Viewpoint

Capturing value from earth observation analytics
Strategic scenarios for the evolution of the earth observation industry

The increasing number of satellites, the growing variety of earth observation (EO) sensors, and the adoption of new
analytics techniques are driving the growth of the satellite-based EO analytics industry. Over the next decade a wide
number of sectors will further leverage EO to enhance their decision-making and operational processes. However, as oftoday, EO analytics is a fragmented, niche industry, with several players evolving their value chain positioning and businessmodels. In light of this, Arthur D. Little foresees two possible scenarios for the evolution of this industry and identifies thekey questions for executives willing to unleash the value creation potential of EO analytics.

Why the EO analytics industry is taking off?
Three concurrent technological innovations are enhancing thevalue creation potential of satellite-enabled EO applications:the increasing volume of satellites, the growing variety of EO
sensors, and the emergence of enhanced analytics technologies(both hardware and software). In fact, the global EO value-added
services market is expected to reach USD5.7bn by 2027, from
USD3.2bn in 20171 (6 percent CAGR).

Increasing volume of satellites
The increasing volume of EO satellites is the result of threemarket drivers: investments in EO satellites from a growing
number of government agencies, lower satellite manufacturingcost, and a decrease in the cost of launch.
Firstly, there is a growing demand for EO satellites fromgovernments and military agencies from both developed andemerging countries, with the aim of enhancing their military
intelligence capabilities. Over the last 10 years more than 16
countries have launched satellites (versus 10 during the previousdecade).
Secondly, the cost of satellite manufacturing has drasticallydecreased with the adoption of nanosatellites, enabled bycommercial off-the-shelf components and higher degrees ofminiaturization and standardization. Between 2013 and 2018 thecost of manufacturing non-geostationary satellites halved2. This
cost reduction resulted in a significant increase in the number ofcompanies investing in satellite infrastructure.
12Euroconsult
Northern Sky Research

Amount of EO satellites launched, 2013–2020+14%25192013

2014

4844422018

2019

30
24222015

2016

2017

2020

Source: Northern Sky ResearchFinally, the cost of launch services decreased with the adoptionof smaller and reusable rockets, as well as the entrance of newlaunchers, such as SpaceX, Blue Origin and Rocket Labs, which
increased the level of competition.
As a result, private investors and entrepreneurs have started
investing in EO satellite constellation ventures, and the volumeof EO satellites launched every year is increasing, with a CAGRof 14 percent between 2013 and 2020 (See above figure).

Increasing performance and variety of EO sensors
EO market demand is shifting towards higher-resolution images
and lower revisit times to provide ubiquitous, near-real-time EO
monitoring. This is enabled by the development of constellationsof small, low-cost satellites and the growing variety andperformance of sensor technologies.

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Historically, optical technologies have been the most widelyadopted sensors in the EO industry. They have dramatically
improved in performance over time, today reaching very highspatial resolutions (up to a few tens of centimeters). The
data generated by optical sensors can be easily interpretedby humans; however, it is dependent on cloud coverage ingiven areas being monitored. Synthetic aperture radar (SAR)
systems have emerged to complement optical ones, whichallows capture of images in all weather conditions and buildingof precise 3D profiles of the earth’s surface called digital
elevation models. The main drawbacks of SAR systems havehistorically been the larger sizes of the satellite payloads andhigher complexity of data analysis. Recent miniaturization ofSAR payloads, as well as improvement of analytics techniques,should significantly improve the adoption of this technology overthe coming decade.
On top of optical and radar, additional sensor technologies are
emerging and being deployed on board satellites. Examples
are hyperspectral sensors, which allow analysis of the chemicalcomposition of the earth’s surface, and GNSS reflectometry,
which enables monitoring of wind speed and direction, humidity,
ice-layer density, and even moving targets.

Advanced analytics techniques
The volume of available satellite earth observation data isincreasing steadily, driven by the growing number of satellites,
higher resolution of sensors and higher on-board capacity.
For example, DigitalGlobe’s satellite fleet currently generates
80TB per day of images, including approximately 1.3m square
kilometers per day at a very high spatial resolution (30 cm). With
the launch of its Legion constellation in 2021, DigitalGlobe will
double the amount of very high-resolution data generated by its
satellites, exceeding 2.5m square kilometers per day.
Such a vast quantity of data never could have been analyzed andstored just a decade ago. It is only with the advent of advanced
analytics techniques enabled by new optimized hardware (e.g.,GPUs), as well as the ability to purchase huge amounts ofcomputing power and data storage in a “pay as you go” model,that it is now economically viable to extract value from theselarge amounts of data.

On the one hand, industries such as infrastructure, defense
and environmental monitoring have already adopted EO in theiroperations. For example, the military industry was an early
adopter of EO technologies and now accounts for more than 60percent of the EO data market3. In fact, between 1998 and 2008
the number of satellites launched for military EO applications
was only 34, compared to more than 118 launched in the last
10 years. Moreover, the number of governments investing in
EO satellites grew from 10 to 16 in the last decade comparedto the previous one, which highlights increasing recognitionof satellites as a key asset to support intelligence activity,
environmental monitoring and weather forecasting.
On the other hand, industries such as insurance and agriculture
are at an early stage, and the full potential of EO still needs to beunleashed. In particular agriculture applications include mappingof soil types for agricultural planning, monitoring the health ofcrops to guide farming (e.g., fertilization and irrigation) in more
precise and sustainable ways, and forecasting yields in supportof agricultural commodity trading activities. In fact, even when
considering an advanced agricultural market such as France,
the potential of satellite EO is still largely untapped. Farmstar,a collaboration between Airbus, Arvalis Institut du vegetal andTerres Inovia, was launched in 2002 to offer EO-based precision
farming applications. Its services, which target soft wheatcultures, today serve approximately 700k hectares (roughly 10percent of the total soft wheat cultures in France). Farmstar
recently widened its portfolio with services addressing colzaand maize cultures, which further increased its potential market.
As the worldwide population grows, a key challenge for theagricultural sector is to increase yield in a sustainable way. This iswhere EO satellite-based technologies can make the difference,for example, by reducing the use of fertilizer and pesticides andoptimizing that of water.
Finally, insurance, infrastructure, finance and disaster monitoring
are additional examples of market verticals in which EO satellitebased technologies are starting to deliver tangible benefits andcreate value.

How is the EO value chain evolving?

Despite the favorable conditions, the EO satellite industry is
still at an early stage overall, applied by a wide range of verticalmarkets with different degrees of maturity.

The EO value chain is rapidly evolving, driven by the threetechnological innovations described earlier. First, hardware
manufacturers and satellite operators are transitioning from
capturing images to selling value-added services to better
differentiate and stimulate demand from early adopters. Second,
digital giants such as Google and Amazon are entering the EO
market ecosystem, offering their massive computing capabilities
and investing in satellites (Google) and ground infrastructure(Amazon). Finally, a growing number of independent geospatial
analytics service providers, such as Orbital Insight andDescartes Labs, are emerging, aiming to extract valuable insightfrom the growing volumes of available data.

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These two trends are reducing the entry barriers todevelopment of new analytics. As a result, more players areproviding EO services, and the business model is shifting fromselling raw data to selling higher-value information.

Which sectors will get the most out of EO over thenext decade?

Capturing value from earth observation analytics

Euroconsult – Satellite-based Earth Observation Market prospects to 2025

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Incumbent satellite operators have gradually moved towards
the data acquisition and processing steps of the value chain tocapture higher shares of value and dramatically simplify the way
their clients can purchase and leverage EO data.
These players have enhanced their presence in specific markets
along the value chain and invested in analytics. For example,Airbus has invested in the development of Farmstar since theearly 2000s to address the agricultural market, and DigitalGlobe
has acquired Radiant Group to strengthen its presence acrossthe US intelligence community.
New-entrant EO satellite operators are also aiming to expand
their processing and geospatial analytics capabilities todifferentiate and increase the value of their data. Planet, theoperator of the largest EO constellation, with more than 300
nanosatellites launched since 2013 (of which approximately
150 are active today), aims to offer a set of basic analytics
functionalities, such as object classification and change
detection, to allow its customers to extract information from its
data easily.

Cloud computing and storage providers expand theirservices to gather higher volumes of data on theirinfrastructure
Digital giants such as Amazon AWS and Google Cloud see theEO market as a fast-growing volume of data to be stored andprocessed on their infrastructure. They offer cloud computing
and storage services to all the players along the value chain andinvest in additional services and functionalities to differentiate
and gather higher volumes of data. Both Amazon and Google
have partnered with ESRI, the leading provider of mapping andanalytics software tools, in order develop combined offerings.
Amazon has launched a ground station-as-a-service offering for
its clients, which has further simplified the acquisition of satellite
EO data to add more volumes to its cloud. Google acquired anequity stake in Planet, which operates a constellation of earthimaging satellites, as part of the sale of Terra Bella (formerlySkybox Imaging) to Planet. Google also signed a multi-year
contract to purchase earth-imaging data from Planet to feed its
services (e.g., Google Maps).

Geospatial analytics providers maximize theiraccess to data and invest in market-specific analytics
capabilities

For example, Orbital Insight has raised more than $70m since
its creation in 2013 to develop advanced analytic techniques toextract information from high-resolution images. The company
focuses on the retail, finance/insurance and defense markets,and has partnered with all major satellite operators to accesstheir large data archives.
We estimate that today there are more than 300 EO geospatial
analytics players active around the world. These players often
focus on small numbers of market verticals, developing highly
specialized algorithms side-by-side with their clients.

What are the potential market development
scenarios?
We expect that the increase in volume and variety of EO data,
as well as the shift towards cloud-based storage and processing
infrastructure, will continue, further stimulating the developmentof new applications.
In this environment, we see two different business models
emerging as sustainable and scalable in the long run.

EO geospatial market evolution scenarios (next decade)Level of adoption

Commercial satellite operators invest in acquisition& processing and selected analytics capabilities todifferentiate

Fullscale
adoption

Verticalized
specialization

Earlystage/niche
adoption

Today

Fragmented

Market-agnostic“APIfication”

Consolidated

Market structure evolution
Source: Arthur D. LittleBusiness model 1: Verticalized specialization
In multiple vertical markets, such as oil & gas, agriculture andenvironmental monitoring, development and commercializationof geospatial analytics services requires deep understandingof market specifics, as well as working closely with clientsto integrate analytics services into their complex operationalmodels. In such markets geospatial analytics service providers
must leverage deep vertical expertise and customer intimacy as
their key success factors.

The availability of data supplied by numerous EO satellites, aswell as the computing power offered by AWS and Google, haveenabled a growing number of new players to enter the market.
Capturing value from earth observation analytics

3

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Business model 2: Market-agnostic “APIfication”

Contacts

A wide range of simpler analytics functionalities, such aschange detection and identification of objects, allows provisionof services across a wide range of markets. Examples of suchservices are counting cars in parking lots to deliver businessintelligence to retail companies and detecting damages tobuildings to validate insurance claims. The Airbus platform
OneAtlas already allows access to EO images through APIs,
including thematic services such as Verde, which provides
detailed crop analytics.

Austria

Middle EastBelgium

The Netherlands

China

NorwayCzech Republic

Russian Federation

FranceSingapore

For these types of services, we foresee the emergence overthe coming decade of generalist players addressing a wide
range of markets with highly automated analytics. Theseplayers will offer fully digitalized interfaces, which will allow
their clients to seamlessly integrate these services into theirown digital processes. In this model, the key success factor for
analytics service providers will be scale: their ability to aggregate
large volumes of demand and invest in best-in-class digital
capabilities.

Germany

SpainIndia

Sweden

Italy

Switzerland

Japan

TurkeyKorea

UK

Latin AmericaUSAWe believe these two business models will be able to coexist
in the future EO analytics markets, as they address different
markets and requirements. Verticalized EO specialists willcapture and develop the demand of high-value, complex
industries, while the market-agnostic “APIfied” players willfurther reduce the barriers to EO adoption in high-volume
markets, which will fuel demand for data along the entire value
chain.

taga.karim@adlittle.com
baes.kurt@adlittle.com
song.ninghua@adlittle.com
brabec.dean@adlittle.com
bamberger.vincent@adlittle.com
schmitz.klaus@adlittle.com
srinivasan.srini@adlittle.com
agresti.giancarlo@adlittle.com
suzuki.hiroto@adlittle.com
lee.kevin@adlittle.com
guzman.rodolfo@adlittle.com

merhaba.adnan@adlittle.com
eikelenboom.martijn@adlittle.com
thurmann-moe.lars@adlittle.com
ovanesov.alexander@adlittle.com
ito.yuma@adlittle.com
colon.cristobal@adlittle.com
brundin.niklas@adlittle.com
schlosser.andreas@adlittle.com
baban.coskun@adlittle.com
eagar.richard@adlittle.com
mcdevitt.sean@adlittle.com

Authors
Matteo Ainardi, Adnan Merhaba, Julien Duvaud-Schelnast,
Vincent Bamberger

Conclusion

Arthur D. Little

As we have highlighted throughout this viewpoint, the EO data
analytics market is rapidly growing, driven by major technologicalinnovations, and we see two business models emerging andcoexisting in the market of geospatial analytics.

Arthur D. Little has been at the forefront of innovation since1886. We are an acknowledged thought leader in linking
strategy, innovation and transformation in technology-intensive
and converging industries. We navigate our clients throughchanging business ecosystems to uncover new growth
opportunities. We enable our clients to build innovation
capabilities and transform their organizations.

These evolutions raise key strategic questions for companies
willing to invest in EO analytics for value creation:
1. What are the benefits and value creation potential of EO for
our activity today and over the next decade?
2. How do we define a future-proof strategy to fully maximize
such value?
3. What are the critical assets and skills we should develop inhouse? Which are the key suppliers and partners?

Our consultants have strong practical industry experience
combined with excellent knowledge of key trends anddynamics. ADL is present in the most important businesscenters around the world. We are proud to serve most of theFortune 1000 companies, in addition to other leading firms andpublic sector organizations.

4. How do we integrate such capability into our organizationand operational model to capture sustainable benefits?

For further information please visit www.adlittle.com orwww.adl.com.

Executives willing to address these questions need to build
robust understanding of EO analytics industry evolution,
its underlying drivers, and the specific implication for theircompanies’ business and operational models.

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All rights reserved.

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