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Executive Report October 2014 Executive Report: This is Volume 3, Issue 10, of the automotiveIT Executive Report. It features exclusive interviews, news stories and analyses covering the top issues facing IT decision makers in the global automotive industry. Subscribers receive the Executive Report either in print or in PDF format via e-mail 12 times a year. The next issue will be published in late October. Make sure you receive the automotiveIT Executive Report and place an order online at www.automotiveit.com/executive-report On the way [P 8] Driver assistance gets complicated at higher speeds · · · · · · · · · · · · · · · · IT specialists [P 10] Smaller IT players expected to grow German car business · · · · · · · · · · · · · · · · Microsoft [P 12] New CEO steps up efforts to change corporate culture · · · · · · · · · · · · · · · · After-sales [P 14] Digital technologies make their way into car service operations · · · · · · · · · · · · · · · · Radio [P 16] Broadcast industry sends digital-radio message to auto industry · · · · · · · · · · · · · · · · Software [P 18] Automakers' decision on software platform seen as crucial · · · · · · · · · · · · · · · · Point of view [P 21] The Uber case: Resisting market change is detrimental to industry · · · · · · · · · · · · · · · · Connections [P 22] Connectivity trend gaining traction across brands and countries Interview with VW Group CIO Martin Hofmann [P 4]
Transcript

Executive Report – October 2014

Executive Report: This is Volume 3, Issue 10, of the automotiveIT Executive Report. It features exclusive interviews, news stories and analyses covering the top issues facing IT decision makers in the global automotive industry. Subscribers receive the Executive Report either in print or in PDF format via e-mail 12 times a year. The next issue will be published in late October. Make sure you receive the automotiveIT Executive Report and place an order online at www.automotiveit.com/executive-report

02 · 2014

Sensors and cameras

Construction site data

ECO PPRO

DynamicChargingStationInformation

BMW i ConnectedDrive Services

Mercedes-Benz Live Traffic: Real-time traffic information

DynamicRange Map

RangeAssisstant

ECO ProRoute

DynamicParkingInformation

Intermodality TrafficInformation

BMW i Remote:Mobility

BMW i Remote:Efficiency

BMW i Remote:Status & Control

Mobile phones

Navigation systems

QNXQNX

On the way [P 8]Driver assistance gets complicatedat higher speeds

· · · · · · · · · · · · · · · ·

IT specialists [P 10]Smaller IT playersexpected to growGerman car business

· · · · · · · · · · · · · · · ·

Microsoft [P 12]New CEO steps upefforts to changecorporate culture

· · · · · · · · · · · · · · · ·

After-sales [P 14]Digital technologiesmake their way intocar service operations

· · · · · · · · · · · · · · · ·

Radio [P 16]Broadcast industrysends digital-radiomessage to auto industry

· · · · · · · · · · · · · · · ·

Software [P 18]Automakers' decision on software platformseen as crucial

· · · · · · · · · · · · · · · ·

Point of view [P 21]The Uber case:Resisting market changeis detrimental to industry

· · · · · · · · · · · · · · · ·

Connections [P 22]Connectivity trend gaining traction acrossbrands and countries

Interview with VW Group CIOMartin Hofmann [P 4]

Executive Report 10/20142

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3www.automotiveIT.com

From the editor:

October's news agendaOctober is always a busy month. At the tail end of the world's biggest commercial-vehicle fair, the IAA in Hanover, we host the annual automo-tiveIT Connected Car Congress. This year's event sees Audi R&D boss, Ulrich Hackenberg discuss technology innovation. Other speakers include Daimler CIO Michael Gorriz; Elmar

Frickenstein, BMW's head of electrical and electronic develop-ment; and Burkhard Milke, director electrical systems, infotain-ment and electrification at General Motors' Opel division.

Immediately following the Congress, the Paris auto show will see some of the most important launches of the year. Audi's new TT roadster will showcase the brand's new "digital cockpit;" Fiat will unveil a new 500x crossover; Ford will give a first showing of the second-generation S-Max van; Mini will debut a five-door hatchback; and Volvo will offer a first public viewing of its second-generation XC90 crossover.

In San Francisco, starting October 13, Salesforce.com will stage its annual Dreamforce convention, which brings together more than 100,000 IT experts and users of the company's business software programs. Dreamforce is also a forum for discussion of the newest information-technology and productivity trends across all indus-tries, including the car business. Sessions concerning the auto-motive industry will focus on how car companies can reap more benefits from connected cars and connected consumers.

In Munich later in October, the eCarTec show has as its theme "Connecting Mobility Markets." The annual fair pays particular attention to electric vehicles, energy storage and the charging infrastructure.

We'll cover all of these events and more in the next automotiveIT Executive Report, but, first, please look at the current issue for a wealth of insights into how automakers are incorporating ever more technology into their cars.

In this edition, we feature an exclusive interview with Volkswagen Group CIO Matthias Hofmann, we explain the software decisions automakers face today and we report on a discussion of digital radio in the car. In addition, we look at the cultural changes CEO Satya Nadella is making at Microsoft and we examine the auto-motiveIT ranking of the top 25 IT service providers to the German automotive industry.

Arjen BongardEditor-in-Chief

[email protected]

Executive Report 10/20144

Group IT at Volkswagen is reactivating its old strengths and wants to take matters in its own hands on issues such as the cloud, big data and mobility. That's why CIO Martin Hofmann has been pushing new specialized staff training. He's also testing joint projects and startups, and is consolidating IT employees into their own office complex at VW's Wolfsburg headquarters in late 2016. Hofmann spoke to automotiveIT about these de-velopments and other matters.

Mr. Hofmann, you want to continue to build up the company's IT expertise. How do you precisely envision future roles and the division of labor?The Volkswagen Group has wide-ranging IT expertise. But over the last few years, we have focused especially on project management and placed the technical execution into the hands of service partners, including the development of new appli-cations and support issues. In the future, we will increasingly

"We are shaping and acting instead of just reacting"

An interview with VW Group CIO

Martin Hofmann

5www.automotiveIT.com

direct our expertise toward technical implementation. When it comes to technologies such as cloud computing, data analytics, the internet of things and mobility, we cannot and will not be satisfied with a control function. As Volkswagen IT, we want to retain the core competency over the entire lifecycle of a solu-tion. That begins with seeking out innovative technologies, continues through the evaluation of their relevance, and covers their seamless integration into our business processes. We are shaping and acting instead of just reacting. That does not mean, however, that we will do everything ourselves.

What are the consequences of this approach?They are positive, without exception. Our highly trained IT team is going through another powerful training initiative. At present, we are training our third-generation IT security specialists. Our cross-brand IT Academy will shortly train 150 enterprise archi-tects and is currently preparing the first 30 pilot project partici-pants. Another example: We are going to offer Java boot camps – all to further expand, deepen, and spread our IT expertise.

So less outsourcing in the future?Precisely. It is a matter of taking what is security-relevant and confidential and handling it ourselves. For example, this in- cludes the operation of our FIS, which is our production, infor-mation and control system. In 2013, we consolidated all the ser-vices of a number of IT providers. At the moment, a software development center is going up in India. We will expand our programming capacity there, and maintain and further develop the systems ourselves. Yet another example: Skoda's brand IT department will take over SAP-related application support for the entire Group. In this way, we are working through all the sections step-by-step and by mutual agreement with our IT partners. We assume that we will complete the insourcing in a little more than three years.

If you support FIS from India, the support processes will also change. That is correct. The service provider is no longer just a few streets away. It is working in another time zone and its employ-ees speak English. Everything is becoming more international.

Does the internal build-up of IT expertise go hand-in-hand with a growing number of IT employees?We use the group's 9,300 IT employees more effectively if we exploit synergies and avoid double work. We will naturally bring new IT specialists on board in the future. In 2012 and 2013, we hired more than 400 IT specialists at just Wolfsburg and at Audi headquarters in Ingolstadt. In addition, we have taken on IT-oriented employees from other areas since last year. This is a true success story. The new co-workers receive custom-fit train-ing. They think and act extremely pragmatically and are user-oriented. Everyone involved sees this as a positive step.

Group IT had a presence at CeBIT 2014 with a large stand for the first time, and it aggressively went after young, qualified talent. What did this campaign accomplish?It was a total success. We could hardly handle all the applica-tions. Two months after CeBIT we no longer had any open posi-tions. I am sure that this was no transitory impression tied to the trade fair. In the current European Graduate Barometer publish- ed by market researchers trendence, the Volkswagen Group holds the second spot in the Engineering/IT area. That puts us significantly ahead of our rivals in the automotive sector. A few years ago, we were not even in the top 10. Through CeBIT, we had contact with 25,000 students and 120 professors – an ideal starting point to strengthen and expand our connection to the university world.

What is your main focus this year and in 2015?There are three that should be emphasized. First, the close coo-peration of Group IT and technology development on network-ing and connectivity; second, our work on a digital mobility platform to facilitate the networking of vehicles with the en-vironment and objects in the internet of things; third, new IT initiatives in artificial intelligence and robotics.

Does the new data lab in Munich play a role in this?Of course. In the data lab, our employees develop ideas, identify trends and test new technologies. In doing so, they work with the support of external partners such as Google and Intel as well as startups from Germany and Silicon Valley. The environment is inspiring and very dynamic, and the approach to work is highly creative. There is experimentation and, as a result, mistakes are allowed. Nonetheless, no one loses sight of the mission. In this way, extremely interesting results emerge within several weeks. If they work out, they become the basis for ongoing projects.

How do you manage relations with the startup scene?We make full use of our partnership with the German Accelera-tor promoted by the Federal Economics Ministry. Through this organization, we are in contact with more than 150 young com-panies in the information and communication technology fields. This new form of cooperation is bringing a breath of fresh air and many ideas into our software development. We are already benefiting from it.

"When it's security-relevant or confidential, we want to

handle it ourselves"

Executive Report 10/20146

Automotive and classic IT are coming together. What does this mean to Volkswagen?The integration of network services in a vehicle like the new Golf is extremely complex. In this area, technology development and IT work together closely under a clear division of labor. Our devel-opment co-workers hold the responsibility for the car's technolo-gy. Corporate IT handles everything from the air interface to the backend. It is a matter of bringing information from the Internet to the driver in such a way that he is informed but not distracted.

Vehicles and software are developed at different paces. How do you achieve pinpoint synchronization?We have adapted our software development process to the product development process. The same logic, the same terms, the same milestones. This promotes a mutual understanding of the work.

Industry 4.0 will be a megatrend in coming years. Where does Volkswagen stand in the networking of the production process?Volkswagen has long worked with networked production facili-ties. This is the only way large production volumes are possible. Industry 4.0 will, for example, offer the opportunity to identify possible malfunctions and improve supply flows into factories. In pilot projects, we are now evaluating large data quantities – the requirement for an even more pro-active maintenance.

You are the head of Group IT, and every brand has its own IT. How difficult is it to walk the tightrope between preserving the inde-pendence of the brands and bundling capabilities group-wide?Strong brands such as Porsche, Audi and Volkswagen are the foundation for company success. In the world of bits and bytes it doesn't matter what logo is on the computing center. The impor-tant factor is that our IT solutions contribute to the success of the brands and to the success of the Group. Hardware infrastructure, network and operating systems are all important for successful business activities and can be the same for all the brands. That is why we standardize processes in the IT area wherever the change is technically feasible and make sense.

You want to make IT resources available to the operating depart-ments more quickly in the future. That is why you have acquired experience with a private cloud architecture in a major project. How will this strategy evolve?We have established a private cloud for the connected car. At the same time, we are examining where we can take advantage of public cloud infrastructures. The volume of storage in the group is growing enormously because developers use storage-intensive simulation technologies, large quantities of machine data are collected from production, and we are networking new vehicle generations. But we will not and cannot build one computing center after another. So we are going to store non-critical data such as relatively old archival data in public clouds – naturally in dedicated hardware environments that are clearly recognizable as Volkswagen IT.

Interview by Ralf Bretting and Hilmar DunkerPhotos: Claus Dick

Martin Hofmann

Martin Hofmann has worked at the Volkswagen Group for 13 years. Before joining Europe's biggest car group, he worked at IT services provider Electronic Data Systems Cor-poration (EDS), handling international duties, and later as the head of Digital Markets Solutions Consulting in the US. Between 2001 and 2003, Hofmann managed e-procurement and supply chain integration at the Volkswagen Group. Thereafter he assumed responsibility for process and infor-mation management in corporate procurement. Starting in 2008, Hofmann took charge of VW organizational develop-ment. He has been Group CIO since December 2011.

Volkswagen Group key facts

Revenue (in billions of euros)2013: 197.012012: 192.682011: 159.342010: 126.88

Capital spending for current operations (in billions of euros)2013: 14.942012: 16.842011: 16.002010: 9.28

Number of employees on December 31, 2013 (Group)2013: 572,8002012: 549,7632011: 454,0002010: 389,000

7www.automotiveIT.com

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Executive Report 10/20148

On the way

Driver assistance systems are considered the pacesetters for autonomous driving. But, though the development goals are re-latively clear, the route to the finish is not. Automakers are con-tinuously adding new assistance systems and eventually, so the thinking goes, these will combine to allow autonomous driving. Several brands are targeting 2020 as the year in which they hope to start marketing such vehicles.

The auto industry is today already showing that the technology exists to take the driver out of the driving equation for exten-ded periods of time. A Mercedes-Benz S-Class earlier this year drove more than 100 km without a driver physically managing the car. Google's driverless pods are cruising down California streets. Other brands are also testing autonomous vehicles.

But many experts say regulatory and technical barriers are sizeable and both need to be overcome before driverless driving becomes a reality. One of these technical experts, Hermann Winner, says col-lision avoidance and collision mitigation systems face a particular problem in that they are difficult to adapt to higher speeds.

In low-speed tests, these systems can successfully recognize that machine intervention entails less risk than doing nothing. In other words, the car brakes or swerves to avoid a potential acci-dent. That's not so easy at higher speeds.

Autonomous cars have to figure out the direction and speed and the intentions of pedestrians and bicyclists. Researchers are find-ing out that low-speed intervention cannot be easily extended to

higher and higher speeds. The reason is that braking distance has a quadratic relationship with speed. It poses no problem to stop within a meter at 10 km an hour. But at 50 km/h, the detection range needed for safe stopping is 25 meters, and at 70 kilometers per hour the figure is nearly 50 meters, or half a football field. It would take extensive algorithmic forecasting to enable the best possible decision-making – all the more because surroundings can change substantially over longer distances.

“None of today's approaches fits very well at 70 km/h,” said Win-ner, who heads the Vehicle Technology department at Germany's Technical University in Darmstadt said. The defined safe condition is always to stop if you're driving at walking speed. But that safe condition no longer exists if you are driving in the left lane of the autobahn, he said. From Winner's perspective, it is still not clear how the problem can be solved.

Research projects in this area are still at square one, the univer-sity professor said. And there's another issue: no one has clarified how the handoff can take place between the automatic system and the driver when they take turns during highly automatic dri-ving. “That is also a legal question,” Winner said. It is a challenge that involves the human-machine interface as well. When the au-tomatic system has taken over, how can the driver's attention be re-directed if he is not even looking at the road? The only certain-ty is that this has to occur within a few seconds. But, said Winner, the mechanism for that is “completely up in the air.”

By Michael Vogel

9www.automotiveIT.com

For current news and opinions on a variety of automotive technology, design, and

manufacturing topics, head to AutomotiveITNews.

From the latest connected car platform wars to innovative fuel economy developments,

we provide up to the minute news online, on Twitter, and via email newsletter subscription.

Automotive IT newsat the speed of innovation

See what’s new at www.automotiveitnews.org/pages/it

Executive Report 10/201410

22 Management · Top 25 der IT-Dienstleister

automotiveIT 08/09 · 2014

Automarkt scheint sich zu stabilisieren. Connected Car und Industrie 4.0 hei-ßen die Topthemen der nahen Zukunft (siehe Zitate). Da verwundert es nicht, dass die große Mehrzahl der befragten IT-Dienstleister auch für dieses Jahr mit steigenden Umsätzen im Automotive-Sektor rechnet.

Ausnahmen gibt es dennoch – und die tragen nahezu ausschließlich große Namen: Mit T-Systems, IBM, HP und Computacenter mussten die Top Four 2013 teils deutliche Umsatzeinbußen verbuchen. Branchenprimus T-Systems bleibt zwar unangefochten an der Spit-

ze, fällt allerdings von 750 auf 715 Mil-lionen Euro beim Automotive-Umsatz zurück. Entsprechend verhalten fallen die Prognosen für dieses Jahr aus. Dies könnte vor allem an einer sich verän-dernden Auftragsvergabe liegen: Aus der Branche ist zu hören, dass große Ausschreibungen kaum noch stattfin-den. Stattdessen werden Aufträge in kleineren Tranchen vergeben – mit ent-sprechenden Auswirkungen auf das Umsatzvolumen. Zudem steigt der Preis-druck durch ausländische Mitbewerber: „Andere sind stets willkommen, um den Preis zu drücken“, so ein IT-Manager gegenüber automotiveIT. Immer mehr

OEMs wie General Motors oder Volks-wagen zeigen zudem Tendenzen, sich vom Outsourcing abzuwenden und die IT vermehrt nach innen zu verlagern (sie he Interview auf Seite 10). Die Pro-bleme der Großen könnten allerdings die Chance der Kleinen sein. Bis auf we-nige Ausnahmen konnte der Großteil der Dienstleister unterhalb der Top Four im letzten Jahr zulegen und seine Progno-sen zum Teil übertreffen. Der positive Trend setzt sich bis in den IT-Mittelstand fort. „Der Mittelstand ist das Herzstück der IT- und Telekommunikationsbran-che in Deutschland. Die Vernetzung mit den Kunden ist dabei sehr eng“, erklärt

Top 25: die umsatzstärksten Anbieter in Deutschland 2014

Alle Angaben in Millionen Euro

1) Includes estimates by automotiveIT 2) Includes IndustrieHansa

• New entry

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Rank2014 Company Automotive revenue

2013 Germany

Automotive revenue Germany 2012

Forecast2014 1)

1 T-Systems International GmbH 1) 715.0 750.0 710.0

2 IBM Deutschland GmbH 1) 540.0 564.0 540.0

3 Hewlett-Packard GmbH 1) 327.0 353.0 335.0

4 Computacenter AG & Co. oHG 238.8 245.0 245.0

5 Altran GmbH & Co.KG 2) 160.0 - 170.0

6 Mieschke Hofmann und Partner GmbH 145.0 125.0 175.0

7 SAP Deutschland AG & Co. KG 1) 140.0 123.0 146.0

8 NTT Data Deutschland GmbH 136.0 113.0 145.0

9 Accenture GmbH 1) 120.0 110.0 130.0

10 Capgemini Deutschland Holding GmbH 1) 102.0 90.0 110.0

11 Atos Information Technology GmbH 1) 85.0 88.4 85.0

12 ESG Elektroniksystem- und Logistik-GmbH 1) 85.0 82.0 91.0

13 Infosys Ltd. 84.0 75.0 95.0

14 All for One Steeb AG 75.4 51.0 87.0

15 H&D International Group 75.0 69.0 80.0

16 msg Systems AG 57.0 45.0 65.5

17 CSC Deutschland GmbH 54.0 43.0 68.5

18 Sulzer GmbH 52.0 40.5 60.0

19 Allgeier SE 1) 38.0 38.0 38.0

20 Abat AG 34.5 27.5 37.0

21 BT Germany GmbH & Co. oHG 1) 32.0 32.0 34.0

22 CGI 32.0 28.5 40.0

23 Cenit AG 1) 31.0 35.0 32.5

24 MVI Solve-IT GmbH 29.0 - 32.0

25 Datagroup AG 27.6 28.0 32.0

Slicing the German automotive IT cake Top 25: Germany's biggest automotive IT service providers

In millions of euros

11www.automotiveIT.com

While some of the biggest IT service providers to the German auto industry are seeing a drop in revenue, many smaller players are growing. That's clear from looking at data on the revenue performance of the 25 biggest IT services suppliers to the Ger-man car industry. According to a list compiled by automotiveIT, the top 3 – T-Systems, IBM Deutschland and Hewlett Packard GmbH – all reported lower automotive revenue in 2013. For the current year, the revenue outlook for T-Systems and IBM is little changed, while HP could see a small increase.

The weak performance of the biggest players says little about the overall German automotive market for IT services. The top 25 posted a 6 percent gain in revenue in 2013 to 3.415 billion euros from 3.194 billion euros in 2012. This year, the top 25 are expected to see another 5 percent growth to rougly 3.58 billion euros.

Industry insiders say the trend favoring smaller IT service providers has several reasons. First of all, automakers are increasingly divi-ding up big consultancy projects, preferring to let smaller specialist companies handle specific tasks. Second, foreign competitors are getting a bigger slice of the IT consultancy pie. As one IT manager said: "Others are always welcome if this brings the price down." And third, automakers are increasingly bringing in-house strate-gically important IT functions that were previously outsourced.

German automakers – like their competitors elsewhere in the world – are counting on IT to realize the transformative plans that should bring their models in line with 21st century mobility re-quirements. And they continue to rely heavily on the help of the IT services industry. To better understand the priorities automotive companies are setting, automotiveIT asked senior German IT exe-cutives which issues are key for the future of the industry.

Here are some of their answers:

"Big data and analytics are increasingly putting their stamp on the auto industry. Applications on the retail side, in product development and in production make

it possible to gain better insights into business processes and react faster."Dirk Wollschlaeger, general manager Global Automotive Industry, IBM Deutschland

"Next to the product, customers and automakers are concerned with the emotional experience of the brand and mobility as well as digital information in and

around the car. Customer Connect is tomorrow's IT issue.Kai Grambow, corporate vice president, Capgemini Deutschland

"Connected car and autonomous driving are be- coming a reality, which pushes IT security to the top of the agenda. Automakers can profit from the ex-

pertise of network providers, who have built up decades of experience protecting connected devices."Ansgar Gruendler, sales director automotive, BT Germany

"IT security, cloud and M2M are the the issues of the future. One central challenge will be how to dyna-mically manage cloud-based systems via a cloud inte-

gration center. The other is Industry 4.0."Luz G. Mauch, senior vice president automotive, T-Systems

"For many customers, assistance systems are more important than horsepower. Those brands inspire that offer seamless and easy-to-use services. The iPhone

is an example. The relevance of the information is decisive and big data is the key."Rainer Mehl, managing director, NTT Deutschland

"In the future we will experience a Smart World with intelligent products. The trajectory will be marked by the connected car, agile IT, Industry 4.0 and big data."

Ralf Hofmann, CEO, Mieschke Hofmann und Partner

"Networked cars are more and more becoming driving data machines. Components equipped with sensors and digital interfaces generate a large amount of

valuable information. And digitalization will fundamentally change the way cars are sold."Andreas Baier, managing director, Accenture

"Industry 4.0 has started. By way of innovation- oriented cyber-physical production systems, intelligent machines and production lines that communicate and

interact with each other, the auto industry will play a key role."Ruchir Budhwar, head of automotive Europe, Infosys

"Today already, the auto industry faces the challenge of managing very large data volumes in real time and using this information in a sensible way. In the near

term, innovations and new business areas based on these data will emerge. These will complement and broaden the established successful business models of automakers and suppliers."Daniel Holz, board member, SAP Germany

"The networked car and service-oriented business models require information management, security and agility. Cloud, Big Data, IT security and mobility

are core technologies for this transformation."Oliver Bahns, director automotive, HP Enterprise Services

By Pascal Nagel

Executive Report 10/201412

66 Karriere · Microsoft

automotiveIT 08/09 · 2014

_Kulturschock. Mit dem Abgang von CEO Steve Ballmer endete bei Microsoft die gefürchtete Mitarbeiterbewertung mittels Glockenkurve. Doch kultureller Umbau gelingt nicht über Nacht.

Traditionally, summer was a trying time for the 40,000 Microsoft employees who live in and around Seattle in the northwestern US. That's when the software giant's so-called stack ranking ex-ercise assessed how the company's employees were doing on the job. Everyone's performance was ranked against each other and workers were divided into different categories. The system had a bad reputation among Microsoft staff. With mostly predeter-mined quota along a bell curve, many ended up in the middle, re-gardless of how successful their teams may have been. For these staffers, their ranking often meant a lower bonus. And for their colleagues at the bottom of the curve, it could mean getting fired.

Since autumn last year, everything has changed, at least in theory. A fresh wind has been blowing since Microsoft CEO Steve Ball-mer announced in August, 2013 that he would be retiring and his successor, Satya Nadella, officially took over in February of this year. The writing was on the wall for stack ranking in November already. That's when HR boss Lisa Brummel wrote a memo saying there would be "no more curve" and no more ratings. Instead, in a new staff evaluation method, employees would receive more frequent feedback on their performance by way of so-called " connects." The uppermost goal: to foster better cooperation between teams.

Culture change at Microsoft

Phot

o M

icro

soft

"We plan to have fewer layers

of management, both top down

and sideways"

"In order to accelerate our

innovation, we must rediscover

our soul – our unique core"

Microsoft CEO Satya Nadella

"Any strategy gets eaten for

lunch if you don't have culture

that backs it up”

13www.automotiveIT.com

The new system was well received but changes in corporate cul-ture take time to implement. According to comments on the Web site Glasdoor, a forum for more than 7,500 current and past Micro-soft staff, political maneuvering and an everyone-for-himself mentality continue to be the reality. Often the most aggressive are rewarded at the expense of other potentially better qualified colleagues, said a marketing employee in Redmond.

Entering the car

To transform a company that continues to be highly profitable but appears to have lost its innovative drive, Nadella likes to resort to strong language. "In order to accelerate our innovation, we must rediscover our soul – our unique core," he said when he took of-fice. Nadella wants nothing less than to reinvent productivity and build a new "operating system for human activity." In the vision of the new CEO, the cloud is central and data analysis is growing in importance. And, if it's up to Microsoft, Windows, which con-tinues to dominate the desktop PC market, will soon enter cars' instrument panels as well. The company has positioned its info-tainment system, which has the same look and feel as Windows 8, as a competitor to Apple's CarPlay.

Microsoft's refocusing and its cultural reorientation also mean job cuts. In July, the company, in the biggest layoff in its 39-year history, said 18,000 people representing 14 percent of its work-force, would have to go. The bulk of these – 12,500 – will come from Nokia's struggling mobile phone operations, which Micro-soft acquired for 7.5 billion dollars earlier this year. In Septem-ber, Microsoft also confirmed it is closing a Silicon Valley research laboratory. Fifty jobs will go at the facility.

A key part of Nadella's corporate transformation plan is to have a a leaner executive team. In an e-mail sent to staff in July, he said: "We plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making." As a result, Microsoft will, if all goes as planned, op-erate more like a startup, questioning the "tired traditions" that characterize many of the older tech companies.

In the Seattle area, 1,351 people have received notice that they are losing their jobs at Microsoft. If the ensuing jobs uncertain-ty continues, some of the company's top engineers may consider heading for other technology groups or startups. All are looking for qualified staff. Nadella knows the risks, but he's also aware that far-reaching change is needed to position Microsoft for long-term success. As he told the Seattle Times this summer: "Any strate- gy gets eaten for lunch if you don't have culture that backs it up.”

By Alexandra Riegler

Imprint/Contact:

MMI – Media-Manufaktur International GmbHSchmiedgasse 1182335 BergGermanyPhone: +49 89 381 517 400Fax: +49 89 381 517 409Email: [email protected]

Registered Office: Berg/ Germany, HRB 207937Register Court: Amtsgericht MünchenManaging Directors: Christiane Sauer, Dominik OrtleppTax Number: 117/132/20657VAT-ID Number: DE 291832268Bank Details: VR Bank, Volksbank RaiffeisenbankBIC: GENODEF1STHIBAN: DE 32 7009 3200 0101 2834 80

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This is Volume 3, Issue 10, of the automotiveIT Executive Report. Only subscribers get full interviews with top decision makers, extensive background information and insightful stories on the hottest issues in the industry. Order your personal copy of the automotiveIT Executive Report now and get it sent to you directly in print or via e-mail 12 times a year.

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Microsoft to buy Mojang, maker of MinecraftMicrosoft is buying Mojang, the Swedish maker of the popular Minecraft computer game. The US company is paying 2.5 billion dollars for Mojang and plans to continue to offer Minecraft on many different platforms. “Gaming is a top activity spanning devices, from PCs and consoles to tablets and mobile, ” said Microsoft CEO Satya Nadella. “Minecraft is more than a great game franchise – it is an open world platform, driven by a vibrant community we care deeply about, and rich with new opportunities for that community and for Microsoft.”

Executive Report 10/201414

Das Auto der Gegenwart ist ein Produkt der Digitalisierung. Dies gilt für Herstellung, Fahrzeugfunktionen und nicht

zuletzt für Inspektion und Wartung. Im Aftersalesservice ste­hen verstärkte Kundenorientierung und Zeitersparnis mittler­weile an erster Stelle. Dabei wandelt sich die klassische Direkt­annahme, bei der Fahrzeugcheck und technische Diagnose im Vordergrund standen, zunehmend zu einem auf den Kunden abgestimmten Dialog. Um diesen für Kunden und Servicebe­triebe möglichst effizient zu gestalten, greifen immer mehr Markenbetriebe und Kfz­Werkstätten auf Innovationen aus der mobilen Kommunikationstechnologie und der Automatisie­rungstechnik zurück. Seit einigen Jahren entwickelt und ver­treibt die Leipziger Firma Automotive Process Institute (API)

42 Vertrieb und Handel · Digitale Dialogannahme

automotiveIT 08/09 · 2014

Lösungen, die beides vereinen: Unter anderem wurde für die Ermittlung des Kundenbedarfs ein digitales Dialogannahme­system via Tablet entworfen, das die Kundendaten bereits vor der Annahme in der Werkstatt verarbeitet. Über eine Checklis­te werden in der Cloud gespeicherte Fahrzeugdaten mit dem aktuellen Zustand des Autos abgeglichen und eventuelle Män­gel über die im Tablet integrierte Kamera festgehalten. Über das mobile Interface kann der Servicemitarbeiter dem Kunden anschließend die Ergebnisse präsentieren. Dabei verdeutlicht ein intuitives Ampelfarbensystem den notwendigen Reparatur­bedarf einzelner Autoteile. „Unser Ziel ist es, über die Aggre­gation der Fahrzeugdaten einen Lernprozess einzuleiten“, sagt Christian Polzer, API­Geschäftsführer, „denn je mehr wir be­ Fo

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Today’s automobiles are a product of digitalization. New IT sys-tems play central roles in manufacturing, vehicle functions and, not least of all, inspection and maintenance. Now, digitaliza-tion is getting traction in the after-sales market as well. Ser-vice operations are increasingly using tablets and robots dur- ing the check-in to collect data about a vehicle. That reflects the stronger customer orientation and time savings that are top priorities for after-sales service. The classic check-in focusing on vehicle inspection and technical diagnosis is becoming a dialogue geared to the customer. To make it as efficient as possible, more and more branded operations and vehicle service shops are turning to innovations from the mobile communication and automation fields.

Over a number of years, Leipzig-based Automotive Process Insti-tute (API) has developed and sold solutions that combine these two fields. Among other features, it has designed a digital check-in system to determine customer needs. It is processing customer data even before the vehicle is checked in. Vehicle data stored

in the cloud are synchronized with the car’s current condition with the help of a checklist. Any deficiencies are recorded by a camera integrated into a tablet. The service employee can then use a mobile interface to show the results to the customer. An in-tuitive traffic-light color system highlights the repair work needed on an individual part. “Our goal is to introduce a learning process via the aggregation of vehicle data,” said Christian Polzer, API's managing director. “The more we know about the vehicle or the vehicle model, the more the examination can be dynamically ad-justed to a specific case.”

Next to API, German companies such as ApplicoData and Procar Informatik are selling comparable tools. But API offers a unique feature. To make the check-in process as efficient as possible, the company has developed a fully automatic inspection robot that examines key vehicle check points. The car is hoisted on a hydrau-lic lift where mobile measurement modules are attached. Chas-sis and tire measurements begin without any manual handling. API says the instruments check tire tread depth, tire damage, and

After-sales goes digital

Robots and computers can examine the state of a car, making the work of the service advisor a little easier

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the current adjustment of the chassis within five minutes. That doesn't mean the service staff is idle; Fluid levels, glass and paint are all inspected with the human eye. “In no way do we want to make the service employees superfluous,” API's Polzer said. “On the contrary, we want to make their work easier with digitaliza-tion and automation, allowing more time for customer dialogue.”

The API system’s first versions, which reached the market five years ago, are gaining currency in Germany, Austria, France and Switzerland. API also works with medium-sized partner compa-nies and with automakers, including Kia and SEAT. In northern Germany, the Kath dealer group, one of API's medium-sized part-ners, has used the system since 2011. “I especially see digitaliza-tion offering advantages when it comes to time-saving through

the use of interfaces to the dealer management system," Kath Service Manager Randolf Gust said.

The automated check-in does not replace the service staff’s skills. “This advanced technology must impress the staff – or the system fails,” Gust said. “The robot is just a supplement to the service advisor. The robot can't see everything.” But one thing is clear: Digital technologies will also transform the after-sales market. API has announced that it will introduce another feature as part of the fully automatic check-in: a multi-sensor arm. It will allow the creation of three-dimensional lattice models displaying any damage to the vehicle.

By Yannick Polchow

ZF to buy TRW to form supplier with 30 billion euros in sales

Germany’s ZF Friedrichshafen is taking over TRW Automotive to form a new global supplier group that, with combined annual revenue of around 30 billion euros and 138,000 employ-ees, will be among the world’s five biggest automotive suppliers. The two companies have complementary strengths, with ZF occupying a leading position in driveline and chassis technologies and TRW specializing in active and passive safety systems and components.

“The transaction combines two highly successful companies that have remarkable track records of innovation and growth and solid financial positions,” ZF CEO Stefan Sommer said in a press release. ZF had to divest its half-share of a 4.1 billion-euro-a-year steering joint venture – ZF Lenksysteme (ZFLS) – to get around potential anti-trust objections. Its partner, Robert Bosch, is acquiring the stake, which will give it full control of a company that could play a key role in autonomous driving.

The new ZF Group will more than double its sales in two major growth markets, China and the US. It will also have a better geographical balance in its sales. Half of all revenue will henceforth come from Europe, while the other half will be generated in North America, Asia-Pacific and the rest of the world. The transaction is expected to close in the first half of 2015.

McAfee warns of phishing danger

Business computer users aren't particularly good at identifying data-security risks in e-mails or on Web sites, according to the latest quarterly McAfee Labs Threats Report. The security specialist, which is part of the Intel Group, found in its tests that 80 percent of participants failed to detect at least one of seven phishing emails. Phishing refers to digital attempts to get sensitive information from people through the use of fake Web sites. The study also showed that finance and HR departments, which hold particularly sensitive corporate data, performed the worst at detecting scams.

McAfee found that the total volume of phishing URLs keeps increasing and that the US continues to host more of them than any other country. "One of the great challenges we face today is upgrading the internet's core technologies to better suit the volume and sensitivity of traffic it now bears," said Vincent Weafer, senior vice president at McAfee.

McAfee employs more than 400 researchers across 30 countries to identify and analyze the complete range of cyber threats.

(Photo: ZF)

(Photo: Shutterstock)

News in brief ++++++++++++++++++++++++++++++++++++++

Executive Report 10/201416

AMSTERDAM – Digital radio is gradually making its way into the car across Europe, but automakers aren't convinced yet that the technology will become a core component of in-car infotainment systems. In a panel discussion on in-car digital broadcast radio at the IBC broadcast exhibition here, digital radio executives made a strong case for the technology. Digital radio offers better sound quality, wider choice and a broad range of possible extra features, said Patrick Hannon, president of WorldDMB, the glo-bal industry forum for digital radio. "The key is to have a highly-diversified quality offering with a stronger content proposition," he said.

Most major car brands offer DAB or DAB+, the European digital ra-dio standard, either as an option or as a basic radio feature. Accor-ding to WorldDMB, 63 percent of new cars sold in Norway and 55 percent in the UK come with DAB and DAB+. The two countries so far are among the most successful in pushing digital radio.

In the car industry, executives are hedging their bets, with many expecting internet radio and IP-delivered information in general to become the standard for in-car infotainment delivery in the future. "The internet potential is bigger," said one automaker executive who didn’t want to be identified. Also, in the views of auto-industry executives and most potential car buyers, digital radio isn't something that stands out as a coveted function avail-able in a new car. That's because it's, at best, seen as "improving on an existing feature," said Kevin Hamlin, an analyst at market researchers IHS. "It's not something that's new and exciting to the buyer."

According to a recent IHS survey, slightly more than 20 percent of respondents indicated that digital radio was a "must have" when buying a new car. By comparison, more than one-third said factory-installed navigation and smartphone connectivity fell into that category.

Europe's digital radio industry makes push into the car

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The auto industry – and car buyers - may be underapprecia-ting the potential of digital radio, broadcast executives say. For example, one of the benefits would be improvements in con-nected safety systems, a key automotive focus. Using the so- called TPEG (Transport Protocol Experts Group) specifications, digital radio can deliver more information faster and more re- liably than internet-based technologies, said Thomas Kusche, who is the president of TISA, the global association that deals with traveller information services. "We're talking about reliable coverage at low delivery costs," Kusche said in the panel dis-cussion. He cited in particular TPEG's improved ability to warn drivers of traffic incidents quickly and provide them with better visual information. TPEG would replace the widely used TMC technology, which relays traffic information using FM signals.

Ford Ennals, CEO of Digital Radio UK, said digital radio can address driver distraction, one of the major preoccupations of the global auto industry. "How do you keep it simple for motorists is a key is-sue," Ennals said. The complexity of radio menus, clear both in the home and in the car, could lead to a loss of listeners in the car, he warned. "The way radio is delivered needs to be simplified."

That issue was specifically addressed by Michael Hill, managing director of Radioplayer UK, whose stated goal is "to make radio listening easy on connected devices." Hill has developed a pro-totype automotive module that takes digital radio and traditional FM and combines them to show a user just one station list. In infotainment systems today, car brands force users to look for a specific radio category, such as DAB, FM, or internet radio. "We've

developed a multiplayer hybrid radio adaptor that hides all trans-mission complexity from the listener," Hill said.

Jacqueline Bierhorst, who runs the campaign to promote digital radio in the Netherlands, underscored how important the car is for the broadcast industry. She cited research that shows 19 per-cent of all radio listening takes place in the car.

The question of whether or not to have DAB in the car is likely to become more acute in coming years as more countries' official broadcasters move from FM to digital transmissions. Norway's of-ficial broadcasters will no longer transmit FM signals from 2017, leaving the spectrum to smaller, private players. Other countries are likely to follow suit, attracted by the broad options offered by the new technology and its lower transmission costs.

Broadcasters at the WorldDMB panel discussion agreed that 3G and 4G mobile coverage today remains too unreliable for high-quality connected services in the car. That opens the car door for digital radio. Several European countries, including the UK, Ger-many, the Netherlands, Norway and Switzerland, have nearly full DAB coverage, which they achieved in only a few years. In other markets, digital radio coverage is expected to grow sharply as governments officially endorse the new standard. The European Broadcast Union is calling for pan-European adoption of the tech-nology and the inclusion of digital receivers in all radios.

By Arjen BongardPhotos: WorldDMB

Italy

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Executive Report 10/201418

20 Mission · IT im Fahrzeug

02 · 2014

Mit dem Betriebssystem legt sich der Anwender auf ein Ökosystem von Tools und Middleware, auf ein Lizenzmodell und eine Anwendungswelt fest. Das gilt für die Software in der kommerziellen IT ebenso wie im Auto.

Schnelle Zyklen

QNX Zu den wichtigsten Unterstützern von QNX zählen Daimler und Audi – die Ingolstädter beispielsweise haben QNX erst jüngst eine tragende Rolle im „Virtual Cockpit“ ihres brandneuen Sportcoupés Audi TT anvertraut

With an operating system, the user is tied to an ecosystem of tools and middleware, to a licensing model and a world of applications. That applies to software in commercial IT as well as in the vehicle. But the automotive software revolution is a rela-tively new development. Now, automakers need to decide what they want and need. That includes decisions on what platforms to deploy, which partners to select and how proprietary they want their offerings to be.

Of course, the technical requirements for software in a vehicle are different from those for software on a company server. In the car, the software must be failproof; it must react to a demand wi-thin milliseconds, or even microseconds. And, where required for the safety of the vehicle and its occupants, it must be developed, tested and approved in accordance with the strict regulations of ISO 26 262.

And then there is the fact that the available storage space in the car's control units is subject to much tighter limits. As a result, the program code must be much more efficient than codes that normally hold sway on company servers and workplace compu-ters. And that is an important consideration: After being switched on, the software environment must be available in a moment. The long booting-up processes common in office environments are unthinkable in a vehicle.

The software landscape in the car is segmented. For starters, there are the system-critical environments: powertrain, body and chassis. This field is to some degree the domain of Autosar system software. The earmarks of this landscape are static task configura-tions and interactive relationships. Uncoupled operating systems are not found here; software environments prevail that are jointly defined by the auto industry and its most important suppliers.

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The trend in head units and expanded infotainment is much more dynamic. Camera-based assistance systems play into this area as well. This is the battle zone – the field where consumer-electro-nics and conventional car technology meet. The consumer indus-try with its fast design cycles and its fashionable trends runs into the somewhat sedate yet solid, traditional automotive technolo-gy, with potential consequences for the automotive and IT power structure.

Long-term commitment

To some degree, operating systems are given the role of the mother ship that conveys the troops – the apps and services – into the battle zone. "The determination of an operating system is a very important decision for an automaker. It implies a long-term commitment," said Juergen Reiner, partner and automotive expert at consulting firm Oliver Wyman. People in the auto indus-try agree. "As a matter of principle, the decision on an operating system is always strategically motivated," confirms Simon Fuerst, department manager for software architecture and platform soft-ware at BMW. "The selection of an operating system is the heart of the platform strategy."

The top dog in this area is QNX and its namesake operating sys-tem. A few years ago, the market share of the Canadian firm's software was a bit over 50 percent. The Posix-capable real-time operating system was explicitly developed for mission-critical use in companies, in particular in the aviation and auto industries. It is considered extremely secure, lean and configurable to the greatest possible extent. QNX has been employed in many areas of the vehicle. The applications range from driver assistance systems to infotainment.

Whither Microsoft?

Daimler and Audi are among its most important fans. Audi just entrusted QNX a leading role in the "virtual cockpit" of its brand-new Audi TT sport coupe. At most manufacturers, QNX basically runs on one of the control units. If the system's market share has eroded somewhat recently, the decline is not due to the software's technical attributes, but rather to QNX's corporate parent, Black-Berry. The auto industry views BlackBerry as a dubious player; its future is not considered rock-solid. BlackBerry’s main market is smartphones with encrypted communication. In this field, major players such as Google with its Android and Apple with iOS are pushing smaller companies aside more and more brusquely.

If you are looking for familiar names from commercial IT in the software landscape beneath the hood or behind the instrument panel, you have to look a bit more deeply. According to the ex-perts, Microsoft, for example, has never achieved a market share of more than 10-to-15 percent. If Microsoft has been able to land a spot in vehicles, it has been incognito: The Microsoft operating

system, Windows Automotive, a special assembly of middleware components based on Windows CE, has definitely made inroads into the auto sector. But it does not have its own user interface and thus cannot be identified at first glance.

For example, a Microsoft heart beats in Fiat’s Blue & Me head units and at Ford, where it is installed in Sync systems. Introduced in 2007, Sync is no longer considered entirely up-to-date, nor are others of its species. No one was surprised when the news made the rounds that Ford wanted to uncouple itself from the aging software and make a fresh start with another operating system. Meanwhile, Ford denied that it planned a divorce, but the denial was so halfhearted that it can almost be seen as confirmation.

At its "Build" developer conference, Microsoft recently presented a further development of its vehicle operating system. For the first time, it anchors its own user interface featuring its characteristic tiles in the infotainment screen. It would offer some up-to-date features such as access to music, calendar and telephone from a smartphone and a voice control system. But the software did not actually do this during the demonstration. It did something that Microsoft users in the workplace know well: It crashed.

It is still not clear whether Microsoft would like to first iron out this bug or adhere to its standard routine and send the software to customers as it is and hope it will reach the required maturity at the customer’s end over a period of time. The giant from Redmond is currently in its quiet mode. When asked, the company declined to explain its strategy for the automotive environment. That's why it remains unclear whether Microsoft even has a strategy for the market.

The Linux lead

Meanwhile, more agile players are dividing up the pie among themselves. Linux is leading the pack. The operating system reaches a car via a number of gateways. One of them is Google with its Android system. This operating system in fact (still) does not function inside the car; it works on the users’ smartphone. But it will soon find its home in cars through the use of MirrorLink

"The selection of an operating system is the heart of the

platform strategy"

Simon Fuerst, BMW software architect

Executive Report 10/201420

22 Mission · IT im Fahrzeug

02 · 2014

traut ist: Sie stürzte ab. Ob Microsoft diesen Bug erst ausbü-geln möchte oder ob das Unternehmen in gewohnter Bananen-Strategie die Software, so wie sie ist, an die Kunden ausliefern wird und darauf hofft, dass sie beim Kunden mit der Zeit schon den nötigen Reifegrad erreichen wird, bleibt unklar: Der Riese aus Redmond ist gegenwärtig im Schweigemodus. Auf Anfrage lehnte es das Unternehmen ab, seine Strategie für das automo-bile Umfeld zu erläutern. Unklar bleibt deswegen immer noch, ob Microsoft überhaupt eine Strategie für den Automobilmarkt hat – immerhin einer der am schnellsten wachsenden Märkte in der gesamten Welt der Software.

Unterdessen verteilen agilere Player den Kuchen unter sich. Ganz vorn dabei: Linux. Das Betriebssystem kommt über meh-rere Einfallstore unter das Blechle. Da ist einmal Google mit Android – dieses Betriebssystem läuft zwar (noch) nicht direkt im Auto, sondern auf den Smartphones der Benutzer und hat damit, über die MirrorLink-Verbindungstechnik, schon bald seinen festen Platz im Armaturenbrett. Zudem entwickelt Audi mit Google zusammen eine Systemsoftware für das Auto. „Die Zusammenarbeit mit Google – und auch Apple – eröffnet uns neue Möglichkeiten in der Vernetzung des Autos mit dem Inter-net“, tönt es aus der Audi-Zentrale in Ingolstadt. Und vor allem gibt es die Genivi-Allianz, die unter Führung von BMW und Ge-neral Motors einen Standard für Infotainment-Betriebssysteme auf Linux-Basis erarbeitet. Auch Daimler sieht sich in der Linux-Welt intensiv um. „Wir haben auch Vergleiche zwischen den verschiedenen Varianten einschließlich Android angestellt“, erklärt Guenter Metsch, bei dem Autobauer für Telematikarchi-tekturen und System Engineering zuständig. „Bei Linux sehen wir größere Flexibilität. Mit seinen vielen applikativen Umfän-gen ist Android mehr als ein Betriebssystem.“ Auch bei Genivi sieht der Experte genau hin. „Wir sind dort kein Mitglied – aber

das muss nicht so bleiben“, deutet Metsch an. Weil Genivi in erster Linie ein Gerüst von Definitionen ist, das nur an einigen Stellen mit realer Software ausgefüllt ist, bietet es dem Autoher-steller eine wichtige Möglichkeit: sich zu differenzieren. Denn, so viel zeichnet sich bei der Diskussion um Systemsoftware und Middleware im Auto ab: An Open Source kommen mittlerwei-le auch die Fahrzeughersteller nicht vorbei. Im Gegenteil, der Community-Gedanke und der damit verbundene Reifegrad der Software kommt den Herstellern sehr entgegen. Gleichzeitig ist die Wiederverwendbarkeit von Softwarefunktionen ein wich-tiges Argument bei der Wirtschaftlichkeitsabwägung der Ent-wicklungsaktivitäten: Warum das Rad neu erfinden, wenn in vielen Fällen bereits eine ausgereifte Software zur Verfügung steht? Und man muss ja nicht alles, was in diesem Zusammen-hang im eigenen Haus entwickelt wurde, wieder in die Open-Source-Community zurückspeisen. „BMW ist schon heute sehr umfangreich im Bereich Open Software unterwegs“, erläutert Softwaremanager Fürst. „Manches, was wir entwickeln, stellen wir auch der Community zur Verfügung. Ausgenommen sind Elemente, die uns eine Differenzierung erlauben, also vor allem Bestandteile der HMI, der Mensch-Maschine-Schnittstelle.“ Sehr ähnlich sieht das auch sein Gegenpart bei Daimler. „Das HMI ist das Differenzierungsmerkmal schlechthin“, sagt Guen-ter Metsch. „Das geben wir nicht aus der Hand.“ Open Software dürfte aber auch für Daimler weiter an Relevanz gewinnen. Das deckt sich mit den Beobachtungen und Erwartungen unabhän-giger Analysten. Auch Juergen Reiner von Oliver Wyman sieht die Linux-Flotte auf dem Weg in die Automärkte – und dabei ist er nicht der einzige Experte. In sieben bis zehn Jahren, so Reiner, werde Linux wohl endgültig die dominierende System-software im Fahrzeug sein.

Autor: Christoph Hammerschmidt

„Das HMI ist das Differenzierungsmerkmal schlechthin“, sagt Guenter Metsch, Softwaremanager bei Daimler

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connectivity technology. Audi is also working with Google to develop a software system for vehicles. "Our cooperation with Google – and Apple as well – is opening up new opportunities for networking vehicles with the internet,” said a source at Audi’s headquarters in Ingolstadt.

Above all, there is the Genivi alliance, which is developing a Linux-based standard for infotainment operating systems under the leadership of BMW and General Motors. Daimler is taking a good look at the Linux world as well. "We have done comparisons between the different variations, including Android," said Guen-ter Metsch, who is responsible for telematics architectures and system engineering at the automaker. "We see greater flexibility with Linux,” he said. “And with its many ranges of application, An-droid is more than an operating system.”

The expert is also looking closely at Genivi. “We are not a mem-ber – but that could change.” As Genivi is first and foremost a framework of definitions that is only filled with real software at a few locations, it offers the automaker a crucial opportunity to differentiate itself. That's because so much is on the horizon for software and middleware. Meanwhile, Genivi's community thin-king and stage of maturity suit automakers quite well. At the same time, the reusability of software functions is a strong argument as

they consider the cost-effectiveness of their development activi-ties. Why reinvent the wheel if there is already tried and tested software available in many cases?

And here companies really do not have to feed all their develop-ments back into the open source community if they originated them in-house. "BMW is already underway very broadly in the open software area,” Fuerst explained. "We make a number of things that we develop available to the community,” he said. “The exceptions are elements that allow us to differentiate ourselves, that is, mainly components of our HMI, the human-machine in-terface." Fuerst's counterpart at Daimler sees the issue quite simi-larly. “The HMI is a differentiating characteristic par excellence,” Metsch said. "We don't give that away."

Open software will likely become increasingly relevant for Daimler. That matches what independent analysts are expecting. Reiner of Oliver Wyman sees the Linux fleet heading into the automotive market, and he is not alone. In seven to 10 years, Reiner says, Linux will likely end up the dominant system soft-ware in vehicles.

By Christoph Hammerschmidt

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A perfect example of resistance to changeIn cities all over the world an ugly war is being fought by “tradi-

tional” taxi companies against a new form of competition from Uber

and other ride-sharing services. These newcomers offer customers

the ability to use a mobile application to find and reserve vehicles

in their immediate area in minutes. From Los Angeles to Sydney

and Singapore, the services are shaking up the taxi business. But

they are being met with heavy resistance by the taxi industry.

Such opposition is a futile attempt to put the brakes on innova-tion. Fortune magazine’s lists compiling the 100 biggest compa-nies from 1900 until today yield only one company that is still in the same business: Ford. Fifteen others still exist but their ac-tivities have evolved drastically. All the rest are gone. The ones that have disappeared were leaders in their markets and had three things in common with today’s taxi drivers:

1. They were prisoners of a system. The world may be changing too fast for the traditional taxi industry, which has launched a crusade to defend its interests and prevent reform of an outdated, often monopolistic and over-regulated system. Tra-ditional taxi drivers are complaining about Uber’s “illegal” activities, saying their drivers don’t have official permits and can’t charge by the kilometer as they don’t have meters. This is a perfect example of industry players being prisoners of an old way of thinking and entrenched in the defence of an aging system.

2. They were stuck in denial. Long waits, rude drivers, uncom-fortable vehicles, and lack of route transparency are just some of the shortcomings of traditional taxis. And that's ex-actly why the new car-sharing services are prospering. Uber founder Travis Kalanick, 37, has said that the idea for his company was born in Paris when he couldn’t find a cab, an experience that seems all too typical. Until now taxi compa-nies seem to be ignoring the simple solutions that customers want. And government policy makers in key countries such as Germany and France seem to be supporting taxi companies’ resistance to change. That's a mistake. Legislation should protect consumers and not industries in decline. Following protests by taxi drivers in London in June, Uber registered an 850% increase in new users. This is proof that yesterday’s keys to success won’t be the same tomorrow.

3. They weren't innovating. Uber isn't successful just because its prices are lower than those of normal taxis. It is succeed-

ing because it is responding to customers’ needs and offer-ing a unique and innovative experience. While taxi com-panies are on the defensive, Uber continues to innovate. It recently announced that it will soon offer trips in helicopters. Investors took notice; they value the five-year-old company at around 17 billion dollars.

Taxi companies are coming up with strategies to continue busi-ness as usual. Some have recently introduced electronic pay-ment solutions, but like many businesses in other sectors, such responses to new challenges are coming too slowly. Success is not guaranteed by a historic position in an industry. It is com-fortable and reassuring in the short term, but dangerous in the long term. If taxi companies refuse to innovate, they will quickly fall behind.

By Cyril Bouguet and Chloe Renault

Cyril Bouguet is professor of strategy at the IMD business school in Lausanne. His major interest is the interface between organizational psychology, strategy and leadership.

Chloe Renault is an IMD researcher, facilitator and graphic recorder working on innovation and organizational transformations.

Executive Report 10/201422

Das vernetzte Auto nimmt weltweit zügig Fahrt auf – und mit ihm die vielfältigen Systeme für die Kommunikation von Fahrzeug zu Fahrzeug (V2V) und Fahrzeug zu Infrastruktur (V2I). Eine aktuelle Studie von Frost and Sullivan rechnet damit, dass 2030 mehr als 40 Prozent der Fahrzeuge mit V2V-Technologien ausgerüstet sein werden.

Schlüsselkomponente

10 Strategie · V2X

02 · 2014

Foto

: BM

W

ECO PPRO

DynamicChargingStationInformation

BMW i ConnectedDrive Services

Mercedes-Benz Live Traffic: Real-time traffic information

DynamicRange Map

RangeAssisstant

ECO ProRoute

DynamicParkingInformation

Intermodality TrafficInformation

BMW i Remote:Mobility

BMW i Remote:Efficiency

BMW i Remote:Status & Control

Navigation systems Sensors and cameras

Mobile phones

Construction site data

The networked car is picking up speed worldwide – accompanied by multifaceted systems for car-to-car and car-to-infrastructure communication. A recent study by Frost and Sullivan forecasts that more than 40 percent of vehicles will be equipped with car-to-car technology in 2030.

In Germany, according to a random survey by the IT industry association Bitkom, 37 percent of all people can imagine them-selves driving an autonomous vehicle in the future – even though the suitable technologies are still in the experimental stage. The reasons are obvious: The systems can benefit and improve trans-portation efficiency, mobility and driving conditions. According to the Frost and Sullivan study, “Strategic Analysis of the Euro-pean Market for car-to-car and car-to-infrastructure Communi-cation Systems,” the latter systems will get a good response in the Netherlands, Denmark, Austria, Germany and France. “The various countries in Europe are looking for ways to minimize the enormous waste of time and money associated with traffic disrup-

tions,” the analysts say. In Germany alone, traffic jams are estima-ted to cost more than 17 billion euros a year.

Matthias Wissmann, president of the German Auto Industry As-sociation (VDA), had a similar message at the carIT Congress in 2013. He sees German automakers playing a key role in network-ing. And he prefers a fully integrated German car to an “ano-nymous Google vehicle,“ he said. “Networking the vehicle not only offers the driver greater comfort but improves driving safety as well," Wissmann said. "With a full-scale penetration of car-to-x functions, more than 11 billion euros in economic costs could be saved each year.”

The US consulting firm IHS Automotive forecasts 50 million autonomous cars globally and a new vehicle share of nearly 30 percent by 2035. By 2025, cars of this type are expected to be available for a surcharge of up to 10,000 dollars. After 2050, the market researchers predict, virtually all vehicles will be driving

Multiple connections

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MW

23www.automotiveIT.com

themselves autonomously, and the number of accidents and traffic jams will approach zero.

Connectivity leaders

BMW, General Motors, Ford, Audi and Chrysler now have the lead in the connectivity rankings, according to a study by the London firm Machina Research. But among the automakers, analyst Neelan Barua of Frost and Sullivan expects Daimler and Volvo to be in the forefront of car-to-car communication in Europe. “With its Intelligent Drive strategy, Mercedes-Benz is well positioned to bring Car-to-X technology onto the road this year, which will ena-ble the exchange of information between individual vehicles as well as between vehicles and the transportation infrastructure,” Barua said.

The Stuttgart-based automaker would also like to join the recent-ly-launched Open Automotive Alliance. “It is totally clear that we have to position ourselves flexibly. We don’t want to focus solely on Apple’s iOS,” said Thomas Weber, Daimler's head of research and development. Volvo wants to make new and sophisticated connectivity features a major reason to buy its new models. The key drivers are expected to be models such as the XC90, which will be on the market later this year, and a completely new approach to HMI. In Volvo’s case, Ericsson built a back-end architecture for networked vehicles using a multiservice delivery platform. Tho-mas Mueller, vice president for E/E systems at Volvo, believes this will lead to new market opportunities. “We can sell apps and ser-vices using this platform,” he said. In the future, “Volvo on Call,” originally developed as an emergency call and security system, is expected to make the car reachable at any time inside the new vehicle and electronic architectures – whether from the couch or from a café.

Car-to-infrastructure

Next to car-to-car, car-to-infrastructure is the key component for automated driving. A so-called cooperative system is the essential base technology. It uses wireless local networks such as a WLAN or dedicated short-range communication (DSRC) to support various kinds of communications to and from the vehicle. In the process, global navigation satellite systems (GNSS) and infrared modes are likely be able to expand DSRC and mo-bile wireless solutions such as LTE. In this way, future plat-forms can be built for cooperative intelligent transportation systems (C-ITS). Said Frost & Sullivan's Barua: “In the next two to three years, substantial growth in the market for C-ITS will likely be stimulated by market-ready car-to-X communi-cation products that are already available at Tier I suppliers." Other drivers are likely to be a range of new products with embedded car-to-X technology that automakers are introducing and the strong continued support from European governments.

By 2015, 15 automakers and 10 Tier 1 suppliers will likely have car-to-X applications ready to go. But automakers worry that the necessary infrastructure may be lagging behind the systems they are developing. “When you are dealing with connectivity, the infrastructure is the biggest construction job,” Daimler's Weber said. “My dream is to quickly bring a high-performance LTE net-work into operation, and we are definitely supporting this effort.”

DSRC will play a crucial role in bringing about the fully connected car. Frost & Sullivan's Barua said startup companies such as Auto-talks, Savari Networks and Cohda Wireless are already successful in building DSRC-based devices for car-to-x communication that work both in Europe and the US. “DSRC seems to be the most-preferred and protected wireless technology for vehicle commu-nication with infrastructure," Barua said. "Satellites represent a potential option for communication with vehicles in remote areas." Among the manufacturers of communication systems, the Frost & Sullivan analyst sees NEC Labs Europe and Kapsch TrafficCom as important players.

Reliability issues

Reliability is a crucial technical issue in wireless connections. According to the Fraunhofer Heinrich Hertz Institute in Berlin, reliability is directly related to the propagation characteristics of the underlying wireless channels. That means that data can be lost during the transmission at increasing speeds as the wireless channel in car-to-car communication is dynamic. The Fraunhofer scientists are working on a true-to-life simulation of dynamic wireless channels with their HHI channel sounder and channel emulator software. The goal is to be able to design future commu-nication systems in adapted form and, what is more, have them seen as a good value. The high resolution measurement data from often complicated “real” traffic situations are entered into the real-time simulations. Highly precise position determinations and 360-degree video recordings accompany the wireless chan-nel measurements. At the same time, the researchers test the mo-dules of various manufacturers. Barua says “the local government plays an important role in regulating the services.”

The two European standardization organizations, ETSI and CEN, have confirmed that the base set of standards required by the Eu-ropean Commission has been completely met, allowing the net-worked car to become a reality. The agreed-upon standards en-sure that vehicles from different manufacturers can communicate with one another. “The EU has invested more than 180 million eu-ros in research projects on cooperative transportation systems,” Frost & Sullivan's Barua said. “This will move the European auto industry and its 13 million jobs forward, so it can develop the next generation of cars."

By Julian Sommer

Executive Report 10/201424

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The new-car market may be declining and Chinese carma-kers' share of it slipping, but Russia remains one of the top priorities for the Chinese automotive industry. Chinese brands are extensively expanding into the Russian market and many also have plans to increase or start local production there. In the first half of 2014, four Chinese automakers started selling cars in Russia: Brilliance, Changan, Dongfeng and JAC. And three more - Great Wall subsidiary Haval, Hawtai and BYD – have announced plans to come to Russia. For BYD, this marks a return to the market. The expansion plans come as the Russian market declined 9 percent in the first half of 2014. Chinese car sales fell by 15 percent during the period and, as a result, their market share slipped to 3.4 percent from 3.7 percent. There are several re-asons Chinese brands are keen on Russia. They see a market that in a good year can have sales of between 3 million and 3.5 million new cars. They're also aware that it's easier to enter new growth markets such as Russia than to go up against esta- blished competitors in more mature car markets. And they are attracted by Russian buying interest in low-cost cars, a segment where Chinese brands offer competitive products.

Up-to-date lineup Chinese carmakers will need an up-to-date model lineup to be successful in Russia. They also will have to expand their dealer networks and build more cars locally. And they will need to have more brands to grow their overall market share. Today, there are 10 Chinese brands actively operating in the Russian market. Geely, Chery, Lifan and Great Wall clearly dominate the segment: together they accounted for more than 90 percent of Chinese car sales in Russia in the first half of 2014. That percentage was unchanged from 2013.

There are two kinds of Chinese carmakers active in Russia. On the one hand there are those like Chery who entered the market relatively early and now have a wide model range that includes different-size sedans and hatchbacks. And there are brands such as Changan and Brilliance that came to Russia later during the SUV sales boom and offer just two or three models. Recently, several Chinese brands – notably Chery, Lifan and Great Wall - have announced plans to start pro-duction in Russia. Domestic car production allows Chinese brands to participate in public procurement and local pro-ducer support programs. Lifan, Geely, JAC, Brilliance and Luxgen already have been building cars in Russia since the mid 2000s. Most of that production takes place at the Der-ways plant in Karachay-Cherkessia in southern Russia.

Chery wants to start car production at Derways with an ini-tial capacity of 12,000 cars a year. That could be increased to 36,000 at a later date. Chery is considering setting up an R&D center in Russia for joint development projects with Derways. Lifan, whose cars are also assembled at Derways, plans to invest up to 300 million dollars to build its own pro-duction facilities in Russia. The projected capacity is 60,000 car a year with the possibility to expand up to 100,000 cars.

Manufacturing plans

Great Wall has already started construction of its own pro-duction facilities in the Tula region about 200 km south of Moscow. The company is planning to complete construction in 2017. The projected capacity is up to 150,000 cars a year. Great Wall cars will also be produced at the “IRITO” plant in the Lipetsk region about 500km south of Moscow. The projected capacity there is 30,000 cars a year. FAW subsidi-ary Haima also announced its intention to set up production in Russia. By the end of 2014 the company is planning to choose the construction site for its assembly plant. Haima is going to start with SKD assembly and increase localiza-tion level with time. Derways used to assemble Haima, but in 2012 the companies stopped their cooperation and Haima started importing its cars to Russia.

Source: Russian Automotive Market Research

Russian Insight

Falling sales

Russian Automotive Market Researchwww.napinfo.ru · [email protected] +7 831 439 21 82

Chinese bet on Russian market

Brand First half 2014 First half 2013 % change

GEELY 9,594 11,300 -15.1%

CHERY 9,056 9,216 -1.7%

LIFAN 8,946 9,306 -3.9%

GREAT WALL 7,130 10,267 -30.6%

VORTEX 1,443

FAW 732 953 -23.2%

BYD - 395

CHANGAN 436 -

HAIMA 322 103 212.6%

BRILLIANCE 139 -

JAC 122 -

Other Chinese brands 250 206 21.4%

Chinese brands: total 36,727 43,189 -15.0%

Sales of Chinese cars in Russia fell 15% in the first half, outpacing the overall market, which dropped 9%

A man who stops advertising

to save money is like a man

who stops a clock to save time.

Henry Ford

Executive Report: This is Volume 3, Issue 5, of the automotiveIT Executive Report. It features exclusive interviews, news stories and

analyses covering the top issues facing IT decision makers in the global automotive industry. Subscribers receive the Executive Report either in print or

in PDF format via e-mail 12 times a year. The next issue will be published in late May. Make sure you receive the automotiveIT Executive Report and

place an order online at www.automotiveit.com/executive-report

Car-to-X [P 8]

European standards

will make it easier

to connect cars

· · · · · · · · · · ·

· · · · ·

Diagnostics [P 10]

Aftermarket sees

new opportunities in

remote diagnostics

· · · · · · · · · · ·

· · · · ·

Formula 1 [P 12]

Data transmissions

are even faster than

Formula 1 race cars

· · · · · · · · · · ·

· · · · ·

Manufacturing [P 16]

Fraunhofer technology

mimics human senses

for process improvement

· · · · · · · · · · ·

Tops & Flops [P 18]

CIOs prioritize

some issues and

downgrade others

· · · · · · · · · · ·

· · · · ·

BMW in the lead [P 21]

German carmaker

tops ranking of

connected cars

· · · · · · · · · · ·

· · · · ·

Smart City [P 22]

Four big projects

provide insights into

future urban mobility

· · · · · · · · · · ·

· · · · ·

Bosch's reality [P 24]

Bosch, Reflekt

develop IT platform

for augmented reality

· · · · · · · · · · ·

· · · · ·

Rodos [P 25]

Driving simulator

tries to get handle

on human behavior

international

Executive Report – May 2014

Interview with

Daimler CIO

Michael Gorriz[P 4]

Executive Report: This is Volume 3, Issue 5, of the automotiveIT Executive Report. It features exclusive interviews, news stories and

analyses covering the top issues facing IT decision makers in the global automotive industry. Subscribers receive the Executive Report either in print or

in PDF format via e-mail 12 times a year. The next issue will be published in late May. Make sure you receive the automotiveIT Executive Report and

place an order online at www.automotiveit.com/executive-report

Car-to-X [P 8]

European standards

will make it easier

to connect cars

· · · · · · · · · · · · · · · ·

Diagnostics [P 10]

Aftermarket sees

new opportunities in

remote diagnostics

· · · · · · · · · · · · · · · ·

Formula 1 [P 12]

Data transmissions

are even faster than

Formula 1 race cars

· · · · · · · · · · · · · · · ·

Manufacturing [P 16]

Fraunhofer technology

mimics human senses

for process improvement

· · · · · · · · · · ·

Tops & Flops [P 18]

CIOs prioritize

some issues and

downgrade others

· · · · · · · · · · · · · · · ·

BMW in the lead [P 21]

German carmaker

tops ranking of

connected cars

· · · · · · · · · · · · · · · ·

Smart City [P 22]

Four big projects

provide insights into

future urban mobility

· · · · · · · · · · · · · · · ·

Bosch's reality [P 24]

Bosch, Reflekt

develop IT platform

for augmented reality

· · · · · · · · · · · · · · · ·

Rodos [P 25]

Driving simulator

tries to get handle

on human behavior

international

Executive Report – May 2014

Interview with

Daimler CIO

Michael Gorriz[P 4]

Executive Report: This is Volume 3, Issue 5, of the automotiveIT Executive Report. It features exclusive interviews, news stories and analyses covering the top issues facing IT decision makers in the global automotive industry. Subscribers receive the Executive Report either in print or in PDF format via e-mail 12 times a year. The next issue will be published in late May. Make sure you receive the automotiveIT Executive Report and place an order online at www.automotiveit.com/executive-report

Car-to-X [P 8]European standardswill make it easier to connect cars· · · · · · · · · · · · · · · · Diagnostics [P 10]Aftermarket sees new opportunities inremote diagnostics· · · · · · · · · · · · · · · · Formula 1 [P 12]Data transmissionsare even faster thanFormula 1 race cars· · · · · · · · · · · · · · · · Manufacturing [P 16]Fraunhofer technologymimics human sensesfor process improvement · · · · · · · · · · · Tops & Flops [P 18]CIOs prioritize some issues anddowngrade others· · · · · · · · · · · · · · · · BMW in the lead [P 21]German carmaker tops ranking of connected cars· · · · · · · · · · · · · · · · Smart City [P 22]Four big projects provide insights into future urban mobility· · · · · · · · · · · · · · · · Bosch's reality [P 24]Bosch, Reflektdevelop IT platform for augmented reality· · · · · · · · · · · · · · · · Rodos [P 25]Driving simulatortries to get handle on human behavior

internationalExecutive Report – May 2014

Interview with Daimler CIO

Michael Gorriz[P 4]

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Audi, BMW and Mercedes-Benz are competing for primacy in the premium segment of the global auto industry. A key requirement for each of the German luxury brands is to have state-of-the-art technology in their newest models. Audi's marketing slogan "Vorsprung durch Technik" literally translates as "Staying ahead through technology." Ulrich Hackenberg, Audi's veteran R&D boss, rejoined VW's premium brand in July 2013 after six years as the head of R&D of the entire Volkswagen Group. His mission: To make sure Audi stays ahead of the competion in all technology areas.

In an interview with automotiveIT, Hackenberg discusses how Audi will reduce the growing complexity inside the car, its con-nected-car strategy and the practical implementations of new technologies that will enter future Audi models.

Hackenberg says the founding early in the year of the Open Auto-motive Alliance, whose goal is to make it easier to integrate An-droid devices in the car, will speed up development overall. "Con-sumer- and automotive technologies are coming closer together than ever before through this cooperation," he said.

The Audi R&D chief also cites "significant progress" in making voice recognition systems in the car work better. And he says there may be a role for augmented reality in future models. But the company is treading carefully with technologies that have relatively high distraction potential. Says Hackenberg: "We won't be playing electronic games at Audi just because we can."

In the next automotiveIT Executive Report:

An interview with Ulrich Hackenberg, head of R&D, Audi

Read more stories and other exclusive news features in thenext issue of the automotiveIT Executive Report

Click here to order a one-year subscription!

14 Strategie · Interview

03 · 2014

»Elektronikspielereien wird es nicht geben«

Ulrich Hackenberg will Kritiker, die bei Audi den „Vorsprung durch Technik“ vermissen, mit neuen Technologien überzeugen. Zudem fordert der Entwicklungsvorstand ein Bündel an Maßnahmen, um die zunehmende Komplexität in der Bedienung zu reduzieren sowie einen höchstmöglichen Schutz gegen Hackerangriffe zu realisieren.

Phot

o: C

laus

Dic

k

• Tesla opens its book of patents, but is anyone using them?

• Opinions differ on who owns the connected-car data

• An interview with ThyssenKrupp CIO Klaus-Hardy Muehleck

• Reports from the annual Dreamforce convention in San Francisco

• News from the Paris auto show

• Full coverage of the Hanover Connected Car Congress

Other stories in the November issue:

JULY 2N D | 2015 | PAR IS | FR ANCE


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