Creative destruction comes to maritime software

Shipping is entering a new phase of software discipline: where investors, customers, and operators are asking harder questions - and only the vendors delivering measurable outcomes will thrive.

A protected bubble meets reality

For a long time, the maritime software industry lived in a protected bubble. Competition was sparse, capital was cheap, growth narratives were rewarded, and the cost of being wrong was postponed into the (distant) future.

That future now seems to have arrived. Rising interest rates have tightened budgets, reintroducing consequences for poor corporate discipline. Any resulting turbulence should not be mistaken for an industry in trouble, but for an industry being priced properly for the first time in years.

Schumpeter and creative destruction in shipping

Shipping, as a global industry with deep ties to trade is a great place if (like me) you have an interest in economics. Chief amongst economists (or at least the ones that are actually worth reading) stands Joseph Schumpeter, who described capitalism as a process of “creative destruction”.

Schumpeter was pointing out how real progress is driven not by steady improvement, but by periodic disruption in which old models are dismantled and replaced by more productive ones. Whilst the maritime software industry (like all industries) has always had a certain amount of background chaos, a spate of recent mergers, workforce reductions and executive departures feels like the delayed arrival of some of Schumpeter’s creative destruction.

The era of cheap capital and easy growth

For much of the past decade, maritime software has benefited from an influx of exceptionally cheap capital. Low interest rates encouraged external investors to fund ambitious growth strategies by sector-specific software companies who were shielded from real competition by their customers’ conservatism.

Investment by PE or other external equity providers was justified by (conceptually) large addressable markets rather than their targets’ real near-term profitability. The result was a proliferation of businesses with ambitious strategies, rapid headcount growth, and product roadmaps that all assumed continued access to funding. And for a while, all this worked out for everyone.

The return of discipline: Cash flow, margins, proof

That financial environment has now changed: as interest rates have risen, capital has become more costly, and investors’ expectations have shifted accordingly. Focus has moved inexorably from business narrative and big marketing claims to demonstrable returns: the traditional cubit rods of cash flow, margin, and credible paths to defined markets. For software companies operating in shipping (a sector characterised by cyclical demand, long sales cycles, and conservative buyers) this shift is particularly acute, and the consequences frequently dramatic.

Creative destruction as a feature, not a bug

Schumpeter’s insight is that this phase is not a failure of capitalism, but a feature of it. His creative destruction clears away inefficiencies (and sometimes whole businesses) that were previously tolerated because access to easy money was available. In maritime software, this could mean the gradual erosion of business models built on fragmented solutions, poor interoperability/UX, or perpetual roadmap promises unsupported by delivery capacity.

Who survives - and who thrives?

So, of the current field, which businesses will survive, and which will thrive? Vendors that can demonstrate clear customer return on investment, integrate deeply into core commercial and operational workflows, and support implementation with strong professional services will be better positioned for long-term success. Vendor strategies that emphasise long-term value realisation, such as data integrity, analytics, and compliance outcomes will become more attractive, prioritised over bleeding-edge technologies by sceptical/cautious customers. Those customers, facing their own cost pressures, are increasingly intolerant of product complexity that does not translate into measurable competitive advantage or financial performance.

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John Wills

COO