Automotive tier ones need to learn from software vendors, study says

Automotive tier ones need to learn from software vendors, study says

Business news |
By eeNews Europe

Within the next couple of years, computing systems in cars will take over the cars. By 2016, 210 million vehicles worldwide will be "always on", with more than 80 percent of the new cars being equipped with internet access. Connected cars, intelligent driver assistant systems or innovative HMI concepts – in all of these cases, electronics suppliers to the automotive value chain these developments will offer new business chances; for tier ones, this trend even offers the chance to break out of their niche in the value chain which often enough is defined and assigned by the OEMs, says Juergen Reiner, Oliver Wyman Partner and author of the study

Reiner polled several hundred R&D and business managers from leading tier ones about their strategies and expectations for the increasingly software-dominated automotive business. The vast majority of them has understood the importance of software for the future of their business – in their view, the significance of the IT in the cars compares to dominating technology and business trends like electromobility and lightweight construction. In particular experts and managers in companies active in the sectors infotainment, telematics and driving safety regard software as an enabler for new developments which eventually also generate new business opportunities.

The most visible benefits lie in replacing hardware functions through software. Modularizing approaches and software reuse translate into significant cost reduction, the manages questioned said. But while cost reductions are important, the competition to technology leadership is the paramount rationale for them. "Who develops and deploys an IT platform attractive enough to be adopted by OEMs, will be able to redefine its position in the value change", Reiner made clear.

Of course, on the autobahn to this bright future the tier ones also will face some risks. The majority of the interviewees worry about the danger of commoditizing hardware and software with razor-thin profit margins being the consequence. In addition, new players foreign to the automotive market could enter the business (which is already the case) and increase the competition pressure. Another nightmare is the ever-increasing complexity which drives development costs and endangers many time-to-market schedules.

Nevertheless, 87 percent of the interviewees believe that the chances by far outweigh the risks. Most companies already have begun to modify their R&D targets and internal structures in order to strengthen their position. Also on their agenda are measures to adapt their innovation management and expand their product portfolio. In addition, many companies have begun to look out for cooperation partners in the industry and among research organizations. But there is still significant need for action, attests Oliver Wyman. In particular, the consulting company finds that research partnerships are still thin on the ground. Also, sweeping cooperations between automotive tier ones and large software vendors or IT organizations are much too rare, the study finds. If it comes to project organization adequate for IT, processes, tools, configuration management, and sales structures are fields where the automotive suppliers could – and should learn from the software industry. An example: Detailed sales models for apps and online functionality do simply not exist.

For all of these reasons, the tier ones need to continue to strengthen their IT competency associated to product development. Besides professionalizing their innovation management, they have to adapt their portfolio management according to the needs of a future IT-driven automotive world. In pursuing this goal they should orient themselves to the best practices already established in the IT business. "For automotive suppliers it is critical to dominate the processes, tools and methods of commercial IT," Reiner said. "This requires the thorough transformation of their design and development activities. Who is able to establish them self as end-to-end provider of IT solutions in the car will come out as the winner."

If you enjoyed this article, you will like the following ones: don't miss them by subscribing to :    eeNews on Google News


Linked Articles