In the rapidly evolving automotive landscape, profound changes are underway. The emergence of Software-Defined Vehicles (SDV) now echoes the smartphone’s transformative impact on the telecommunications industry.
Today, expectations for automobiles exceed mere mobility. Customers envision a smart and intuitive vehicle experience, their vehicles perpetually equipped with the latest software throughout their lifecycle. This paradigm shift gains momentum through such groundbreaking innovations as Advanced Driver Assistance Systems (ADAS), Digital Cockpits, and Over-the-Air (OTA) updates. But these innovations would not be possible without the power of automotive software.
In the automotive industry, it is evident that modern software and the services it enables is becoming the cornerstone for competitiveness. However, it is noteworthy that the software development capabilities of many OEMs are currently rather underdeveloped. Furthermore, both new market entrants and tech giants keenly identify this trend, seizing the opportunity to establish a presence in the market. Where traditional OEMs and suppliers, such as Volkswagen and Valeo, once dominated the market, they now fiercely compete with more agile and tech-savvy players, such as Tesla, Google and BYD. Consequently, OEMs find themselves engaged not only in trying to catch up with their software capabilities but also confronting challenges posed by experienced tech giants.
The only way forward
The resonant message rings loud and clear: in a future overwhelmingly dominated by software, a holistic software-driven transformation into a modern tech organization is now imperative for OEMs. In recent years, most OEMs have recognized the importance of software, investing billions and establishing dedicated organizations. A Capgemini study supports this, revealing that 55% of surveyed companies anticipate market share loss due to a lack of investment in software skills. Despite knowing this and undergoing several years of transformation, significant gaps between established players and new entrants still exist. This is necessitating an exhaustive reshaping of operations, competitive strategies, and business models at this pivotal juncture of the automotive industry. Here, survival hinges on adeptly navigating the software-centric landscape.
The twists and turns of the software-driven transformation
In an evolving environment where software plays a key role, OEMs must embark on a comprehensive journey across four key dimensions, each crucial for success in the software-driven era.
- Turning into a software-native enterprise
A crucial transformation for OEMs involves shifting from an engineering-centric to a software-native approach. Established automotive firms must excel in agile software delivery to compete with new entrants. This requires reshaping the operating model and fostering a cultural shift aligned with tech-driven principles. Only those companies cultivating a diverse, skilled software talent pool and creating an environment in which they can thrive will be successful.
- Accelerating software delivery via a software unit
In order to improve an enterprise’s software delivery speed and quality, OEMs must seamlessly integrate a software unit into the organizational structure. This specialized unit is anchored in agile principles and cohesive Processes, Methods, and Tools (PMT). It is critical to bridge the gap between software and hardware development and interface with the broader enterprise ecosystem to seamlessly integrate software into the final product.
- Building the Software-Defined Vehicle of the future
The future of SDVs will be shaped by OEMs with a comprehensive approach to mastering the complexity introduced by the extension of software. These OEMs will need to address the full onboard-offboard systems continuum. Success relies on holistically designing SDV architectures, extending from Electronic Control Units (ECUs) to the cloud backend. The same degree of importance must be placed on laying the technical foundation for a fully functional customer ecosystem around the vehicle. Data is the lifeblood of SDVs, making collecting and progressing data to evolve the SDV a strategic mandate. Moreover, a robust Digital Lifecycle Management and Over-the-Air updates are vital, ensuring continual success in daily operations for SDVs.
- Software-Driven Services and Business Models
The SDV is the catalyst for introducing innovative connected services throughout the vehicle's lifecycle, unlocking untapped revenue streams and new business models. When designing these services, OEMs must shift focus from the vehicle alone to an all-encompassing ecosystem. Creating a holistic experience involves embracing an open partner ecosystem, empowering developers with such tools as Software Development Kits (SDK) for collaborative innovation, thus addressing the requirements for new business models.