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Technology Lock-In

Forest consulting and management firms often rely on commercial GIS software to map, store and analyze data about their land holdings. It’s not uncommon for such companies to spend tens of thousands of dollars annually to maintain commercial software licenses. In this article, I’d like to challenge the status-quo and ask, “For small to mid-sized firms is this expense really necessary?”

Before we go much further, let me start by saying that I have used commercial GIS software most of my career. As an advanced GIS user/programmer, I’ve spent thousands of hours learning and using commercial desktop, mobile, and cloud-based applications. However, the investment in these technologies was at my employer’s expense.

For personal experience, I sought out various projects that would require mapping, data storage and analysis capabilities similar to those I was using at work. The lack of funds for these personal projects prompted me to discover less expensive (i.e. free) software solutions. As time went on, these projects became more advanced and I began to notice that the required tasks were easily completed using these low-cost solutions. This led me to wonder how many small to mid-sized GIS shops are using commercial software when it may be an unnecessary expense.

Side Note:  I currently work for a small family company with a GIS budget of about $3000 per year for maintaining a commercial GIS solution.  A budget like this will only support a basic GIS solution for a single GIS administrator with a few "viewer" licenses for the stakeholders.  This is by far, not an Enterprise system, and the database functionality is rudimentary at best.  However, using open-source solutions, I discovered that I can create an Enterprise grade, multi-user GIS system with a cloud-hosted database, thereby having all the functionality of a larger Enterprise system for a tiny fraction of the cost (~$300 per year).  Compare this to other companies that are paying tens or hundreds of thousands of dollars each year for an Enterprise GIS solution.

Let this sink in for a moment. Everything I was doing as an advanced GIS administrator at work, could be done with a low-cost software solution. Why then, are many Forest Management companies spending thousands of dollars each year on commercial solutions? I believe the reason is due to a concept called Technology lock-in.

What is technology lock-in? Glad you asked… According to an article on Mises Wiki, technology lock-in is defined as follows;

Technology lock-in is a form of economic path dependence whereby the market selects a technological standard and because of network effects the market gets locked-in or stuck with that standard even though market participants may be better off with an alternative.

Mises Wiki (2011) – Technology Lock-In (retrieved at: https://wiki.mises.org/wiki/Technology_lock-in)

As defined above, lock-in is a market dependence on a technological standard. How does a single technology solution get so ingrained in a particular market?

Economists suggest a couple ideas for why this occurs. One idea stems from our deeply held technological paradigms. Consequently, efforts to move technology forward are often focused on a specific path, that builds on past achievements and prior knowledge, thereby excluding new alternatives and leading to incremental change instead of radical change (Perkins, 2003).

Perkins also explains another factor called Increasing returns to adoption, where a particular solution leads the early adoption, thereby promoting further improvement, thus making it more attractive to users. In the early days of GIS adoption in the forest industry, there were no open-source or low-cost alternatives, and only the larger companies were able to invest in GIS solutions. As small and mid-sized firms began to see the value-added with GIS software, they soon followed suit. Although, some smaller firms may purposefully avoid GIS software, due to the high cost of these products and the technical knowledge required to work with them.

Fast forward two decades, and some companies still have a tendency to believe that commercial software is technologically superior to open-source. However, given the general improvements in software development and the rapid release schedule of open-source solutions, I’m not sure this still holds. In addition, open-source is developed and maintained by the community of users, which some view is an advantage over corporate policies and vision surrounding commercial products.

In addition to our ingrained technological paradigms and increasing returns to adoption, there are significant costs, financial and intellectual, associated with developing a GIS-centric business. The upfront cost, continued annual license expenses, and the cost of training personnel can create a barrier to switching to other alternatives. In other words, the investment leads to a snowball effect, and in essence companies continue to “pay the piper”.

Is technological lock-in a valid concern for firms requiring GIS solutions in our industry? I think it depends on the firm and the resources at their disposal. Sometimes this is driven by what the client wants, but my contention is that small to mid-sized GIS shops could probably forgo the expense and learn to adapt solutions to open-source technologies. In the long-run I believe it would pay off.

Categories: Technology Adoption Technology Investments

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JwL

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