With the annual Mobile World Congress (MWC) conference looming, it is an important time to see what trends are evolving across the digital landscape. The buzzword phrase this year is the “internet of things” (IoT). IoT is contributing to digital disruption globally and across industries, revolutionising the transportation industry.
It’s no secret that industries around the world are having to evolve in the face of huge digital disruption. Several years ago, we witnessed traditional banks being disrupted by new fintech players that were driving the sector towards the current digital payment and open banking revolution. Banks that survived did so in two ways: either by quickly restructuring and developing the required new capabilities in-house; or by buying smaller players and rolling out their offering globally. This allowed traditional banks to become adept at trialling and implementing new technologies, and building co-innovative incubators to develop new offerings and create open platforms. These advances gave birth to the industry we now know as “fintech”.
The automotive sector is undergoing a similar transformation. The traditional manufacturing giants are now struggling to adapt to the connected car model, while new AutoTech companies with a start-up mentality are bringing new ways of working to the sector. This can be clearly seen in the mobility as a service sector where new technologies, such as on demand public transport and bike sharing, are continually being trialled and implemented to augment the customer experience. At the centre of these new business models is a colossal amount of data from a variety of distributed sources – data that has major implications for digital infrastructure as cars become the new edge and the sheer volume, variety, velocity, and veracity of data explodes.
In this new digitally-led future, OEMs will have to know how to off-load critical data and analytics through third parties, while ensuring data sovereignty compliance. The shift will require multiple AutoTech players to collaborate on architecture and security frameworks. Additionally, OEMs will need to become experts in connectivity, not least to collect and share data while protecting users and providing an enhanced user experience, but also to ensure that their cars are constantly connected as they navigate complex terrains. This is both a significant catalyst for overall growth, while simultaneously being one of the industry’s biggest challenges.
Modernise or die
Connected, Autonomous, Shared/Subscription, Electric (CASE) vehicles have transformed the global automotive sector. Although the connected car has been around in some form for over 20 years, until relatively recently its capabilities have largely been limited to emergency help, location tracking, remote diagnostics and audio-visual entertainment. But there is so much more to come.
Currently, the penetration of in-vehicle connectivity is limited to a relatively small group of OEMs and certain segments. But there will be a gear shift in the coming years, with increased activity from a wide variety of players thanks to increased customer demand, technological advancements, and new legislation.
Major advances in parallel technologies, such as cloud infrastructure and mobility and edge computing, have also opened up a plethora of opportunities, enabling connected cars to become more than just a mode of digital transportation, but also a hub for infotainment, retail and communications. This will further proliferate with the arrival of 5G and ultra-high bandwidth connectivity.
The implementation of 5G later this year will undoubtedly transform industries, helping companies across sectors to interconnect with partners to drive their businesses forward and achieve optimal performance. It will provide an endless range of potential applications, leading to the evolution of smart technologies such as those that are pivotal in enabling smart transportation. But the resulting drastic rise in the amount of data moving around will place additional strain on existing digital infrastructures, requiring legacy technology to be updated and developed to handle the increased data demands of the future.
Connected cars are now finding their way into the mainstream. Adoption is expected to accelerate from 35% in 2015 to 98% of all produced cars by 2022. Gartner estimates that 250 million vehicles will be connected to the Internet by 2020, making connected cars not only a major element of the IoT, but also one of the earliest examples of how IoT can fundamentally change the shape of our everyday lives and have an indelible mark on the industry as a whole.
As with any industry that undergoes rapid digital transformation, business models must adapt to keep pace. In this instance, OEMs must consider a range of factors, such as what their customers are willing to pay for, who owns the data that is being created, and what the main risks are around privacy.
We expect to see a significant investment in this space. There have already been some notable examples, such as the recent $15.3 billion acquisition of Mobileye by Intel. OEMs and other value chain partners will need to acquire or collaborate with partners, adapting their approach to research and development to stay ahead of the competition.
As it stands, many companies are still in the infancy of determining exactly what the standards should be between parties, including the regulatory and security frameworks that need to be implemented. There is also a lack of understanding around what a digital data exchange marketplace will look like. But as the industry develops and more cars become connected, we anticipate there will be a more rigid framework in place for companies to adhere to.
Changing with the times
The vehicle itself has always been at the centre of the OEM business model, but this is changing. As customer experience becomes a more integral part of the design process, connection is becoming key to success. Legacy players are having to collaborate with their industry peers through consortia and partnerships to develop complex software platforms that seamlessly integrate with their vehicles. This comes as a response to both customer demand and changes in policy, but also helps vehicle manufacturers avoid being locked into systems that do not deliver on interoperability, interconnection and scalability expectations.
Additionally, as car ownership dwindles due to the prevalence of ride-sharing services such as Uber and Lyft, traditional thinking is changing. We expect to see new monetisation models appear including advertisement-funded ride-sharing, data monetisation in personalised use cases (e.g. insurance) and anonymised cases, for example in traffic optimisation. To enable this technology, it’s imperative that companies utilise technologies such as IoT, edge computing, analytics, artificial intelligence, machine learning and cloud.
Sharing is caring
Many OEMs will want to collect and protect data in the hope they can monetise it in a business-to-business market or offer better efficiencies and streamline service offerings for a superior customer experience. But it’s important for the industry that this data is shared, so that valuable insights can be gathered from it. Connected cars – and connected devices as a whole – depend upon the sharing of data to make informed decisions, whether that’s where parking spaces are available, or which is the most effective route to take during rush hour.
Sharing data equates to sharing intellectual property rights, and it is understandably something companies in the automotive sector are wary of. But with a new cadre of industry players coming through the ranks that aren’t tied to legacy business models, it’s imperative companies collaborate in an open platform environment that provides the scale and performance to further drive these innovations and trends through interconnection. This will allow new sector developments and give rise to whole new industries, in the same way that fintech rose from digital innovation in the banking sector.
Automotive companies cannot work independently to cover all the areas of expertise needed to produce and maintain CASE vehicles. OEMs face challenges moving from a standalone product to a platform mindset. Increasing the speed of innovation and harvesting data in the platform environment clashes with decades of rigid workflows, stable supply chains, and longer-term R&D and manufacturing planning. As the world of CASE evolves, it’s not realistic or cost effective for OEMs to build private data centres all over the world, given the uncertainties around business models and revenue opportunities. A distributed digital infrastructure, incorporating hybrid and multicloud not only gives access to the necessary platforms, but also allows companies to interconnect within an Equinix data centre. Directly and securely connecting to partners in this manner is a business-critical enabler and vital to long-term success in an ultra-competitive and increasingly disrupted industry sector.
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