Connected cars to benefit from commercial software

A car is no longer just a standalone machine for personal transportation. It is connected to a broader digital ecosystem and should serve as an extension for mobility, just as the smartphone does for communication. Connected cars are on the rise and are already making 50 % of the world of new cars sold. By 2030, the share is expected to reach 95 %. A car today is built on software - not the other way around - and manufacturers can take advantage of all the opportunities offered by these data-rich vehicles.

Connected cars are the future - but there are still gaps

The automotive industry is changing at an unprecedented pace. According to one Report of the consulting firm McKinsey & Co., the market for vehicle software is expected to grow by 9 % annually until 2030. This affects all areas, from research and development to vehicle functions and other areas subject to digital transformation, such as sales, customer service and production.

This also impacts the driving experience. If automakers can improve vehicle connectivity and leverage data, they can create intuitive, personalized services that deliver the "smart" experiences they expect. Data can power everything from AI assistants to smart navigation solutions. Furthermore, brands like Hyundai and Ferrari are already seizing the opportunity to use data to better understand customer behavior, which in turn leads to further business opportunities. But how can automakers close the connectivity gap to deliver these new opportunities and experiences?

A data-first approach

As vehicles become smarter, the amount of data they generate grows exponentially. Original equipment manufacturers (OEMs) realize that both structured and unstructured data can be analyzed to provide valuable insights and constant product feedback. With a data-driven infrastructure, they can become more agile, adapt to consumer demand, and reduce time to market for new digital products and mobility services.

Automakers that have already moved from legacy systems to the cloud are now modernizing their business applications and processes while leveraging the unparalleled security, scalability and agility of cloud platforms. Cloud infrastructure and applications are helping to optimize data-driven vehicles, connect supply chain management and smart factories, and automate various aspects of customer service.

The data-first approach has proven its worth. Mazda Motor Europe for example, saves time and increases efficiency with a cloud-based customer data platform. With a comprehensive suite of data management solutions, the company can collaborate seamlessly across all markets, ensure continuity of customer journeys, and increase revenue through automation.

The in-house question

Car manufacturers have a decision to make: Do they develop their own connectivity services or source solutions from other vendors? Another McKinsey study on the mobility investment landscape found that connectivity is the least popular investment category, with $61 billion invested, compared to the $206 billion invested in autonomous vehicles and smart mobility technologies. While this suggests that many companies prefer in-house development for connectivity, it has both advantages and disadvantages.

Internally developed technology can set OEMs apart from the competition. Customers and drivers will choose them because they offer added value - for example, technology developed exclusively by them that others don't offer. However, if you develop everything in-house, you run the risk of over-customization, which will strain your resources and keep your digital services from full smartphone-like connectivity.

This kind of over-customization has slowed the ability of vehicle manufacturers to introduce new digital models and services. For many, it would be better to break free from the constraints of existing system architecture and adopt a more standardized, modular approach. That way, they can integrate more third-party services, scale faster, and put the customer experience at the center of their business.

Scaling with out-of-the-box solutions

In the new age of automotive connectivity, OEMs are rethinking the way they develop software. They are considering using off-the-shelf components from established vendors to reduce complexity and shorten time to market. There are now many digital-native vendors with software that can be used in automotive technology that mirrors the smooth smartphone features customers are used to. The trick is to find a way to use digital services that customers are already using and deliver them out-of-the-box. This would lead to a more flexible system that allows monetization in both B2B and B2C contexts by opening up new revenue streams through the cars' digital features, selling captured data, etc. The bottom line is more revenue and a premium customer experience.

One area that lends itself to this ready-made solution approach is revenue management for digital services. At many OEMs, this area is fragmented, with payment functions spread across multiple departments. Some manage subscription-based models for connected car features, while others cover API monitoring and monetization for third-party data aggregators or vendors, online sales and more. These departments and customer front-ends may be run by different systems, but they have the same goal - to enable data flows or services for third parties, customers or fleet managers, and to provide state-of-the-art payment methods. So why not integrate payment services, for example, into an out-of-the-box stack that the entire enterprise can use? In fact, e-commerce capabilities already exist for cars to pay tolls and parking fees.

In addition to payment, there are a number of car-specific software solutions that drivers and companies can benefit from. ODO DRIVE, for example, uses car data to provide an intelligent vehicle and driver management platform with Oracle Cloud. The dashboard provides a complete view of all vehicles and comprehensive analytics based on real-time data. In this way, costs can be reduced - from fuel to maintenance to insurance.

Future-oriented mobility

With connected cars set to become commonplace in the next decade according to various forecasts, it is essential that OEMs prepare accordingly. Most have announced plans for highly autonomous vehicles, and even full automation could be achieved sooner than we think. However, getting there will require bridging the connectivity gap, which could be further widened by internal service development.

Connected, autonomous, sharing and electric vehicles are creating lucrative opportunities for the automotive industry. Given the technology-driven trends around vehicle sharing and electric cars, now is the time for auto brands to embrace data and all its benefits. If they deploy their resources efficiently and use out-of-the-box software where it makes sense, they can more effectively realize their goal of making vehicles as connected as smartphones. This gives them the adaptability they need to succeed, while drivers benefit from intuitive experiences.

Authors:
Aniello Pepe is Global Director for Automotive at Oracle in Milan. Marco Lanzetta is Director of Digital Transformation and Connectivity for Automotive at Oracle in Zurich.