Enabling the “digital drivestyle” through connected vehicle services is one of the key transformation areas in the automotive industry. Beyond subscription fees, OEMs can benefit from an increase of competitive differentiation and improve their customer experience as well as their internal processes. The successful introduction of these future-oriented connected vehicle services is dependent on a strong IT backend and IT organization. CIOs need to apply a “New Style of IT” as the challenges of “connected vehicle IT” are significantly different from traditional “process IT”.
The Connected Vehicle Provides a Multi-Billion USD Opportunity for the Automotive Industry
It’s almost 20 years since telematics were introduced in the U.S. and no one will doubt that the vehicle of the future will be connected across the globe. However, there have always been discussions about the business case of telematics, especially since the subscription model did not work so well in other geographies than the U.S. In the last years, OEMs started to realize that beyond subscription fees there is a lot more value to discover and as a result, evolved their service offerings and business models. Unleashing the full potential of the connected vehicle, the financial contribution of a holistic approach can be in the magnitude of one billion USD or more for an OEM selling only three Mio cars per year. The financial contributions of the business case come from various external and internal sources:
• Subscription & service fees of customers willing to pay for connected services (in those automotive markets where a subscription model is successful)
• Increase of vehicle sales as a result of competitive differentiation due to a more attractive product & brand image
• Increase of after-sales profits resulting from additional cars being maintained in the OEM associated repair shops
• Additional sold premium options like high-end Infotainment systems offered in a bundle with connected vehicle services
• Cost reduction in the service process based on remote diagnostics, predictive maintenance and improved repair shop logistics
• CRM process improvements enabled by a new quality of customer engagement and intelligence leading to additional sold cars
• PLM process improvements due to engineers having direct access to field-data en masse leading to a more customer-oriented design of cars and reduced material cost
• Commission fees for 3rd party apps and services made available in the car through the two-sided business model
• Commission fees for OEM community services using the connected vehicle as a platform for a B2C2C business model
• Connected vehicle data monetarization by making field & customer data available to 3rd parties in a legally compliant and customer accepted fashion
The IT Becomes a Critical Success Factor of the Product and the Customer Experience
The increasing importance of a powerful IT backbone for the connected vehicle is evident, not only to realize the above mentioned financial benefits, but also to provide the expected quality of services to the driver. With the emergence of digital lifestyle services in the car, the IT backend–and with it the IT organization-becomes a critical success factor for the product and the customer experience. One cannot emphasize it enough: For the vehicle of the future, for the connected vehicle, for the future of the automotive industry, IT outside the car is potentially the most important success factor!
One needs to look at younger generations to understand the challenges of the transformation of the automotive industry. While OEMs are concerned about driver distraction, the Gen Y is concerned about being distracted from their digital lifestyle in the car. Customer expectations are moving away from horse-powers, driving dynamics and fuel-efficiency towards a connected drivestyle. The OEMs will no longer only produce and sell cars, they will become a service provider in the true sense of the word dealing with daily interactions per customer instead of an annual inspection. As a consequence, what the assembly plant was to the traditional OEM is the connected vehicle backend to the OEM of the future.
The Connected Vehicle Requires a “New Style of IT”
The introduction of the connected vehicle in scale and future-oriented fashion requires a paradigm shift for the traditional enterprise IT. Over the last 10 years, the “process IT” in automotive enterprises has successfully reduced complexity, introduced a high degree of standardization, well-defined processes and is used to predictable quantity structures. The connected car calls, however, exactly the opposite: high scalability, high flexibility with respect to the integration of personal devices and the management of complex ecosystems of development and services partners.
Scalability: Connected vehicles require an extraordinary dynamic in the IT infrastructure, exceeding the requirements of traditional IT by a factor of 10 or even more. The backend needs to cope with an exploding amount of connected vehicles, services, providers, partners and users as well as an unpredictable growth, spread, adoption and utilization of connected car services. Speed and responsiveness are of essence, not only to adapt to changing customer preferences but to be in the position to set trends. To be prepared for these uncertainties, a highly scalable automated hybrid cloud platform is needed.
Mobile devices and mobility ecosystems: Diversity is a must here, as the car buyer wants to use the smartphone of their choice in the vehicle. This means for IT the challenge to master an uncontrollable variety of mobile devices, form factors and operating systems: Currently, more than 1000 end-devices need to be supported–growing, in addition a variety of content, services and development partners need to be managed. The magic formula is: develop once, deploy many times-and control the ecosystem efficiently. Software development and testing in the traditional sense are no longer sufficient; 3rd-party app developers, daily updates for apps, new apps in weeks are the new normal, nevertheless, the quality may not suffer. To achieve this in an efficient and affordable fashion it requires an enterprise mobility platform that provides the suitable development tools and processes.
Security: Connecting end-users, as well as 3rd party append service providers to the connected vehicle solution, comes with a new quality of security, safety, liability and data privacy concerns, compared to the relatively simple task of securing the OEMs customer portal or engineering collaboration platform. First cars have been hacked already a couple of years ago–potential brand damage or even human injuries are no longer science fiction. The challenge to secure the connected vehicle but providing enough openness for customer and 3rd party integration at the same time requires new security architecture.
Big Data: 1 gigabyte of data per minute provides the sensors of current premium cars. 1GB per second is Google’s autonomous vehicle supposed to exchange with the backend. In addition, the backend needs to handle customer and 3rd party data and combine an unimaginable data variety across infotainment content, radar signals, vehicle-and OEM systems, traffic infrastructure. These facts make it clear: The connected vehicle is a true treasure trove of data-if you can lift it. Volume, velocity and variety of data are reaching unprecedented dimensions. “Big Data” is a core competency if you want to realize the potential of the millions of connected vehicles. Bottom line, the connected vehicle is a huge opportunity but also a significant challenge. IT organizations play a decisive role in making this a success. To fulfill their role they need to evolve beyond traditional success recipes and apply a “New Style of IT”.