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The future of applications in the automotive industry

Three strategies for winning the digital battle.

The automotive industry enjoys about $1 trillion in annual global revenues. Conditions have improved since the 2008 economic crisis. Increasing consumer confidence, moderate fuel prices, and greater credit availability are among the factors contributing to the industry's sales growth.

Automotive has always been a sector open to innovation. A recent report from the Center of Automotive Research notes that the industry spends about $100 billion each year on R&D, or about $1,200 per vehicle produced. Today, however, more disruptive innovation is at hand, coming from Internet, software and big data companies outside the traditional automotive ecosystem.

The explosive growth of digital technology and its evasive use by consumers around the world in their daily lives is having a profound impact on Original Equipment Manufacturers (OEMs), as purchasing behaviors are changing significantly, and there is a growing demand for connected vehicle services.

Purchasing behaviors have evolved at a rapid pace according to "Automotive industry: What digital drivers want" an Accenture global survey of 10,000 consumers in Brazil, China, France, Germany, India, Italy, Japan, and the U.S. An overwhelming 93 percent of all surveyed drivers seeking to purchase a new vehicle are using some form of digital process to research their buying preferences. Nearly two-thirds (62 percent) are initiating the process online, including consulting social media, before entering a dealer showroom. In addition, 42 percent of consumers say digital will radically disrupt the entire purchase process. They believe they will be able to buy, finance and have a car delivered completely via an online interaction, or believe that only the final paperwork will need to be completed in person.

For example, BMW offers customers three direct sales channels to buy their innovative electronic BMWi cars including customer interaction centers, an online store and a mobile sales force. With the increasing use of social media and mobile technology, consumers also are much more in touch with each other, brand owners and retailers. Such ubiquitous communications are making it necessary for OEMs and dealers to react faster to car-buying needs to remain competitive.

Drivers and passengers increasingly expect access to connected services in their vehicles. The connected vehicle space is a fast-growing market and a strategic priority for the automotive industry. What once was perceived as personal transportation is fast evolving into a new mobile device, merging with the digital world into an all-encompassing communications environment.

The diagnostics data that connected vehicle systems generate can also provide OEMs with the insights they need to enhance services in areas such as CRM/marketing, quality, customer services, after sales and R&D. Today's business world is increasingly high velocity and software driven. Sooner or later, these two realities will push every automotive company to rethink its potential and reinvent itself.

We urge companies to begin that reinvention today, starting with a fundamentally new approach to the business of applications. Be prepared to face a number of technical questions and decisions as you start that journey: standard software versus customized; closed versus open innovation; open versus proprietary platforms; service oriented versus event-based architectures.

Beneath those considerations, however, is the fact that many automotive companies' existing operating model for software development is not fit for purpose in today's fast-paced business environment. Effectively driving business strategy through software will require a new business and IT operating model. The IT organization must be prepared to define and execute business strategy through software that is liquid, intelligent and connected. For its part, the business must strive to gain more technology savvy as it assumes a bigger role in building software. Innovations must be driven jointly, tied to new strategic planning processes that span both business and technology. In this operating model, software becomes a revenue-generating product of the company. Business needs IT to ensure the company's software products are market relevant, and IT needs business to identify new markets where they can introduce these software products.

Ramnath Venkataraman, Senior Managing Director, Products Global Application Services Lead