across disciplines to build tooling that matched their requirements. It then furthered this distribution advantage by working with universities and other education programs to ensure ESRI became the default option used in GIS classes. This is a similar motion to AutoCAD and how, by onboarding and familiarizing a young generation of specialists at such an early stage, it became the go-to for industry as well. You can now even get a master’s degree in GIS.

Another key driver of their growth was their embracing of government entities, for which it became the default provider and could command massive contracts without question, as all its users were trained on ESRI from their educational experiences.

In more recent times, the move to the cloud helped further expand their already large scale as ESRI started introducing different levels of offerings, enabling users with more elementary knowledge of GIS to also use the platform. Whereas historically, map work would be sent to the specialist, today an increasing number of non-technical users can navigate the platform and tweak parameters and make sense of presented data, enabled by real-time collaboration on the cloud through simpler web interfaces, which could include adding in layers of power lines or water pipes and viewing population density to decide where to build a new supermarket, as well as traffic data during rush hour to plan the best route for the presidential motorcade! The cloud-based offering also reduced the amount of hardware organizations (particularly smaller ones) needed to run GIS, thus expanding the scope of ESRI’s reach.

Where Are They Now

‍ESRI is still privately controlled and owned entirely by its two founders, having never accepted any external capital (besides a $5k loan from the founder’s mother). Today, ESRI is the dominant market player with a ~50% market share, with 2018 revenue rumored to be in the $3B vicinity (~30% growth) and 350k customers (1M users). These include 50% of Fortune 500 companies, every US state government, and most national governments. They continue to have a strong community foothold. Their annual ESRI User Conference attracts more than 18k+ attendees.

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