A hardware, software marriage
When Helsinki-based Cargotec Corp. announced its plan to purchase Navis from Zebra Technologies earlier this year, it set the stage for a unique marriage of hardware and software in the terminal management segment.
Cargotec, a provider of cargo handling equipment, owns the Kalmar, Hiab and MacGregor brands. The company also owns crane spreader manufacturer Bromma, although it's operated as an independent entity.
Oakland, Calif.-based Navis provides terminal operating systems (TOS) that manage more than 400 sites including 217 marine terminals worldwide.
The combination of these two companies is the latest example of a series of deals combining software and hardware under one roof. Perhaps, a more notable example of this trend is database and enterprise resource planning software giant Oracle Corp.'s 2009 acquisition of hardware technology provider Sun Microsystems.
Cargotec and Navis make a compelling pair. But to fully understand the merits of this transaction it's important to understand why Zebra, a provider of radio frequency identification technologies, was not the ideal partner.
'Zebra acquired Navis for the logistics element of what Navis provides,' said Bill Walsh, Navis' chief executive officer. 'Their intention for Navis was to use it in a more horizontal fashion, so they weren't necessarily interested in getting into the transportation business.'
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|'With integration, customers are getting better values, less vendors and less risk.'|
Navis, on the other hand, has deep roots in the transportation business, particularly the maritime segment.
'What changed at Zebra is they decided they had a lot more room to grow in their core RFID offering and the distribution model was very different; Navis is hands-on, whereas Zebra is channel-driven,' Walsh explained.
'We are in the exact same industry as Cargotec,' he said. 'Cargotec wants to take our software and services and combine them with the equipment and hardware they possess and create solutions with their customers.'
Cargotec's purchase endorses the notion that customers are looking for integrated offerings instead of tying together the pieces themselves. However the company is keeping Navis at arms length.
'We're running independent for a reason,' Walsh said. 'Not every terminal in the world employs Cargotec equipment in their operation. It's important for Navis that we work well with other providers because we have so many customers around the world. We need to continue to be independent to work with all the equipment and technology that exists,' he said.
Walsh cited Cargotec's similar relationship with Bromma as the example of the independent model.
Navis' position among maritime and intermodal terminal operating systems providers is impressive. 'We believe we're in the mid- to high-20s in terms of global market share, where our next nearest competitor is single digits. Much of the market today is still in-house development,' he said.
Walsh believes competition in the TOS market is heating up based on the strategic use of the technology rather than the tactical. 'We don't spend a lot of time on features and functions,' he said. 'Everybody has the features and functions you need to operate.
'Navis solutions should be viewed as a platform,' he added. 'Roughly 80 percent of what most terminal operators need is standard in our solutions. Customers can then focus on customizing the remaining 20 percent themselves to achieve a competitive differentiation.'
Walsh highlighted the increasing demand for highly automated terminal operations as a key driver of Navis' growth, since true automation requires large investments in hardware and equipment that often come from a variety of sources.
'There are several examples of highly automated terminals today, and Navis has played a part in the majority of them,' he said. 'But having gone through those projects without having integration, you have more risk and more vendors to deal with. With integration, customers are getting better value, less vendors and less risk.
'Norfolk, Va., is a project we did several years ago that's regarded as one of the more highly automated terminals in the world,' Walsh said. Formerly managed by APM Terminals, the facility is now operated on a long-term lease by Virginia International Terminals. 'It is a showcase, but as you can imagine it took quite a bit of coordination with all the vendors involved to make that work. There's quite a variety of hardware being used in this terminal.'
Global terminal operators are not only seeking more automation within their terminals, they're demanding an enterprise-wide connectivity between ' and visibility into ' a network of facilities. Walsh noted this trend, which he called 'distributed processing,' as a key focus for Navis and its development plans.
'Navis SPARCS N4 (the company's TOS) technology allows customers to view, manage and control multiple terminals at the same time,' he said. 'This ability to control things on an enterprise level and not a site-by-site basis is a huge differentiator for us and it really starts to tie the supply chain together.'
Lastly, Walsh said integration with other systems is a key consideration in the TOS marketplace. 'Customers are tired of buying 20 technologies and having integration problems,' he said.
Now that Navis' goals are aligned with Cargotec's mission, terminal operators can expect a roadmap more closely tied to the future of the cargo handling business.
'When you look at the overall scope of Cargotec, we do plan to play in more than just the marine terminal world, and so does Cargotec,' Walsh said. 'They're about handling cargo on a worldwide basis and wherever they move cargo we can add value. Any place that Cargotec plays is an area we're going to investigate.
'We're going to come up with new ways of doing things, new integration points, new product sets, that we would never have been able to dream of with Zebra,' he said.