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ESRI Acquires CACI Marketing Systems Group: Part 2

ESRI Acquires CACI Marketing Systems Group: Part 2

by Adena Schutzberg, from GIS Monitor 24, 2002, part 1


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This second article on the ESRI acquisition of the CACI Marketing Systems Group will touch on the practical side of the purchase as well as share the analysis of two business geographics gurus.

Before diving in, it's worth taking a closer look at CACI itself. The company, which focuses on information technology products and services, was founded in 1967 as California Analysis Center, Inc. It was later renamed Consolidated Analysis Centers, Inc. and officially changed to CACI, Inc. in 1973. In 1986, after some international growth, CACI became CACI International Inc.

CACI serves industries that include aerospace, health care, transportation and manufacturing. It's a public company with $563.8 million revenues in 2001. There are approximately 5,700 employees worldwide. The main interest to ESRI is CACI's US branch of Marketing Systems Group (MSG), which specializes in customer profiling and segmentation, custom target analysis, demographic data reports and maps, site evaluation and selection and target marketing.

ESRI has purchased the group's software, data assets and methodologies and will combine them with existing ESRI software and staff to form ESRI Business Information Solutions (EBIS). EBIS will retain all of the CACI MSG group staff and continue to serve CACI MSG customers.

Joe Lewis, a longtime ESRI business partner, and a Strategic Mapping partner before that, is the founder of Decision Support Systems of Portland, Maine. Lewis provided me with his candid thoughts on the CACI acquisition, starting with the significance of ESRI's first wholesale data purchase.

"I don't think this represents a fundamental ESRI change, because it is not a big deal. That being said, anytime you see a company stray from a core competency, there is cause for at least some measure of concern.

"This [going into the data business] was a move that was suicidal for Strategic Mapping, but ESRI's breadth and strength will enable it to be completely wrong and still be just fine. A much better idea would be to go toe-to-toe with GDT for the vector cartographic data business. Your average ESRI rep is going to be much better versed with these sorts of data products."

Lewis next addressed the state of business geographics. "As someone who lives (quietly) in that space, let say that I still have customers, I still get new customers and I am still continually amazed at the lack of penetration of GIS as the fundamental information tool in the private sector.

"Small bits of GIS functionality have found their way into enterprise set-ups, but many fewer than you would guess. ASPs [application service providers] are delivering important and easy GIS functionality (dealer locator, directions, map viewing/creation, site reporting) to the private sector.

"The reason no one hears about business geographics applications is that they are not sexy. GIS professionals are not likely to get excited by site reports, territory design, pin maps or choropleth maps, and that represents a lot of what people do with GIS in business."

Finally, I asked about "who was looking for whom" in the acquisition. Lewis noted that he had no details but felt that "ESRI has not seen sufficient profit from this market segment to warrant a proactive fishing expedition." Therefore, he suggests, the CACI group was simply available.

I also spoke with Steve Lackow, a senior staff member at Retail Profit Management, of Northridge, California, also an ESRI business partner, and a former Strategic Mapping partner, who now manages Atlas GIS and its customer base for ESRI. Lackow made it clear that CACI MSG was in a challenging situation financially. "They weren't paying their bills; service requests were ignored; sales opportunities went unanswered." He suggests that CACI corporate may have been looking for a buyer for six months or longer..

Lackow is anxious to point out that those who simply equate CACI MSG with EBIS are missing the point. ESRI, he argues, is not simply buying a data company, but rather "creating a company within a company organized around the complete needs of business users - software and data and services." The new EBIS, he explains, "is the beginning of a new business model focusing on solutions."

He compares the creation of EBIS to that of IBM's skunkworks operation to develop the personal computer outside the traditional realm of IBM; or, how Honda created Acura to enter a new high-end market, followed by Toyota with Lexus and Nissan with Infiniti. The existing infrastructures and brands, for differing reasons, he suggests, were not capable of taking on these new markets. There needed to be a whole "new" organization, even if it had ties to the "mother ship."

Lackow also feels that "it's all about selling solutions, not software and data." Strategic Mapping and MapInfo both attempted that, but lacked the vision and communication ability to engage both the channel and internal resources to become a services-oriented solutions provider. The idea behind EBIS is to wrap the ESRI products and data, partners, consultants and developers together and become a service company. Lackow points to IBM and Microsoft as companies who are already moving away from strictly hardware and software toward services.

Although he's unsure how all of the players are going to work together, Lackow is optimistic and sees two key challenges for EBIS. One is communication. The other is more practical: will business users move away from consumer operating systems like Windows 98 and onto business platforms like Windows XP? Or perhaps Unix? If not, he says, ESRI's choice to build only for the high-end operating systems may be a limitation in the business market, at least in the short-term.

CACI's data, he feels, is a great starting point. Though typically thought of as "low priced" data, the "low value add" gives EBIS some real opportunities to improve and create new products as components of the services business. With that in hand, Lackow argues, "EBIS will be in a very good position to take on the likes of Claritas (owned by VNU) with a strong mix of data, software and services, particularly in the services industries where Claritas has traditionally been strong."

Summarizing the creation of EBIS, Lackow adds that's been "a five-year project for ESRI and its partners to market to business and act like a business."


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