ShippingWatch

170 companies racing to digitalize shipping

There is a race underway among IT entrepreneurs to develop solutions for container shipping. A total of 170 companies are currently competing, and only a few of them will make it and break through, says Ulrik Sanders, Managing Partner at Boston Consulting Group in Copenhagen.

Photo: PR-foto/Rolls-Royce

The undergrowth of small IT companies and entrepreneurs looking to enter the shipping sector is overrun.

Ulrik Sanders, Managing Partner of Boston Consulting Group in Copenhagen, tells ShippingWatch that the firm estimates that 170 companies are currently working to develop new digital solutions for the shipping sector.

"There's a large cluster of these smaller companies right now, which are trying to get a part of the logistics or container business. They're vying for a piece of the pie, but only a few of them will succeed, mainly because they will have a hard time growing the scope of their business," he says.

The problems related to growing the scope of the business relate to three factors, says Sanders.

We're noting that many of the major container carriers don't have a clear strategy for which solutions they're looking for and what they need the digital solutions for"

Ulrik Sanders, Managing Partner, Boston Consulting Group
First of all, only a few of these 170 companies will have enough capital to sufficiently expand their product. The second problem is that they will not be able to secure a broad enough customer base. According to Sanders, it is, for instance, not enough to sell the solution to just one liner company – rather, they need to get a broader hold of the sector in order to successfully break through with an IT solution.

The third challenge to IT entrepreneurs will be that they quite simply cannot deliver enough, in the sense that they may have the right solution, but that they are unable to provide the additional services, for instance new functionalities in the digital solution, which could become necessary.

So far, however, the entrepreneurs have not had problems raising money. In the past six years alone, USD 3.3 billion has been invested in digital startups targeting the shipping sector.

And even though many of them will struggle to break through, the successful ones could represent a threat to the liner companies if they do not themselves get to work on IT solutions, says Sanders.

Lack of plans

Only a few liner companies have settled on a digital strategy.

"We're noting that many of the major container carriers don't have a clear strategy for which solutions they're looking for and what they need the digital solutions for," says Sanders.

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A recent analysis from Boston Consulting Group about digitalization in container shipping concluded that the window is closing for liner companies in terms of getting on board the digitalization wave in the sector.

The consulting firm also stressed that only a few liner companies have started real digitalization efforts. As such, many of the shipping companies could see this window close on them.

"Though there is still time to get started, we expect that this window will close soon. Shipowners need to start the journey now to become digital leaders," wrote the firm in the report 'The Digital Imperative in Container Shipping'.

Sanders declines to name which liner companies have made it through the window, because the major box carriers, as the report notes, are also among Boston Consulting's customers. But he says that the market is divided, adding that all liner companies could do more to strengthen their digitalization efforts.

"Numerous shipping companies lack the courage to go all the way and remove the digital efforts from their core business to instead make it an independent unit. If we look at other sectors, for instance the auto industry, a company such as Renault-Nissan has successfully created a digital unit that refers directly to senior management, and which works together with the other units in the company. This is what shipowners need to do," says Sanders.

English Edit: Daniel Logan Berg-Munch

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