Future of IT in the Automotive Industry

When we talk about IT in the automotive industry, we fall into the trap (much like the confusion with how Asian OEMs define vehicle IT) of talking about the connected car alone. The bigger trend here that we are trying to uncover through our newly launched research program titled “Automotive IT” is how this concept of digitization (connected, multi-device, data-generating and thus ripe for big data programs) is impacting many functions across the automotive space ranging from the vehicle retail and ownership experience to launching new shared mobility programs. My colleague Niranjan based with me in our Detroit office is heading this new program and we are currently working on a number of interesting topics in this space.

There are a few important trends to begin with here but key is that IT investments in the automotive industry are not just about day to day operational efficiencies anymore, they are increasingly being tied to business objectives

• Bringing the retail experience into the 21st century. This largely defined as moving from Brick to bricks and clicks and is not just about opening lifestyle stores in cities like the Audi City showroom in London.
• It also involves digitizing the customer engagement process and where augmented reality apps, digital screens and the newest Volvo Microsoft HoloLens immersive project all comes in. It is also about digitizing the long and boring pages of owner manuals (a market where vendors like Tweedle Automotive are supporting OEMs such as FCA on digital owner manuals).
• Bringing in new car configurator portals that can be tailored to mobile and web. This is where Audi, BMW and Mercedes Benz are trying to bring a new wave. Augmented reality apps (limited experience) to immersive options like Volvo (full scale) are emerging here. But most of these are limited to luxury OEMs and newer brands like Hyundai who are keen to capture market share.
• Taking a leaf out of Apple and introducing the concept of hiring “product geniuses”. BMW has already started this in full scale and has an ambitious plan of hiring 1000 such individuals (young tech savvy folks) who are merely trained to explain features and the vehicle to probable customers and not push sales. All the other luxury brands have similar ambitions and even GM tried this for Cadillac and now for other brands after the introduction of LTE (20 somethings product geniuses). This is again a new investment area and a highly relevant one given the increasing tech content in cars and an area where OEMs will atleast be able to convince big franchisee dealers in the US.
• Web equivalent of lifestyle stores like the “Mercedes Me” concept. This platform that is offered by Mercedes came as a result of their “best customer experience” 2020 team that is a cross functional team including telematics engineers, sales and marketing folks, finance folks and so on. One look at this and we can understand that the concept here is to engage potential customers and existing customers with a slew of offers clubbed into connect, assist, finance, inspire and move me that offers everything from leasing to finance to Car2Go car sharing service to connected services like diagnostics health check and maintenance alerts. The concept that came into the web in the same shape as the lifestyle store in Hamburg hopes to connect with the new gen customers.
• So very clearly just between these few trends there is massive dollars going into investment on wearables, new mobile and web platforms, new car configurator ideas, etc. Apart from this expect a good amount of investment moving away from the traditional dealer management systems into more dynamic CRM systems that can offer much more potential to engage with the customer over the vehicle lifecycle using the connected car as a central platform (Nissan Microsoft Dynamics CRM and Azure partnership for DMS systems is a good example)
• Building new services for the vehicle and user with a focus on harnessing big data platforms. This is where OnStar prognostics to pushing contextual offers/coupons to building app stores and payment platforms/wallets (for example in the SAP vehicle network users can pay for parking through Samsung Pay) in the vehicle. This is the use case for pushing internet and cloud to the vehicle and this is where use cases around connected living (nest Mercedes example), connected health and safety come in. All of these will come at a certain investment but our belief is that they will be solid revenue streams in the medium term.
• Another major area where most German OEMs are pumping billions and others on the average 3-5% of their turnover is digitizing the manufacturing space or Industrie 4.0. OEMs like BMW have a six pillar definition of this and players like Siemens are highly active here. This is not just process improvement but given the migration of most OEMs to unified global vehicle platforms, it is also about meeting business goals. Again this is where CIO’s and COO’s are equal stakeholders with the quality departments as well.
• Launching new mobility initiatives is not just about business models or a use case for alternative fuel vehicles but more about comprehensive models that push driving or mobility as a service. This is where Faraday Future, the next disruptor after Tesla is looking to innovate in the market. This is also closely linked to use cases on building new services for the vehicle/user and pumping investment dollars into new payment platforms and big data SaaS models.
• A big area where 3-5% costs will increase for OEMs depending on the approach is Cybersecurity. While the focus currently is just on intrusion prevention systems or hack mitigation systems, there is a wider approach required to enable an integrated model that ensures hardware, software, network and cloud security (What giants like McAfee are preaching). There also needs to be an approach for data privacy, security and retention policies and all of these in conjunction will define OEM cybersecurity investments. And despite more than 10 qualified startup or specialist Cybersecurity vendors, for most OEMs this is still a learning game.

As you can see, IT in this industry is not about the next design tool, prototyping tool or pushing more dollars into bringing high speed connectivity in the vehicle. It is about realizing business objectives ranging from improving market share to generating more revenue per user and improving the overall security architecture (security ranks number 1 to 2 in terms of concerns of most CIO’s).

Again, me and my team would love to speak to you if you want to know more about this research program. You can reach me at cpraveen@frost.com