Vincent Smyth, general manager EMEA, Flexera Software, on how the CaaS model can transform cars into platforms, increasing profitability and achieving business goals
Car manufacturing is an expensive, technologically driven and competitive business. Given people’s fascination and often passion for cars, manufacturers are constantly looking to add new features and options to entice buyers to purchase their models.
Up until now, most manufacturers have focused on providing communication and entertainment-related bells and whistles, but creating “smart cars” utilizing embedded software and software-based licensing offers them the ability to do much more.
Consider the following scenario: Car companies standardize their engine production by manufacturing fewer models and simply use software to differentiate between them by licensing the ‘horsepower’.
For instance, all BMWs would have the same car engine, but the company varies engines’ horsepower via software. This allows BMW to reduce manufacturing costs by producing fewer physical engine models, yet still accommodate different market needs by licensing the 500 horsepower models to those who purchase that capacity, and licensing the 300 horsepower model to those wanting a less muscular engine.
Catering to buyers
What about catering to buyers who want both types of cars in the one vehicle? To illustrate, while some customers may require a city car to get to and back from work, over the weekend, they may want a powerful sports car for leisure, but buying two cars may be a luxury they could ill afford. What if they could turn their 300 horsepower BMW M5 into a 500 horsepower sports car? How would that work?
Perhaps like this: The owner signs into his BMW portal, and for a fee upgrades the engine to 500-horse power for the weekend in question. By offering this upgrade capability enabled through embedded software and licensing, BMW will have redefined the car by customizing it to suit different needs, tastes and desires over the life of the vehicle. Think “car as a service – CaaS”. (For more on CaaS, see Why smartphones are still key to telematics in-car apps, Q&A: Telematics meets Tweddle and Q&A: Telematics and the connected car.)
This ability to tailor physical products and create new markets and revenue streams is enabled by making devices/products ‘intelligent’ by powering them with software and controlling them through licensing and entitlement management.
Built-in satellite navigation systems are becoming commonplace in most car models today. Rather than the car owners purchasing satellite navigation map upgrades for a regular fee as is currently the case, the car manufacture allows the customers the ability to activate the map of the required geographic region just for the weekend in question, saving them a much larger upgrade fee; i.e., the car owner could license the map of Italy for a week at X pounds a day.
In-car entertainment is seen as attractive feature for car owners with young families. So the manufacturer also offers the ability to purchase movies or rent video games via the car’s in-car console for the duration of the journey. (For more on in-car entertainment, see Industry insight: Telematics, electric vehicles and the connected home.)
Embedded software and software licensing can revolutionize many previously staid industries. Take car insurance as an example where this is already happening. Customers can pay for insurance based on actual car usage patterns. Possibly a great device for parents of young teenagers; using licensing, they could determine exactly how fast their children drove, how many times brakes were slammed, how many passengers were in the car, etc. (For more on insurance, see Industry insight: Insurance telematics.)
While some of this might still be hypothetical at this stage, the technology already exists and is being used today in many types of intelligent devices right across industry sectors such as telecoms, healthcare and building automation.
For instance, Siemens Building Technologies has made its buildings intelligent. The company has customized individual buildings to customers’ needs by provisioning and controlling systems such as heating, ventilation, air conditioning, security and fire protection through embedded software and licensing.
Making cars more intelligent will extend their life, enable the creation of new revenue streams, automate support, reduce manufacturing costs and grow the customer base.
Vincent Smyth is general manager EMEAat Flexera Software, a provider of strategic solutions for application usage management.
For more on the CaaS model, see Industry insight: Telematics, electric vehicles and the connected home.
Coming up in 2013: V2X for Auto Safety and Mobility Europe 2013 on February 19-20 in Frankfurt, Telematics for Fleet Management Europe 2013 on March 19-20 in Amsterdam, Insurance Telematics Europe 2013 on May 8-9 in London and Telematics India and South Asia 2013 on June 5-7 in India.
For exclusive telematics business analysis and insight, check out TU’s reports: In-Vehicle Smartphone Integration Report, Human Machine Interface Technologies and Smart Vehicle Technology: The Future of Insurance Telematics.
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