The New Tier Ones in Automobile Industry

With the most conservative revenue estimate of the connected car market at 75 – 80 billion dollars in 2020, automakers’ IT and engineering departments are feeling a huge strain today to build out necessary capabilities in an efficient and scalable manner.

As consumers have come to expect more from their cars, automakers are undergoing fundamental operational changes to capitalize on the technology revolution in the connected car domain, from embedded systems to analytics and cloud that are required to deliver connected services. The auto industry will continue to evolve rapidly and ‘dot versions’ – Lexus 1.0 or 2.0 – of car models are on the horizon.

These changes have given rise to the role software vendors, engineering service firms and system integrators play in this multi-disciplinary domain. Software companies have plenty of room to grow into the tier one space and we are witnessing this transition with software centric platforms such Telematics Service Provider platforms, RTOS vendors, ADAS platforms and others.

Product engineering services and software firms will play a vital role in this ecosystem, which is being redefined by key forces in the industry – the rapid technology evolution, the connectivity explosion and extremely demanding customer demographics.

These firms have the opportunity to transform from being a vendor to a strategic “skin in the game” partner with three critical roles in the connected car ecosystem. These are not mutually exclusive but rather intertwined and morph into each other based on circumstances.

  1. Innovation partner: P&G popularized open innovation by including customers in the new product development process. Innovation cannot be restricted to one singular enterprise department; rather it must be democratized across stakeholder ecosystem to show tremendous benefits.Being an innovation partner means demonstrating an organizational DNA of experimentation, curiosity, stretching the boundaries and willingness to fail. While technology is a critical evaluation parameter for the vendor partner, the ability to go beyond and put forth a compelling proposition will take the relationship to the next orbit. Product engineering firms that focus on software powered innovation are uniquely positioned to amplify innovation for our clients.
  2. Technology partner: Services firms have the distinct advantage of working across multitude of technologies for clients in different industry verticals. The diversity helps in honing technology expertise coupled with real-world experience.As a technology partner, the key is to contextualize technologies from different domains to the automotive context. For instance, as touchless payments gain popularity in retail industry, we must determine how to apply this technology to the connected car ecosystem. Clients look at us to highlight the possibilities, adoption trends and pitfalls of the technology and collaborate with them to imagine its application in the auto industry
  3. Business partner: Software-powered innovation, and thereby differentiation, is rapidly changing industries. In this context, the role of service firms is evolving. The traditional model of pay-for-services, while still relevant, leaves room for improvement in next gen technology.Another trend that’s challenging business models is “everything as a service” being offered to end consumers. This means that consumers pay for only what they use, and avoid upfront down payment, subscription based models, etc.

Service firms that are an integral part of the ecosystem are now starting to rethink commercial models with their client, which will likely take off in the connected car world. Auto manufacturers and tier ones will likely demand that their service partners put a stake along with them. Which model will dominate the future remains to be seen, but the risk appetite of service firms will be certainly larger, with pay per use (multi-party sharing), sharing of sales and marketing, subsidized billing, transaction based pricing and adoption based incentives.

These are exciting times as rapid technology growth and proliferation is redefining experiences, behavior and customer interactions and engineering service firms are vital to the growth of this transformation. It is crucial that we are mindful of the changes, take an avid interest in customer feedback, invest for the long haul and enhance risk taking in order to ensure a smooth road to the “new tier one of connected car world.”

Check out Aricent @ CES 2015, Hospitality Suite, The Venetian, Las Vegas

Additional reading on the connected car:
2015 Predictions: The connected car – connectivity table stakes in 2015
Connected cars overtake video games at CES
Mobility Driving The Next Wave Of Transformation

Leave a Reply

Your email address will not be published. Required fields are marked *