The story so far
In my previous post, I compared IT transformation to hip surgery to point out that many automotive companies have been soldiering on for too long with old IT systems that aren’t up to the challenges of today’s automotive marketplace. I suggested that it’s time for companies to embrace IT transformation.
Now I want to shift gears and write about major auto industry forces that are driving the need for IT transformation, and talk about the areas where IBM Smarter Computing can help.
Not your father’s automotive industry
When you think about the challenges automotive companies face, you have to start with customers. Thanks to the rapid pace of innovation in consumer electronics and social media, automotive customers have become increasingly sophisticated about what they want in a vehicle. Giving customers a comfortable vehicle that is safe and reliable is taken for granted. Today’s vehicle must also function as a mobile extension of someone’s connected lifestyle and exceed their constantly evolving expectations. Automakers are dealing with designing, building, selling and servicing these sophisticated vehicles in the face of increasingly stringent environmental and safety regulations set by governments around the world, in both mature and developing markets.
To compete and flourish in the face of these challenges, automotive companies must transform how they:
- Rapidly launch increasingly complex, sustainable vehicles.
- Transform retail and improve the customer experience.
- Create new business models with intelligent, connected vehicles.
- Build and optimize dynamic value chains.
Rapidly launch increasingly complex vehicles
A modern automobile has around 30,000 parts, 2,000 functional components, and 100 million lines of code. And that’s just the beginning of the complexity! Today’s customer expects all of the technological conveniences of their home and work lives to be reflected in the makeup of their vehicles. Auto manufacturers must have rapid product development that can span geographically dispersed teams of engineers to keep pace with personal technology and shifting consumer demands. All of this development must be achieved while costs are reduced, time to market is shortened, and product quality and reliability is improved.
Transform retail and improve the customer experience
Sophisticated consumers are changing marketplace dynamics and challenging automakers to respond to far-reaching changes in access to information sources. Well-informed consumers directly engage automakers about their customer experience, demanding high levels of service for loyalty. Automakers have to refocus the management of customer relationships on new ways that demonstrate and sell value. With the traditional dealer model under threat or potentially not even feasible in emerging markets, automakers must navigate new, virtual sales channels. This landscape gives automakers the opportunity to enhance their brands and develop direct, personal relationships with customers by effectively assessing and responding to their needs in the digital and mobile world.
Create new business models with intelligent, connected vehicles
The introduction of intelligent, sustainable vehicles is redefining personal mobility around the world, and connected vehicles are the future of the industry. The “connected car” possesses multiple systems that are seamlessly integrated to link consumers to their digital worlds. This trend requires added competencies from automakers, especially in collaborating with new partners and developing the ability to pursue new business models. Automakers need to have open, scalable and flexible mobility services that are customizable and differentiated. It is imperative that smart automotive enterprises develop an interdependent ecosystem of suppliers and partners to help them deliver innovative services to their customers.
Build and optimize dynamic value chains
In the US market last year, 17.8 million cars were recalled, exceeding the 15.5 million vehicles recalled in 2011. Setting aside design flaws, recalls can often be traced to quality defects in the affected components. This issue suggests manufacturing supply chains aren’t smart and agile enough to detect incipient quality problems and enable correction before they become widespread. At the same time, the shift in vehicle demand is accelerating in places like Brazil, Russia, India and China, where it is now projected that 30 percent of the global demand for automobiles reside.
Automakers must accurately forecast sales and product mixes in these regions. They then must ensure that raw materials and supplier-manufactured components are scheduled for delivery to foundries and final assembly plants at the right time and in the correct quantities. As the right mix of vehicles is manufactured, they must be shipped to their destinations for final delivery. And as all of these processes often run over time, automakers must be able to quickly read changes in consumer tastes and product demand and adjust vehicle content and production accordingly.
IT systems enable key business transformation
As the automotive industry transforms because of these market forces, I believe there is a direct linkage to the IT infrastructures required to support the business. The progress of automotive business transformation is blocked by traditional IT that’s tied to individual sites. Often computing resources are tied to specific workloads and contain many copies of design and customer data. The business then has limited ability to securely manage and derive insight from that disparate information.
It’s not a matter of making isolated changes to the infrastructure. If you just add faster servers or more storage and continue to maintain the existing IT design and structure, it’s like taking pain pills for a bad hip that needs to be replaced. It temporarily dulls the symptoms but doesn’t fix the real problem. To enable automotive business transformation, you need IT infrastructure transformation that addresses three key areas: cloud computing, data and security.
Cloud computing enables faster application deployments and supports multiple services, ranging from security as a service to software as a service to platform as a service. IBM clients who are embracing cloud computing are discovering multiple benefits, including less downtime, lower total cost of ownership, reduced maintenance costs, faster time to market for new applications and improved customer satisfaction. In the automotive industry, cloud computing helps companies move past the era of static, siloed IT, and fosters new ways of working. For example, it allows teams of engineers who are spread around the globe to access consistent sets of engineering tools and data and collaborate with their teammates in real time.
To gain customer insights that they can use to add the most desired features into new vehicles and transform the customer experiences, automakers need to analyze massive amounts of data. Much of this data comes from unstructured sources such as social and mobile commerce. Beyond this social/retail aspect, auto companies are doing more of their product design and engineering analysis in the virtual world. This change creates lots of engineering and test data that has to be crunched quickly to determine important characteristics like crashworthiness, aerodynamics and component reliability.
It’s safe to say data security is critical to a modern automotive company’s ability to survive and prosper. What happens if the design and engineering data related to an upcoming vehicle launch is lost or stolen? Or what if the confidentiality of sensitive customer data is compromised? I’m sure we can all think of examples in many industries of data breaches that became public. You can probably recall the impact those breaches had on the affected companies and their customers. The costs related to a significant breach can easily grow into the millions of dollars, and the targeted company also suffers a loss of credibility and standing among its peers, partners and clients.
Now that I’ve introduced the major forces driving the need for IT transformation in the automotive industry and the key areas that this sort of transformation needs to address, I’ll continue in future blog posts to explore these topics in more detail. I hope you’ll join me for the ride!
Grant McLaughlin is the STG CTO of Automotive and Aerospace & Defense Industries at IBM. His career with IBM spans more than two decades and multiple disciplines. Grant was also a founding member, engagement leader, and project manager for the High Availability Center of Competency, a role he took on after holding project management and software development roles on the PowerHA (formerly HACMP) clustering product.
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