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Software-only companies in the automotive industry
Software-only companies are entering the automotive industry. Is this the automotive future? However, there are some barriers to entry. Here are the key takeaways from Deloitte’s automotive software vision.
Amid the Covid-pandemic there has been an increase of possible scenarios about the future of the automotive industry. An industry that is so important that certain countries link a significant part of their GDP to it.
When it comes to imagining the future of the automotive industry, experts agree on at least three forces of evolution. The first is autonomous driving. The second, emission regulation and a shift towards electric vehicles. The third is the need for standardization and security.
The recent Deloitte article is analyzing future strategic options for software-only automotive companies. What changes for these companies, where is their role, and what barriers to entry do they face in the near future? Especially, now that the automotive industry is at a turning point.
The future of the automotive industry – Key takeaways
Technology companies entered the automotive industry and changed its course
The course of classic automotive player’s strategy has changes when big technology companies entered the industry. These companies introduced the concept of software-driven E/E (electric and electronic) vehicle architecture. And now the whole market is evolving with this concept soon at its core. Also, these technology companies pave the way for automotive software-only companies around the world, like software outsourcing companies, that support the biggest players in this shift. There is a need for more standardization and highly qualified talent.
Standardization is not a new concept in the automotive industry. However, keeping up with the pace of change in this competition-based industry is difficult. But the necessity is simple. Players in the industry, whether hardware or software, need to create pieces that will fit in many puzzles. This means independent applications, increased scalability, and outsourcing for third parties that have strong software engineering skills.
Ever-increasing on-board processing power and data flow capacity
New software features and products need increasing processing power. Advanced driver assistance systems, infotainment systems, head-up displays, and battery management systems all require a lot of processing power.
Furthermore, vehicle-connectivity increases as well. Plus, as vehicles level-up with autonomous driving, there is even more need for processing power.
From ECU to DCU to VC
It all started with a closed system, based on function-specific ECUs. Then their number grew with the required processing power. Now a modern vehicle has around 100 ECUs. These evolve into a few DCUs (domain-specific control units) and in the future the electronic architecture shifts toward a central or just a few domain-independent vehicle computers (VCs).
Challenges that software-only companies are facing
- As the complexity of the industry increases so does the barrier to entry for software-only companies in this industry.
- The shift from software embedded in hardware systems to independent software is changing the pricing approach, making providers vulnerable to the client’s perceived value of the product.
- Big investment and a longer amortization which means higher financial risks.
- Lack of stability and predictability in customer-requests.
These are some of the biggest challenges for software-only companies that are willing to enter the automotive industry. However, as the request for higher connectivity increases so does the need of the automotive industry for software companies.
AROBS and the automotive industry
AROBS is a software development company with a focus on automotive technology outsourcing, with over 20 years of experience. It was listed four years in a row in the Deloitte Central Europe Technology FAST 50.
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