Joining the Dots to a Connected Car Future

connected carI’ve been prepping a new feature on the future of the connected car industry and one thing is pretty clear: things are moving faster than you think.

We’re currently working our way through three of the four stages of industry evolution mapped out by Gartner. It claimed in a December report that efforts to integrate mobile and cloud-based apps into the car are almost complete – that’s one stage down. Then, up until 2024 it’ll be all about “digital lifestyle convergence”.

The report explained:

“This convergence means that consumers want to be able to communicate with friends and family members, remain productive to their workplace, and to be entertained with the content that they also access outside of the automobile. Users will also expect an automotive connectivity experience that is similar to other device experiences they are increasingly accustomed to, such as remote, over-the-air software updates and content/services upgrades.”

Microsoft has a good chance to capitalise on this shifting focus, with its new Connected Vehicle Platform. One of the five main pillars outlined by EVP of business development, Peggy Johnson, at CES, is “improved in-car productivity” via tools like Cortana, Dynamics, Office 365, Power BI and Skype for Business.

“For instance, imagine that Cortana seamlessly connects you whether you’re at home or in your car,” she explained. “Let’s say you’re on your phone at home and tell Cortana to set up a meeting for you and your colleague the next morning at a coffee shop. The next time you get in your car, Cortana reminds you of the morning meeting and starts navigation to get you to that coffee shop.”

With its heritage in the office productivity space, Microsoft obviously has an edge in these scenarios over connected car rivals like Apple, Google and Amazon, although its Azure-powered platform will also cover predictive maintenance, advanced navigation, customer insights and autonomous capabilities.

The platform’s open, partnership-based approach could also play well with consumers who are sick of many current systems, according to Quocirca analyst Clive Longbottom.

“Users are increasingly frustrated with in-car technology,” he told me. “Even new models tend to be based on old, proprietary technology; technology that is impossible to swap out and replace with something more up to date and flexible.”

The Redmond giant knows the industry better than most, continued IHS Markit principal analyst Egil Juliussen.

“The auto industry is among those global industries which adds numerous requirements for how connected cars are treated (i.e. privacy, data storage locations, etc.),” he told me via email. “All of these complexities make it expensive and time-consuming for any auto manufacturer (even the largest) to develop, update and maintain cloud and software platforms to manage their network of connected cars.”

Partners on board

And therein lies the opportunity for Microsoft and others. The firm has also announced partnerships with Volvo, Daimler, Nissan-Renault, BMW and Toyota which will see each use its cloud-based tech to create their own unique platforms. This ability to customise is another obvious benefit of its platform for carmakers.

So where are we headed? Well, autonomous vehicles of course. Gartner reckons that by 2030 self-driving tech might even have created a new car ownership model – where we simply “hire” on-demand driverless cars for our journeys rather than own a vehicle outright. Already a third of Americans the analyst surveyed said they’d forgo purchasing a new vehicle if they could pay for such a service.

Apple CarPlay and Google’s Android Auto are certainly major contenders for the connected car crown, especially in terms of integrating the car into the whole mobile experience. But Microsoft’s cloud-based approach, which is flexible enough to incorporate new technologies as it goes, has a decent chance of winning more carmaker minds and driver hearts.

 

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Is Groupon Doomed to Fail?

groupon logoDaily deals giant and one-time darling of Silicon Valley, Groupon, is having a hard time of it. An IPO in 2011 raised a whopping $700 million, apparently more money at the time than any US firm since Google. But more than four years after the flash deals specialist was valued at nearly $13 billion, there’s very little to celebrate.

In September, the firm announced over 1,000 job cuts as part of its ‘One Playbook’ plan to cut debt and kick-start growth. Its CEO has moved across to chairman and the firm is quitting several markets including Morocco, Panama, the Philippines, Puerto Rico, Taiwan, Thailand and Uruguay. In November the firm’s shares plummeted 27% after it forecast 2016 revenue of $2.75 billion-$3.05 billion, below analyst estimates.

So what went wrong? I’ve been chatting to analysts for a piece in IT Pro (Hong Kong) about this and the general consensus is that it shouldn’t have IPO’d when it did. IDC Retail head of Europe, Spencer Izard, told me that the firm simply can’t keep up with the demand for high quality deals on a daily basis, so it’s failing in turn to meet the insatiable growth demands of shareholders.

For Gartner’s Sandy Shen, it’s a vicious circle. Groupon is not coming up with consistently good deals, so customers are leaving. Merchants see these falling customer numbers and the fact that most are only after that one deal and aren’t returning, so they also lose interest.

For Miya Knights, global technology research director at Planet Retail, there’s simply too much competition for the firm these days, and not just from bricks and mortar stores, which have lowered their prices to match the web.

“Groupon was first to the flash deals party, but has certainly not been the last. The space it occupies has been filled with direct, global and local competitors that offer deals across a wide range of categories, like Wowcher in the UK. More niche, specialist deal sites, for hotels, holidays, and home furnishings etc. have also emerged to fill the space,” she told me by email.

“Groupon’s figures, however, show it still has a loyal customer base and that revenues are strong. It’s just that its business model is broken: it does not generate enough revenue from its daily deals, which is where the margin lies, and relies too heavily on selling goods at discount prices, where the margins are tiny.”

So is there any hope for the site? It’s now trying to rebrand as an online marketplace, but with the likes of Amazon and eBay also playing in that space, the future doesn’t look too rosy.


“Don’t get bitten by Asia’s offshore tigers,” says Gartner

chinese dragonIT offshoring; not the most exciting topic in the world but a vital contributor to the global IT economy. Last week Gartner released a new report detailing the challenges and opportunities facing Asian locations and warned that while emerging stars such as Indonesia and Vietnam offer great cost savings, there are risks.

Primary among these, as I noted for The Reg, is that none are doing well when it comes to their Data/IP Security and Privacy rating.

Indonesia, Thailand, Sri Lanka, Bangladesh and Vietnam all ranked “poor”, while more mature markets China, Philippines, India and Malaysia only did one better at “fair”.

Report author Jim Longwood also told me that despite ostensibly low costs, some emerging destinations may incur hidden “soft costs”.

“In some countries, for example, you might have to use a local joint venture; or for manufacturing pay additional fees to ensure a higher level of continuity of power supply than local businesses and homes might receive to avoid ‘brown outs’,” he said.

“Another soft cost is building a local brand, to enable the captive to attract a better quality of resources, e.g. when competing against the well-known global brands like of IBM, HP, Microsoft, SAP & Oracle for local talent. Part of this may well be investing building campus type facilities as the Indian providers have done.”

So, which will emerge as the favourite place to offshore IT services in the future?

Well, there are a number of locations vying for the business of MNCs, the analyst told me. Vietnam Bangladesh and Indonesia are leading the pack of emerging Asian countries thanks to strong government support for the first two and “more adhoc local entrepreneurial means” in the latter.

As for China, well it is certainly creeping up fast on India, and was rated by Gartner as the sub-continent’s number one challenger in terms of scale.

However, India has won the “current battle” in terms of horizontal IT services for apps and business processes and will not be overtaken by the Middle Kingdom anytime soon.

“However, versus India, China has certainly won the ‘battle’ to be a leading global site for manufacturing technology whether for TVs, telecommunications or IT hardware componentry,” he added.


Alibaba’s IPO: time to splash some cash on the cloud

moneyAlibaba finally announced plans to list on the stock market on Sunday after months of speculation and protracted discussions with the Hong Kong stock exchange.

A lot of the column inches devoted to this piece of news have focused on the firm’s decision to chose the US, rather than Hong Kong to IPO, and while it will be a blow to the SAR, there really wasn’t much it could do.

The bottom line is that Alibaba wanted to continue electing the majority of its board even after going public and the HKSE has a very strict one-shareholder-one-vote rule, which it could not break. End of story.

Of course, its decision to go Stateside doesn’t hurt Alibaba’s attempts to globalise its brands and attract more big name investors from the US. It will certainly be pretty happy with the way things turned out.

However, it would be wrong to interpret the move as an attempt to internationalise, even given the following statement from the firm:

This [IPO] will make us a more global company and enhance the company’s transparency, as well as allow the company to continue to pursue our long-term vision and ideals.

As numerous industry analysts have told me this week, the IPO is all about raising funds (as much as $15bn if rumours are to be believed) to grow its business in China.

Yes, it’s still China that dominates Alibaba’s thinking and it’s easy to see why. In terms of e-commerce the likes of Amazon and eBay will make it very difficult to compete outside the Middle Kingdom, while inside there is still a huge amount of growth going on.

China is poised to become the world’s biggest market for online commerce by 2015-16. “Growth will double in the next five years so the market is definitely big enough for two or three major providers,” Gartner analyst Jane Zhang told me.

This is just as well, as arch rival Tencent is breathing down its neck with its recent JD.com deal and could present a significant challenge to Ali in the future, Zhang added.

Not that Alibaba has taken its eye off the ball with mobile, investing in Sina, AutoNavi and extending Taobao to the mobile sphere, but its Laiwang messaging service has been a bit of a stinker and really pales in comparison to WeChat’s success.

A lot of the IPO money, Zhang told me, will go on growing its cloud and hybrid infrastructure, as Alibaba takes a leaf out of Amazon’s book and goes into business of providing IT infrastructure as a service in earnest.

Frost & Sullivan analyst Marc Einstein echoed these thoughts.

“Alibaba has some global ambitions but obviously competition is too severe in the US and emerging markets would be more likely targets,” he told me. “Therefore I think that they will continue to diversify into new businesses and mirror companies like Google and Amazon rather than trying to compete head on.”


Forcing out rooms – Japan’s dirty secret

exitOver the weekend a New York Times story had some interesting insights into the continuing labour problems at Japan’s once proud electronics giants.

It alleged that workers who are unable to be sacked are often sent to oidashibeya or “forcing out rooms” where they are made to perform menial or repetitive tasks in a bid to make them resign out of shame and boredom.

It’s not particularly nice but it’s a situation that seems to have been forced upon multinationals such as Sony because of Japan’s relatively strict employment laws which make it hard to sack staff without good reason.

These firms simply can’t be as agile as their international rivals because they can’t downsize or strip out waste in specific areas. In the technology industry especially, skills can quickly become outdated.

As Gartner analyst Hiroyuki Shimizu told me, these laws should take the majority of the blame for the decline of Japan’s electronics industry on the global stage.

“In these 20 years, the goal for the company executives in almost all the Japanese electronics companies were to make much use of (or not to leave idle) their own excessive resources including workers and assets,” he said.

“In the global electronics market, companies focus on their differentiators. However, Japanese companies focused on the segments where they have plenty of human resources and large assets.”

This is a major failing of Japanese technology firms but not the only one.

Large scale job cuts are starting to appear, at firms including NEC, Sharp and Sony, although more are probably needed. However, this stripping out of dead wood needs to go hand in hand with enhancing traditional areas of technical weakness, said Shimizu.

It’s also true that there’s more to Japan’s well-charted decline on the technology front than just some stubborn employment laws.

“There are several reasons for each Japanese company for losing power such as commoditisation of electronics products, severe competition with Korean or Taiwanese companies or exchange rates,” he told me.

“But we consider that the deep-seated reason is the employment policy of Japanese companies.”


Lenovo will struggle in US smartphone market … for a while

lenovoLenovo has been talking up its move into the US smartphone market this week, as global PC sales continue to stagnate, but the analysts I spoke to are far from convinced that the Chinese hardware giant can repeat its success in the traditional computing space.

CEO Yang Yuanqing told the WSJ that the firm would be taking aim at the US mobile space within a year. You can’t argue that it doesn’t represent a “new opportunity” for growth, given that PC shipments are still falling in most markets around the world.

In Western Europe they declined by the biggest ever amount in the last quarter – down 20 per cent year-on-year – and even in the still healthy Chinese market they are only forecast to grow by 3-4 per cent this year.

So can the hardware behemoth, which recently became the world’s number one PC vendor, tap a user trend which is seeing more and more gravitate towards mobile devices instead of traditional notebooks and desktops?

Well, Gartner has forecast it will take the lead in its domestic market – the world’s biggest for smartphones – as early as this year, but the US would seem harder to crack.

“The only way Lenovo would have a way to even have a chance would be to have a key carrier support it by lining up one or more of their products in the portfolio. Even this way, I believe consumers will not necessarily see the brand as sexy,” Gartner research VP Carolina Milanesi told me.

“Lenovo’s position in the corporate PC market might give them an opportunity in the prosumer segment especially if they brought to market an Android based device with an enterprise class security and manageability feature set. Bottom line: it’s a tough job and Lenovo would be better off capturing more of the tablet market first so that they could get one step closer to consumers.”

Canalys research director Nicole Peng was not much more optimistic of its chances in the near term, telling me China sales would continue to make up the majority of its global volume.

“The competition landscape in the US smart phone market is far more challenging for new comers, with Apple and Samsung dominating over 70 per cent share,” she added. “However to start selling smart phone in the US, more importantly to gain carrier support is strategically important for Lenovo’s overall PC+ strategy globally.”

All reasonable comments and I think they’ll be true in the short term, but I wouldn’t be surprised to see Lenovo up there in the top three or five US smartphone vendors in a couple of years’ time. ZTE, with all of its problems and negative publicity in the US, has already nabbed third place, according to new stats from ITG Market Research.

With a hefty R&D team and vaulting ambition, Lenovo will be hard to ignore, even if its brand image is not exactly an enticing one for smartphone users Stateside at the moment.