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Six Questions Every Automotive Executive Should Ask About Cloud Computing

Executives in the automotive industry need to evaluate what cloud computing can do for their business. Asking the right questions is the place to start.
By Luca Mentuccia, Neil Gissler, Marcello Tamietti and Alan Healey

No leader in business or government today can afford to ignore cloud computing.1 Many global organizations including Starbucks, Citigroup and a major pharmaceuticals group are already using it to analyze data, provide applications to employees and run special projects.2 Media giants are reported to be working on a cloudlike service that will enable content to be delivered dynamically in multiple formats and on a variety of devices.3 And more cloud services will soon be available, as established IT and telecom providers including Accenture, Microsoft, Fujitsu, KDDI, China Mobile and SingTel join cloud pioneers like Google, Amazon Web Services and Salesforce.com.4 Given the momentum behind cloud computing across so many industries, it is not surprising that automotive companies are beginning to evaluate its potential and capitalize on the benefits it offers. When assessing what cloud can do for their businesses, automotive leaders need to take into account the distinct and rapidly-evolving challenges that their industry faces today. These include the fundamental and ongoing changes in the way automotive companies communicate and transact with their customers; capture, manage, protect and analyze their ever-expanding collection of customer data; strive to decrease their IT operating costs while upgrading their capabilities; and expand into new and emerging markets at low cost. A further key trend is the rapidly rising importance of in-vehicle infotainment (IVI) technology in product design and customer purchasing decisions. As you will read in this paper, cloud computing has the potential to deliver significant benefits in all these areas. For this reason, our view is that cloud solutions are not an option but a necessity and that their widespread take-up in the automotive industry is a case of when rather than if.

However, even with the optimism that surrounds the potential of cloud computing, its entry into both commercial and government sectors generates difficult questions. Cloud can undoubtedly bring significant benefits to automotive businesses, significantly reducing the required capital investment in infrastructure, while also opening up new opportunities to reduce operating costs and work with customers and suppliers in new ways. However, questions and concerns remain about issues such as the security of customer data, a feared loss of control over businesscritical applications, and the reliability of cloud technology for automotive companies most critical customer-facing activities. Also, while cloud computing promises to deliver a wide and powerful range of capabilities, the technologys disruptive and pervasive impact makes it hard to evaluate its longer-term costs and risks, and its potential uses are exceptionally broad and difficult to foretell. What is clear is that cloud will affect how computing strategies are developed and managed, how information is controlled, and how the economics of business technology are applied in automotive. Experience to date shows that the significance and effects of the cloud widely vary between different industries, and even different companies in the same industry. Faced with such uncertainty, it is all too easy for decision makers to succumb to analysis paralysis or the temptation to leave all decisions to the IT department. But cloud computing is too important for such a handsoff approach.

Executives in automotive businesses face different challenges from their counterparts in other industries, and need to scrutinize their decisions about cloud computing through a different lens. Specifically, the impact of cloud in the automotive sector will involve much more than an evolution in IT, but will ultimately drive a true business transformation, affecting every aspect of the industrys products, competitive differentiation and value chain. To reach an accurate assessment of clouds potential implications for their businesses, industry leaders need to take into account the following eight industry-specific trends: 1. Rising importance of automotive electronics Customers across the world have rising expectations of the experience and convenience of driving and using an automobile. Sophisticated technologyenabled capabilities ranging from safety and security to maintenance, and from entertainment to fuel economy to global positioning systems, are already important in buying decisions and will become more so. These shifts have major implications for the relative value of the technology component in cars, and for automotive companies talent requirements going forward. Also, with product lifecycles shortening, speed to market with new in-car services will be key. 2. The rising importance of emerging markets The current total of 13.2 million new cars sold each year in the US will rise to 15 million by 2020. In contrast, China will see its annual car sales more than triple from 8.6 million today to 30.2 million by 2020, while car sales in India will rise five-fold from 1.7 million to 8.4 million. So the balance of market power and revenues are shifting strongly towards emerging markets, and automotive Original Equipment Manufacturers (OEMs) need sufficient agility, reach and collaborative capability to continue to capitalize on this change.5

3. Industry competition and consolidation Given intensifying competitive and cost pressures, the reshaping of the global market and the rising importance of scale and global reach and branding, the automotive industry is moving steadily from its fragmented past towards a future model based on a handful of perhaps six global OEMs. 4. Exponentially growing amounts of data Automotive companies manage an immense amount of data between their customers, products, dealerships, sales, marketing, and supply chain. The cost of capturing, storing and maintaining this ever expanding data in traditional data centers is expensive. 5. Analytics Customers expect better and differentiated services based on the valuable data they are providing. Automotive companies not only need to collect this valuable information but must also analyze it in combination with sales, marketing, and supply chain data, to serve and communicate with their customers in more effective and dynamic ways thereby improving the customer experience and companies top and bottom lines. 6. Capabilities and cost reduction: Automotive OEMs are still heavily reliant on traditional ERP-style systems for most of their management processes and applications. These tend to be less flexible than the networked, web-based platforms increasingly used in other industries for activities such as sales & marketing and supply chain management and collaboration. As a result, automotive OEMs are looking for low cost opportunities to upgrade their capabilities, while decreasing the operating costs of those that will remain.

7. Data security Automotive companies and customers need to know that their data is safe. Given the vast and rising amount of data that the industry holds and processes, it is paramount that their corporate data and, even more importantly, the data their customers entrust to them, is safeguarded. 8. Unfavorable externalities and regulations Automotive companies are facing an expanding multitude of regulations around issues such as environmental protection, in-car safety and taxation. Rising commodity and raw material prices are impacting profitability, and increasing fuel prices are favoring the use of public transportation such as railways. At the same time, environmental awareness is encouraging alternative approaches to transportation, such as cycling or walking to work, or moving closer to the city.

Opportunities and potential benefits


Cloud computing solutions can help automotive companies tackle all these challenges. And, going forward, the cloud presents many further opportunities and potential benefits for the automotive industry. Today, it is estimated that some 80 percent of management applications in the sector are based on ERP-style systems. As a result, changing or adding additional components to their application sets is quite difficult and expensive for the automotive OEMs. Cloud technologies will enable faster, more dynamic and more flexible changes and additions, thereby boosting OEMs agility and responsiveness to market, customer and competitive change. This agility will depend critically on OEMs ability to collect, store, analyze and create actionable intelligence from customer data. With the volumes of storage needed in the industrys data

centers continuing to rise, the costs involved in storing and maintaining this data is already high and rising. At the same time the necessary processing capacity is also undergoing a dramatic increase, meaning physical data centers will become even more expensive and complex to manage. As a result, automotive OEMs are increasingly turning to cloud computing solutions as a way of making total costs of ownership lower and more variable, while simultaneously gaining access to far greater processing and storage capacity. The need to store and analyze rising volumes of increasingly businesscritical corporate and customer data inevitably brings with it responsibilities and concerns around data privacy and security. Automotive companies will need a pragmatic and practical approach to these issues, reflecting the different levels of sensitivity that apply to different data sets ranging from widely-available low-sensitivity data to highly confidential financial

information about customers. Different levels of data can be handled through different cloud architectures and a hierarchy of user authentication and access processes, ensuring that the cloud strategy matches the sensitivity of the data itself.

Filling in the white spaces


Automotive OEMs already know from long experience how to integrate processes from a product perspective in their cars. However, the current speed of change both in the elements they need to integrate, and also in the dynamics within each element, means automotive OEMs have no choice but to identify and implement a more streamlined and efficient model to cope with fundamental industry change. For example, ongoing industry consolidation means dealers will sell several car brands at the same time, and will no longer represent just one

Cloud suits in-car entertainment and information: Gartner


Automotive entertainment and advanced driver information content will need more dynamic content which is best managed by cloud computing platforms. Safety, security and environmental factors will drive penetration of wireless communication technology in cars. As services develop and content increases for automotive applications, automotive OEMs will be compelled to offer a communication platform in the car. The road map for automotive OEMs to offer embedded Internet access in the automobile will be defined by emerging Internet-based/cloud computing services proliferating the market. For in-car entertainment, digital Internet radio stations will provide greater flexibility for consumers and a higher standard of driver information content.6

specific brand. This kind of multifaceted selling model will require OEMs and dealers to have scalable systems that are flexible, low-cost and easily adaptable. Similarly, consolidation between OEMs will demand systems that can be easily and quickly integrated to plug in new brands and operations and move quickly to realize economies of scale. Of all the technology options currently available to the automotive industry, cloud computing is the one that meets these sector-specific requirements the most fully and effectively.

in-vehicle services, entertainment and connectivity. These new technologies are also able to help address the call from regulatory agencies and consumers groups for cars to become safer and more environmentally friendly. As the industry continues to adapt to these changing business, regulatory and consumer trends, IVI is opening up new vistas of opportunity for innovation and competitive differentiation.

Rising relative value


To better understand the specific market context for IVI, its importance and its future potential, Accenture found the current usage and sophistication of IVI means that IVI technologies represent about 20 percent of the dollar value of todays cars. Over the next fifteen years this proportion of the overall value will rise steadily, and technology will account for more than 40 percent of the average automobiles total dollar value in 2025. In Accentures view, the development of IVI will be focused around six key components. These are: 1. Greater safety and security on board 2. Car maintenance & optimization 3. Communication 4. Entertainment 5. Commerce 6. Infomobility. While the relative growth rate and pace of technology progress will vary in each of these components, the overall trend will be toward increased sophistication and value, leading to a new generation of technology-enabled automobiles.

and variable cost of cloud computing make it a highly suitable platform for supplying, sustaining and progressing the development of the full range of IVI components. This is one of the main reasons why we believe that widespread cloud adoption in the industry is a question of when, not if. It also underlines the fact that the rising penetration of cloud in the automotive industry will represent not only an evolution of the industrys IT assets, but also of its products, relationships and commercial dynamics along the entire value chain. Currently, the rise of IVI technology is having the effect of accelerating discussions about cloud computing in the automotive industry. Accenture believes that IVI technology requires the coordination and synchronization of several assets and attributes, including deep knowledge and experience of the automotive industry, and various capabilities such as mobility and engineering outsourcing. Cloud computing represents a natural solution for integrating, targeting and delivering all these components for drivers worldwide.

In-Vehicle Infotainment: a key business change


Additionally, in our view one of the key factors that will make cloud an imperative in the automotive industry is its key role in supporting and enabling future developments in in-vehicle infotainment (IVI). Amid the widespread industry change we have described, the rising importance and sophistication of IVI systems will present both the biggest challenges and the greatest opportunities for automotive OEMs going forward. The rapid growth and development of IVI will reflect a variety of drivers, ranging from advances in technology to ongoing urbanization in emerging markets. By 2015, for example, 40 percent of the world will live in cities with populations of more than one million and 17 percent will live in megacities with more than five million inhabitants.7 Drivers navigating their way round these increasingly crowded urban areas will need in-vehicle systems to help them more readily plot their route through congested city road-ways. They will also use their cars as information channels pointing them to the best restaurants, and as sources of entertainment. More generally, across all demographics, young and old alike, customers will drive demand for new features that provide greater comfort and ease-of-use on the road. New technological developments are advancing and converging to meet all these needs, allowing for more

Six key questions


As with most technologies, the significance of cloud computing differs widely from industry to industry. Accenture has identified six key questions that automotive decision makers should ask about this still-new phenomenon. By focusing on these questions, executives can narrow their inquiries and start to identify opportunities and risks that will impact their own companies. We will now examine each of these questions in turn.

What is In-Vehicle Infotainment IVI?


Accenture defines IVI as a set of solutions and applications for automobiles which satisfy various customer needs including commerce, entertainment, safety, maintenance, communication and infomobility (i.e. navigation).
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Cloud computing: not just an IT evolution


The rising importance of IVI is one of the key factors that will drive OEMs across the automotive industry to adopt and apply cloud solutions. The flexibility, scalable capacity and low

1. What is cloud computing, and how does it work?


Cloud computing allows companies to access ITbased services, including infrastructure, applications, platforms and business processes, via the internet. Cloud technologies allow IT to better respond to the changing needs of the business, creating new services and opening new markets, thereby helping to achieve high performance. Although the term cloud computing was coined relatively recently, many elements of the concept, such as timesharing and virtual machines, have been around for several decades.

The characteristics of cloud services include: Little or no capital investment Variable pricing based on consumption; buyers pay per use Rapid acquisition and deployment Infinitely scalable Lower ongoing operating costs For business people, cloud computing can seem too good to be true: plenty of computing power, no expensive IT infrastructure. Cloud computing lets organizations bypass the expense and lead time of buying, installing, operating, maintaining and upgrading the networks and computers found in data centers. Instead of licensing software, users tap into a service when its needed for as long as its needed. All that is required is a broadband Internet connection and a mobile device or personal computer with a browser to access and activate the cloud service. As with most utilities, organizations pay by the kind and amount of services used, plus any additional fees.
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Once the cloud-based service has been initiated, the data processing is done on the back end in the remote data centers. Clouds are designed so that processing power can be added simply by attaching more servers; everything is virtualized so that software can be run on any available server with excess capacity. And because everything is hosted in the cloud, users can run processes, build applications and more without loading each and every tool onto their computers. The basic technologies are well established and can be duplicated by any organization. This makes it possible for automotive companies to potentially build private clouds restricted infrastructure that uses cloud computing technologies, but is only shared by approved organizations. Private clouds can be used within single companies or possibly be shared with business partners. Clouds the size of those run by Microsoft, Amazon Web Services and Google require additional technologies so they can support many millions of users around the world without becoming sluggish.8

Given the specific challenges that automotive companies face around securing and analyzing personal financial and location information to support IVI offerings and services, establishing a common, secure infrastructure for managing and processing this information is a critical requirement. In addition, unique cloud services and applications specific to automotive are beginning to emerge. These are rented on a capacity or per-usage basis and range from financial planning applications to customer analytic business process outsourcing services. This description barely touches the underlying complexities. But for business leaders, it gets at the crucial point: with cloud computing the provision of IT power becomes someone elses problem. Cloud computing opens the door to new capabilities, including new business processes and new application solutions that are automotive industry-specific at a price point remarkably lower than traditional solutions implemented only 1-2 years ago.

2. What benefits can cloud bring to my company?


The three top benefits of cloud computing talked about today are cost, flexibility and speed to market. However forward looking companies are thinking about how cloud technologies will change the face of their operations (see question 5).

Figure 1. Initial opportunities for using clouds


Accenture has identified many different possible uses for cloud computing.

Easy

Business continuity (storage)


Extensive storage Backup and recovery

New businesses Software development and testing

Provide IT support for new ventures

Batch and data-intensive applications

Ease of implementation

Software development and testing environment Performance testing Nonproduction projects R&D activities Reduced time to market

One-off applications that dont rely on real-time response Data and high performance intensive applications (financial risk modeling, simulation, data compression, graphics rendering) New back-office applications

Desktop productivity

Web 2.0 applications Workgroup applications Office suites E-mail and calendaring

Geographic expansion

Replicate standard processes in new locations and branches

Peak load demands

New business activities Applications with peak loads Seasonal websites Applications with scalability needs

Sensitive applications Legacy


Specific existing infrastructure Complex legacy systems Hard
Source: Accenture Technology Labs

Mission-critical applications Regulation-protected data (HIPAA, SOX, PCI...)

Value to the enterprise

High value

Cost Low prices on cloud services are a big part of their allure. For example, a major pharmaceuticals group was reported to have paid Amazon Web Services only $89 to analyze data on a drug under developmenta job that would have required its researchers to buy 25 servers to perform in-house.9 Add the savings from eliminating the cost of servers, software licenses, maintenance fees, data center space, electricity and IT labor, and the benefits of replacing a large up-front capital expense with a low, pay-for-use operating expense, and the financial appeal of cloud computing is obvious. Flexibility Clouds offer extraordinarily flexible resources because of their technical design. Clouds can be summoned quickly when needed, grow by assigning more servers to a job, then shrink or disappear when no longer needed. That makes clouds well suited for sporadic, seasonal or temporary work, for finishing tasks at lightning speed and processing vast amounts of

data, and for software development and testing projects. Clouds can also supplement conventional systems when demand for computing exceeds supply. And since they are an operational expense, cloud services can often bypass the capital-expense approval process, and thus be quicker to procure than conventional systems. In the case of the pharmaceuticals company mentioned above, using clouds shaved three months off the IT budget and approval process, resulting in faster time to market and $1 billion in opportunity costs avoided. Speed Cloud technology has the potential to empower a programmer to create a software service using free or low-cost development tools, and quickly make it available to all. This capability can help organizations to become more agile and responsive, as well as increasing their ability to impose a standard set of applications or processes enterprisewide. For those applications that require a great deal of IT infrastructure

(servers and storage), cloud can significantly shorten the lead time to procure, deliver, and install the service. Overall, properly implemented cloud architecture can mean the time and costs of provisioning an innovative IT service have never been lower.

The capabilities of cloud computing are ideally suited to running automotive businesses, given their core functional activities, and their constant need to manage supply and demand proactively throughout the value chain. Figure 2 sets out the basic functionalities inherent in the automotive industry. Accenture industry templates for all of these functions already exist, and each of them can be and are being delivered as a service to clients. At the same time, the increasing complexity of automotive operations, including the need to integrate an increasingly dynamic and complex supply chain, is demanding ever-greater processing power, data storage and bandwidth. Smaller automotive OEMs in particular face challenges in findings the cash and the skills to develop the capabilities they need to meet customers rising expectations.

Figure 2. An example of the basic core functions of an automotive business that could be impacted by cloud computing
Help OEMs to improve clients attractiveness Help OEMs to provide same level of service after the selling phase Help OEMs to reduce operational costs
Sales & Marketing Dealer Management System Sales kiosks Dealer training Parts & Logistics Virtual merchandising Original Parts Order Management

ITO Data Center virtualization

OEMs

Supply Chain Management Inventory planning, forecasting & replenishment Waterhouse management Transport scheduling & optimization

3. How can cloud computing help address the specific challenges my company faces?
The automotive industry has faced tremendous change in recent years, probably more significant than at any time in recent history. Companies are having to readjust to the new business environment to survive and thrive in what has become a truly multi-channel world:

Relentless focus on customers and bringing them to the center of decision making in product and service development, marketing and merchandising Integrating data and processes across the organization to dismantle the business silos that exist today Re-assessing the high costs and brittle operations of their technology platforms Equipping operations to deliver in a new environment where IVI accounts for a growing proportion of value, in terms of dollars invested, revenues received and customer experience and satisfaction delivered. It is our view that cloud computing has the attributes to help companies in the automotive industry make these changes through the combination of low capital investment costs, standard applications and platforms, quick deployment and lower running costs. Here are some of the changes to IT that we think many companies will need to make, and a description of clouds role as part of each solution:
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1. Platform consolidation, rationalization and virtualization Many automotive OEMs are looking at massive consolidation and transformation of ageing applications and antiquated platforms in order to realize the benefits of both private virtualization and public cloud services, while reducing infrastructure costs from the data center to the desktop. More generally, if automotive companies want to continue to innovate in their systems, they cannot afford to ignore cloud computing. 2. Data Centricity Many of todays applications operate within silos (e.g. product, departmental) with hard coded business functions that are antiquated and narrowly focused. Building/ upgrading enterprise data centers and building new data centric applications across the business are massive undertakings, and cloud solutions can offset costs and speed implementation.

3. Ubiquitous customer touch points Over the coming years, the rising importance and sophistication of IVI will see customers increasingly engage with automotive OEMs and their collaborative partners through multiple channels. This trend will see drivers become omni-channel consumers, driven by convenience, location, ease of use, availability of technology and other factors that were not taken into account even a few years ago, when todays automotive systems, processes, and capabilities were being developed. These new customer engagement models are changing rapidly, driving automotive companies to adopt more innovative solutions quickly and cost effectively. 4. Pervasive Analytics As automotive companies continue to increase their reliance on IVI as a source of value for themselves and their customers, analytics will take on an ever increasing role. This focus will create an evolving need for dynamic analytical capacity and computing power. Automotive OEMs will need access to massive computing

capacity to handle peaks in demand for analytic processing power, ranging from the daily rush-hour traffic flow to occasional gridlock in major cities. In addition, as new analytical business processes become available as a cloud service, automotive companies will further benefit from not just computing capacity but also on demand business capabilities. 5. Automation Many automotive OEMs still have a relatively high degree of manual, spread sheet and other forms of personal processing. New regulations and risk management processes will force this to change (e.g. SarbanesOxley). Cloud solutions can help to move data off the desktop into standard applications where more control can be maintained.

6. Enterprise Risk Management Almost all automotive OEMs are still facing significant upgrades to their enterprise risk capabilitiesin particular technologies that manage data-real time information hubs, complex event processing, and business warehouse analysis, etc. Again our view is that cloud based solutions may be suitable for many of these services.

Leveraging social networking on mobile handsets


If automotive companies want to harness the power and reach of mobile devices and social networking tools such as Facebook, they cannot ignore cloud computing. Both of these options utilize cloud technologies so if an automotive OEM does not embrace cloud, these opportunities will not be available.

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4. Can I depend on clouds to save my organization money?


CIOs say they are finding real savings from cloud computing. Accenture estimates its own IT organization could save up to 50 percent of its hosting costs annually by transferring most of its applications to infrastructure clouds.10 Bechtels CIO benchmarked the companys internal data center and storage against those of Google, Amazon Web Services and Salesforce.com, concluding he could greatly reduce his per unit costs by creating an internal cloud.11

Clearly, executives should not take the promises and projections of cloud savings at face value. The articles about companies that have saved money rarely explain how these savings were calculated, and several apparently rigorous analyses of cloud savings have been attacked as unrealistic.12 Executives therefore need to look closely into the costs of cloud computing for their organizations. They should seek rigorous ROI case studies based on actual cloud usage, rather than estimates of anticipated savings. Hardware, after all, is a relatively small component of data center costs. They need to uncover the hidden management, transition, and usage costs that reveal themselves only when organizations start to work with the technology. They need to evaluate the pricing models of different kinds of cloud services. And they need to work with the finance department to develop a consistent and acceptable approach to measuring the costs and return from clouds. Only then can they reliably estimate the savings.
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In addition, the following factors will be critical for companies to realize the greatest possible benefits: Adopting common standards that make sharing easier Using standard, fit-for-purpose service levels as much as possible, according to requirements of the specific application Applying security and data privacy restrictions appropriately and, again, standardizing the number of different levels as much as possible Overcoming any departmental ownership issues so as much work can be moved to the shared cloud as possible Taking care to maintain flexibility around procurement to avoid being locked into specific supplier arrangements

General Motors new IT strategy includes cloud13


New GM CIO Terry Kline [is looking to] make GM's IT architecture more hospitable to leading-edge consumer technologies, particularly smartphones. On its most recent trip to see technology vendors on the West Coast, Kline says, GM's IT leadership team made it a point to visit Google and Apple, not just Cisco, Hewlett-Packard, Oracle, and the other usual suspects. Kline describes Google Apps as one crank away from being enterpriseclass, and says Google CEO Eric Schmidt asked him to make a list of requirements that would get them there. A more robust spreadsheet and a clearer (more auditable) idea of where data in the cloud actually resides are on Kline's wish list. Google Apps will be a legitimate threat to competing enterprise apps by the second half of next year, Kline predicts, at a price point that is impressive.

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5. How will clouds affect the way my company operates in the future?
Companies that have built massive clouds are already transforming the nature of competition. Googles advertising-supported search engine and tools and Amazons online retail operations are all made possible by the computing clouds created by those companies. Cloudbased consumer applications such as Facebook and iPhone applets are driving innovation in unpredictable ways, and we may see automotive companies making similar leaps that leverage cloud computing. Examples include:

1. Customer Interaction The nature of how automotive companies differentiate themselves, communicate and transact with their customer is changing. Delivery of IVI services to consumers in real-time whenever and wherever they need them is essential. Cloud based solutions that deliver relevant services to drivers through appropriate channels prior to and during the trip will be valued. Mobile solutions already exist today that leverage mobile phones location-based capabilities to engage the consumer based on their specific geographic location, and these will become increasingly important, tailored and sophisticated. For example, an in-car restaurant finder will know that the driver has a particular liking for Chinese or Italian food. Whether delivered via social media platforms, e-commerce engines, search optimization services or mobile computing solutions, capabilities in the cloud can enable automotive OEMs to engage with their customers

in novel and innovative ways, without the level of capital investment typically required to build and support a new channel. 2. Customer Analysis Efforts to segment specific customer groups and market cars and in-car services to them require a great deal of data and computing power, and may be well served by cloud-based solutions. 3. Real-time Analytics Scenario modeling, what-if analysis, and forecasting these types of lumpy, data intensive processes are great candidates to be served by cloud based solutions. Customer programs, marketing, merchandising, and pricing all stand to benefit greatly from such capabilities. 4. Faster Access to Capabilities As software vendors continue to build capabilities on cloud architecture, automotive companies will experience faster implementation and access to software/technology at lower cost.

5. Statements and Reporting Production of customized reports based on cross-platform organizational data may be served by cloud based solutions. 6. Global Expansion As automotive companies consolidate across the world and expand to seize revenue and cost opportunities in emerging markets, they face the daunting task of standing up the technology infrastructure to support their increasingly diverse global operations. Cloud can substantially impact the related costs and speed to deliver. Put simply, if automotive OEMs want to expand and consolidate their global footprint in a cost-efficient way, cloud is now the way to deliver it.

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Ford MyTouch uses cloud to help turn its vehicles into mobile communications hubs14
In January 2010, Ford unveiled its new cloud-based MyTouch system at the CES show in Las Vegas. The new program brings hightech applications, WiFi capability, and the second generation of Microsoft's SYNC software into Ford vehicles. Jim Buczkowski, Fords director of electrical and electronics systems engineering, commented: What the mouse did for the PC, we need to create for the automobile. MyTouch will first feature in the 2011 Lincoln MXK, followed by the companys other Lincoln and Ford vehicles. It will have several
As with benefits, it is difficult to fully gauge all of the ways in which the cloud will change how automotive companies will operate. Decision makers will need to perform a thorough assessment to understand how clouds can help them. In particular, strategists must investigate what new services should be pursued using cloud computing, while CIOs must track the evolution of the technology and the market for cloud services, to ensure that strategic ambitions do not outrun the capabilities of the technology. CIOs will also need to mature their systems management and operations tools and processes to seamlessly manage a heterogeneous traditional (non-cloud) and cloud environment, which needs to co-exist in the future.

advanced telematics services that will be standard on new vehicles equipped with MyTouch and its SYNC communications and entertainment platform. These services include enhanced touch and voice access, WiFi connections, cloud service connectivity, and pre-installed web applications such as Twitter and Pandora. Derrick Kuzak, VP of Global Product Development at Ford Group, commented that Ford's vision for SYNC is to connect customers with families and friends, with their personal
More generally, automotive OEMs that fail to embrace the cloud may find their IT options become increasingly limited over time as will their ability to contain costs and collaborate effectively along the supply chain. There is a growing view that if automotive businesses, or indeed those in other industries, want to continue to take advantage of packaged software application in the future, they may find that most of this software is written only for the cloud, and that if they havent created a cloud-friendly or cloud-relevant IT environment they will not be able to benefit. This view is supported by the fact that venture capitalists investing in the software industry are increasingly focusing on funding new entrants who are building their applications specifically for the cloud.

devices, and with the data they have stored in the cloud. "They can chat with their kids, listen to their RSS feeds, scan their iPods and make dinner reservations all while driving home from work," he said. "And all while keeping their eyes on the road and their hands on the wheel.

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6. What about assurance of security and data privacy?


Various surveys tell us that security and data privacy remain prime concerns for cloud implementers in the automotive sector. The fear of their data being in the cloud is often the single greatest hurdle that leaders must overcome to build trust and gain the benefits from cloud computing. CIOs are concerned that their data could be stolen or compromised by hackers, mixed with data from their cloud providers other customers, or released by mistake. Any of the above could expose companies to compensation claims, public embarrassment, lawsuits and brand damage.

Many companies today have very specific challenges in areas of security and data privacy. Their existing IT estates consist of highly fragmented landscapes of security and data privacy approaches and policies taken across different departments. This in turn carries a lot of risk and cost. Using the move to cloud computing to drive more consistency and automation in security and data privacy may actually provide a catalyst for driving greater security and reduced costs. Companies need to adopt a very practical approach to thinking about security and data privacy in the cloud. Data comes with different levels of sensitivity, from low level (published widely and no restrictions) to ultra secure (highly confidential customer financial information). In the same way companies will need to design their cloud to have similar and appropriate security built in, through a managed combination of both private and public clouds. So, for example, low level data and access may well be suitable to go onto a public cloud
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infrastructure service with simple password access, whereas ultra secure data may require dedicated secure servers housed in ultra secure data centers with strong authentication required for access. There will be several different levels of security in between. Building and managing a secure and flexible infrastructure cloud using a combination of private and public services will provide the key for companies to gain the enormous benefits that cloud computing can provide. It is also important that as companies choose cloud service providers they include security and data privacy capabilities as a major part of the selection criteria. The key to understanding security in cloud computing is to realize that the technology is not a break with the past. Instead it represents the logical next step in the outsourcing of commodity services to many of the same trusted IT providers that have been leaders in the field for years.

We recommend that companies take the following into account: Work with your provider to determine its attention to security, privacy, and compliance with data laws in all relevant jurisdictions. Make sure the provider can achieve parity or better levels of security, privacy, and compliance with law than you have today. Remember that the security of the cloud should be equal to the most risky client that is serviced by the provider. Rigorous risk assessment is a complex undertaking that represents the key to effective security in the cloud. Require your cloud computing partner to provide you with its risk assessment and how it intends to mitigate any issues found. If the cloud provider does not have a seasoned Privacy Officer and a client-facing CSO, CISO, or equivalent security role, be very careful. It could be a sign that the provider doesnt take security seriously enough.

Daimler uses cloud to connect with its supplier network15


In 2009, Daimler extended its agreement with CompuServes Covisint group to build and maintain a comprehensive portal and identity management solution that securely connects Daimler with its vast network of suppliers globally. Covisint provides Daimler and its suppliers with an industry-standard connectivity and security solution including single-sign-on in a cloud computing, SaaS model enabling seamless and secure collaboration for critical-business information. Daimler AG Director Florian Manhart comments: As social media and other newer technologies continue to emerge, security's role in communications and transactions becomes even more critical. Together with Covisint, we will further leverage the latest Web 2.0 features and, in a systematic approach, look for solutions to bring the communication with our suppliers to the next level.

Schedule mandatory monthly discussions with the cloud providers top privacy and security people. This discussion should flow both ways with no hidden items. The cloud provider should have the ability to map its policy and procedures to any security mandate or security/privacy/compliance driven contractual obligation you face. Pay attention to your cloud providers adherence to secure coding practices.

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Taking the first steps


Automotive OEMs need to consider how to take account of and plan for cloud computing services such as: Infrastructure CPU, memory, and disk capacity available on demand, real time, and usage based will be a big driver of benefit Architecture The technology architecture for the automotive IT organization can be evolved to take greater advantage of cloud-related services. This is an important step to taking advantage of emerging capabilities and services available in the cloud Applications Commercial cloud-based automotive applications that provide industrialstrength functionality are emerging and growing rapidly. Services Cloud services including new business processes such as analytical services are rapidly becoming available for automotive companies to leverage. The ability to achieve a step-change in capability through these cloud services offerings enhances the competitiveness of automotive companies and enables more agile and cost-effective responses to change. As we highlighted at the start of this paper, cloud computing is too important a technology to leave entirely to technologists. While the work of migrating from conventional to cloud computing is likely to fall on the shoulders of the CIO, other senior executives have important roles to play. To make sure an organization maximizes benefits and minimizes risks, executives must: Ask hard questions and demand databased analyses regarding cost savings Dont assume automatic and substantive cost savings. Do an ROI analysis. Consider conversion and ongoing costs as well as savings. Dont be intimidated by the jargon. Experiment or pilot on low-hanging fruit such as workgroup applications,
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or on a non-mission critical, nonintegrated application. Then be ready to scale once youve proven the benefits are worth it. Establish a clear governance structure for cloud computing Many organizations have rules and structures in place that govern how IT decisions are shared between departmental leaders and IT executives. Use them (and if they dont exist, create them) to decide who inside and outside the IT organization should be engaged in decisions on cloud computing, and what decision-making rights and responsibilities they have. Keep cloud efforts on track Make sure cloud computing receives the focused thinking, planning and follow-up it requires. Use the answers to these six questions to identify and address both immediate and longerterm business needs and opportunities that lend themselves to cloud computing, to develop a plan for using public and perhaps private clouds, and to gain the capabilities the plan requires. Make sure the organization senses and responds appropriately to the impact clouds are having on their operations. Set the standards for success Provide the necessary oversight to the IT organization. Make sure goals and deliverables are well understood, and projects are well aligned with business needs. Clarify how the value from cloud computing is to be determined: which quantitative and qualitative benefits are sought? And consider what else constitutes success besides value achieved and projects completed: skills developed, partnerships established, and risks addressed. Provide the necessary support Besides financial resources and technical talent, support other activities that will underpin the success of cloud initiatives. For example, organizations may benefit from a community of practice or a cloud program office to develop the skills and share the experiences of people engaged in cloud projects.

Buy cautiously, appraise frequently Its too early to predict who the major cloud providers will be in a few years, what capabilities they will deliver, when they will deliver them, and how well. So when selecting cloud providers, carefully consider whether they have the potential to be a desirable partner in the future. Even after they are chosen, evaluate your partners on their financial stability, as well as their ability to improve functionality and service levels, to integrate data across different technology platforms and cloud services, and to deliver on their promises.

The automotive industrys migration to cloud: not a question of if, but when
While it may take time for companies to transition to cloud computing, beginning the journey early can deliver some substantial financial benefits. Executives are still grappling with its risks, possibilities, and the cost of writing off current IT investments. However, for several companies the transition to a hybrid cloud environment is already under way. The capabilities and potential savings from clouds are too great to ignore. In addition, software developers and venture capitalists will be drawn to this new market. The low development cost, short development cycle, and quick return on cloud services are irresistible. This means future IT advances and innovations are much more likely to be based on clouds than conventional computing. The critical issue isnt whether cloud computing will become a fundamental technology in the next decade. It is how successfully companies will profit from the capabilities it offers. Managing the new cloud capabilities with all the existing legacy systems in a way that is seamless to business units and users will be critical to achieving the benefits and managing the risks.

References
1 What the Enterprise Needs to Know About Cloud Computing, Accenture Technology Labs, October 2009; Gartner Identifies the Top 10 Strategic Technologies for 2010, Gartner, Inc. press release, October 20, 2009; 2009 (Cloud Computing in 2009 Forum dossier), Chinese Institute of Electronics Cloud Computing Experts Association, http:// server.it168.com; The Cloud Wars: $100+ billion at stake, Merrill Lynch, May 7, 2008; Avenade 2009 Global Survey of Cloud Computing, http:// www.avanade.com; Laurianne McLaughlin, Cloud Computing Survey: IT Leaders See Big Promise, Have Big Security Questions, CIO Magazine, October 21, 2008. 2 Eric Auchard, Salesforce.com Signs Citigroup 6 Copyright Gartner. Source: Emerging Technology Analysis: Automotive IP Nodes, Automotive Electronics by Mike Williams. 29 September 2009, Doc ID:G00171126. 7 The Oliver Wyman Journal http://www. oliverwyman.com/ow/pdf_files/OWJCarsPeopleWanttoBuy.pdf. 8 Luiz Andr Barroso and Urs Hlzle, The Datacenter as a Computer: An Introduction to the Design of Warehouse-Scale Machines (Morgan & Claypool Publishers, 2009). 9 Condon, ibid. 10 Pressure Performance: 2009 IT Report, Accenture CIO Organization, November 2009. 11 CTO Roundtable: Cloud Computing,

Deal, Reuters.com, November 15, 2007; Salesforce.com Powers Starbucks Campaign to Mobilize Americans in National Service, Salesforce. com press release, January 21, 2009, http://www. salesforce.com; Ron Condon, The Opportunities and Risks of Cloud Computing Services, SearchSecurity.co.uk, February 23, 2009.
3 Ethan Smith, Disney Touts a Way to Ditch the DVD, Wall Street Journal, October 21, 2009. 4 Ben Worthen and Justin Scheck, Tech Giants

Communications of the ACM, Volume 52, Number 8 (2009), Pages 50-56 http://queue. acm.org; Gray Hall, Bechtel Harnesses the Cloud: Case Study of an Enterprise Cloud, Cloudstoragestrategy.com.
12 Cloud Coockoo Land Computing,

Ramp Up Their Online Offerings, Wall Street Journal, June 22, 2009; Cloud Services/ SaaS: What Telcos Are Doing, IDC Technology Assessment, October 2009; China Mobile Enters Sphere of Cloud Computing, Interfax, November 17, 2009; Bernard Golden, The State of Cloud Computing in Japan, CIO.com, November 5, 2009; SingTel to Help Establish Singapore as a Regional Cloud Computing Hub, SingTel press release, July 14, 2009; Chris Preimesberger, Fujitsu Launches Cloud Services in North America, eWeek.com, December 8, 2009. 5 China - http://www.chinadaily.com.cn/ bizchina/2010-03/11/content_9573292.htm US - http://www.plunkettresearch.com/ Industries/AutomobilesTrucks/AutomobileTrends/ tabid/89/Default.aspx http://www.bestcarbuyingadvice.com/ blog/1046931_gloomy-outlook-in-u-s-autosales India - http://www.ibtimes.com/ articles/33477/20100708/car-sales-indianauto-industry.htm .

dotfuturemanifesto.blogspot.com; Andy Greenberg, Deflating the Cloud, Forbes.com, April 15, 2009
13 Source: GM's IT Strategy: InformationWeek, 7 December 2009 14 Sources: Accenture Research; http://www.

brandchannel.com/home/post/2010/01/19/ Fords-My-Touch-Software-Gets-High-Tech. aspx ; Ford Rewires Cars for Connectivity CMP TechWeb. 7 January 2010
15 Sources: Accenture Research Analysis; Factiva; Compuware Covisint Extends Global Supplier Portal Contract with Daimler AG GlobeNewswire. 16 June 2009

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About the authors


Luca Mentuccia (luca.mentuccia@ accenture.com) is the Accenture Automotive Global Director Luca Mentuccia joined Accenture in 1981, immediately after the degree in information science at the University of Turin in Italy. He spent his entire career around the Automotive and Manufacturing companies, hence he developed a deep and extensive knowledge of the automotive industry and of car manufacturers throughout the world. He is also an expert in industrial processes and their implementation both in Italian and multinational corporations. He is based in Turin, Italy. Neil Gissler (d.neil.gissler@accenture. com) is the lead for Accentures North America Technology growth platform which includes all IT Services (IT Strategy, Enterprise Architecture, Application Portfolio

Optimization, Application Development & Management, Infrastructure and Security), spanning both consulting and outsourcing services, provided to Accentures clients. He is accountable for sales, delivery, client satisfaction, and the engagement and retention of over 22,000 people. He is based in Chicago. Marcello Tamietti (marcello.tamietti@ accenture.com) - is the Automotive & Industrial Equipment Industry Lead in IGEM, Italy, Greece and Emerging Markets as well as being responsible in Europe and Latin America for one of the most important European Original Equipment Manufacturers. In this role, he is responsible for creating value for Accentures client as well as supporting them in their journey towards delivering innovative solutions. He has a deep knowledge about IT and process transformation, Spare Parts and Warranty management, In-vehicle Infotainment solutions. He joined

Accenture in 1991 after the degree in Electronics at University Politecnico of Turin in Italy. He is based in Turin, Italy. Alan Healey (alan.healey@accenture. com) is the executive responsible for leading the Cloud Computing Program for the Products Operating Group within Accenture. Automotive is an industry sector within the OG. Alan has 25 years experience in outsourcing and managing large programs of work. He has operated across multiple industry sectors, managing several of Accentures most significant long term contracts, covering also areas such as transformation change, commercial management, and service management as well as technical delivery. He has held a variety of management roles within Accenture. He is based in London.

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About the Accenture Institute for High Performance


The Accenture Institute for High Performance creates strategic insights into key management issues and macroeconomic and political trends through original research and analysis. Its management researchers combine world-class reputations with Accentures extensive consulting, technology and outsourcing experience to conduct innovative research and analysis into how organizations become and remain high-performance businesses. Both research fellows at the Accenture Institute for High Performance, Jeanne G. Harris (jeanne.g.harris@accenture.com) and Allan E. Alter (allan.e.alter@accenture. com) led the Cloud Computing research that is referenced in this paper.

About Accenture
Accenture is a global management consulting, technology services and outsourcing company, with more than 190,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the worlds most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$21.58 billion for the fiscal year ended Aug. 31, 2009. Its home page is www. accenture.com.

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