January 14, 2021
The proliferation of the software-defined vehicle and emerging 5G networks has thrusted the need for advanced OTA connectivity, software and data management to the forefront of automotive product design and strategy.
To sustain a competitive edge, manufacturers are reassessing and retooling their development processes to infuse modern OTA software and data management functionality into their next generation products.
Formulating the business case for tomorrow's connected vehicle can be an arduous task with many nuances, yet is broadly built upon new subscription-based revenue potential and cost savings resulting from manufacturing optimization and recall avoidance.
Determining whether to build in-house or buy an existing solution is an age-old decision point that is highly dependent upon the unique requirements, capabilities and resources of the manufacturer. In this blog, we break down the key considerations of the build vs. buy decision to help automakers navigate this critical path that can make or break the success outcomes of a connected vehicle investment.
To better forecast connected vehicle investment ROI in either a build or buy model that utilizes a connected vehicle subscription offering, we first must define and factor in the key success metrics which primarily include:
As automotive technology continues to evolve, the product life cycles will be faster than anything OEMs have previously experienced. Given the rapid turnover, product time-to-market could be the difference between success and failure of a product launch, or even a company’s future.
Building in-house OTA software and data management systems take OEMs a longer time to develop because it requires an entire team dedicated to the research, design, and implementation, followed by a series of pre-market tests to ensure compliance with safety and security protocols.
In contrast, OTA software and data solutions such as those provided by Sibros are purpose built for rapid integration, bypassing the need for OEMs to invest the time, resources, and effort into building their own proprietary software update systems. These software update management system platforms often include pre-tested protocol libraries as well as full compliance with functional safety, cybersecurity and data privacy such as those set forth by ISO 26262, WP.29 and GDPR regulations.
Although internally developing an OTA software and data management solution can provide more control, the trade-off comes with a significantly higher price tag and longer deployment timelines. Internally developed solutions can cost 10-20x more versus buying an existing solution and can take as long as 2-years to develop, test and launch.
The most significant hard costs and factors behind this higher price tag and longer deployment timeframe are most often a result of:
Companies that specialize in connected vehicle software platforms are able to offer solutions to OEMs that are unquestionably cheaper and faster to integrate, but sometimes come with customization limits.
Existing systems are designed to accommodate the needs across multiple customers and the flexibility to customize features varies between providers, though some features such as cybersecurity are becoming standardized as the automotive industry adapts to new regulations such as WP.29 from the UNECE.
While the drawback of adopting an off-the-shelf approach for OTA might limit control and customization options, it frees up resources and funds that automakers can reallocate to higher value areas of product development. Automakers may also see a reduction in the number of unexpected costs by offloading work that would otherwise be incurred during internal development.
Due to the rapid acceleration of C.A.S.E. (Connected, Autonomous, Shared and Electrified) enabled vehicles on the road, OTA solution providers are also 100% focused on evolving features and functionality across a wide swath of industry requirements at a global scale.
To put automotive software and data management technology into perspective, cars require more code to function than an F-35 Fighter Jet, thus leaving many opportunities for things to go wrong. The requisite knowledge to design, test, implement, and maintain advanced OTA capabilities for modern vehicles to operate with high reliability is vast and extensive.
OEMs must consider whether they have internal access to the expertise required to build a solution in-house. The assembled team must possess the industry specific functional and technical skill sets not only to develop and integrate the software, but also to keep pace with ongoing development, maintenance, support and enhancements over the long run.
While both build versus buy scenarios for an advanced OTA software and data management solution show either approach can be fruitful long-term investment, the industry currently leans heavily towards purchasing. Ready-built OTA solutions can prove easier to integrate, more cost effective and require fewer OEM resources while offering the ability to meet or exceed an OEMs specific OTA and connectivity requirements. Considering a buy approach utilizing a solution such as Sibros’ Deep Connectivity Platform may prove to yield a significant cost savings to accelerate profitability three years sooner while long-term profitability is still significantly more than what can be expected from investing in an internally developed solution.
What to better understand OEM ROI and cashflow impact when building a connected vehicle solution in-house? Use this calculator to see what the outcomes are. Default values have been entered as a baseline for a modest size fleet using comparable cost averages, change these figures to suit and see where you land!