AUTOMAKERS BECOME SOFTWARE COMPANIESAs the smartphone market continues to expandand initiatives like smart electric grids continue topick up steam, another industry has begun getting"smarter" with software and apps: the automo-bile industry. Ford, BMW;and other automobilecompanies are enhancing their vehicles with on-board software that improves the customer experi-ence, and the auto industry is working on technologythat will allow cars to be managed via the cloud.

Automakers are finding that software is a way ofadding more "value" and freshness to their prad-ucts without having to invest so heavily in newvehicle production. It takes Ford Motor Company,for example, about two and one-half years to plan,design, and build a new caroDesign and productiori,including metal stamping equipment and assemblyline setup, must be finalized long before the carrolls off the line. But the auto makers can createa new software interface for a car within monthsand update it again and again over the life of thecar without much lead time. This enables Ford andother automakers to significantly improve the pas-senger experience and add new features to carsyears after they are built.

Ford is perhaps the automaker doing the mostto innovate with software and apps. Its MyFordTouch interface is an in-dash touch screen avail-able for select vehicles with controls for navigation,music, phone integration, and temperature. Fordhas upgraded this interface and the Sync softwarebehind the interface, adding tablet and smartphoneintegration and better voice response. In 2010,Fordadded support for the online music streaming ser-vice Pandora, which is very popular among youngpotential buyers. This update enables drivers toconnect their tablets and smartphones to the Syncsystem to access music and other apps using voicecommands.

Chairman Bill Ford Jr. has championed theuse of software to alleviate urban congestionby investing in technology that responds to theproblems created by traffic in the biggest cities.Theoretically, technology might help cars to avoidtraffic jarns, to reserve parking spaces in advance,and possibly to even drive themselves.

Tomanage vehicles in this way, cars need to beconnected to some kind of central system, whichwould coordinate with public transit and other

transportation methods, and to do this, cars needto be equipped with software that can monitor andenhance vehicle function at the most basic levels.The eventual system would require that cars feedincreasing amounts of information to systemswhose purpose would be to minimize highway con-gestion. The system would also require an industrystandard, which does not exist as of yet. Ford hasdoubled its investment in vehicle-to-vehicle com-munication technologies and BMWis also continu-ing to develop ways for vehicles to communicatewith one another on the road to avoid collisions.

With the inclusion of software in their cars,automakers are entering uncharted territory. Theymust now devote resources to updating and testingtheir software, as well as establishing ways topravide the updated software to their customers.Car companies need to coordinate their car devel-opment cycles more closely with their softwaredevelopment cycles. Also, many of the technolo-gies included in automobile software packages raisethe same privacy concerns surrounding locationtracking that have often plagued smartphone man-ufacturers and app developers.

Ford is grappling with the best way to roll outsoftware upgrades to its customers. The companyhas been mailing USBsticks to 250,000 customerswhose cars have an advanced touch screencontrol panel running the MyFord Tbuch interface.The stick contains a software upgrade that willimprove navigation controls, the music and phonefeatures, as well as the ability to control car tem-perature. The upgrade also contains code that willupgrade system speed and imprave the interfacebased on common criticisms from Ford owners.

A1though Ford says it plans to continue issuingsoftware upgrades this way, the company hopesthat customers will get into the habit of check-ing the Ford Web site for software upgrades ontheir own. Though most car owners are used tothe technology in their cars remaining constantthroughout the life of the car, newer cars are poisedto change all of that.

Ford has hired "human-machine interface engi-neers," whose job is to analyze how their customersinteract with the software in their cars. Often, theseengineers use customer feedback to make changesto the software. Customers complained that too

much information was available on each screen ofthe interface, so Ford moved the most commonlyused features to more prominentpositions on screen and increased their font size,relegating the rest to submenus. Feedback has beenpositive. Ford has also asked dealers to dedicatemore time and personnel to hands-on technologytraining to help customers master its interface.

GM,Daimler, and other companies are alldeveloping new features for their cars that operateonline in the cloud. Users will be able to remotelytrack their cars (you'll never forget where youparked again) and diagnose problems with the car,like low tire pressure or the need for an oil change.Corporations will be able to track employee useof company cars by interpreting car sensors andengine readouts. Manufacturers will be able toaggregate and analyze the data from custorners'cars to identify quality problems and, if neces-sary, quickly issue recalls. Just as with apps, thepossibilities are limited only by the imagination ofautomakers.

GMwill allow its app developers to accessits computer systems to improve app function,which raises a familiar set of privacy concerns.Auto analysts believe that automakers will makemistakes as they learn how to properly handle

CASE STUDV QUESTIONS

1. How is software adding value to autornakers'praducts?

2. How are the automakers benefiting framsoftware-enhanced cars? How are customersbenefiting?

Chapter 3 Information Systems, Organizations, and Strategy 135

sensitive customer data and to provide robustprivacy options. On the other hand, automak-ers are hoping that younger customers who havegrown up using Facebook are less likely to careabout privacy, and features that collect highlytargeted information about a car's location anddriving habits.

BMWis also investing a whopping $100millionin mobile apps, hoping to market them to theircustomers as "prernium services." Some analystsare skeptical of the decision to invest that muchmoney, but BMWbelieves that mobile apps willbecome an increasingly attractive selling point forcustomers of its BMWielectric and hybrid cars.Although the future of cars sharing informationwith other nearby cars is still years away, automak-ers are excited by the possibilities afforded by smartsoftware and apps.Sources. Ian Sherr, "Cars Pump Up 1Q To Get Edge," The WallStreet [ournal, .Ianuary 13, 2012; Chris Murphy, "4 Ways Ford IsExploring Next-Gen Car Tech," Information Week, July 27, 2012;Mike Ramsey, "Avoiding Gridlock with Smart Autos," The WallStreet [ournal, February 27, 2012; Joseph B. White, "New Driver'sEd: Thtors to Decode High-Tech Dashboards," The Wall Street[ournal, May 8, 2012; Chris Murphy, "Ford is Now a SoftwareCompany," Information Week, November 28, 2011 and "Why BMWStrddenly Loves Mobile Apps," lnformation Week, March 2, 2011;and Chuck Squatriglia, "Ford Brings SmartPhone Apps to YourDashboard," Wired, April 20, 2010.

3. What value chain activities are involved inenhancing cars with software?

4. How much of a competitive advantage is softwareproviding for automakers? Explain your answer.