From Software-as-a-Service to Vehicle-as-a-Digital-Service

For quite a while there have been concepts such as Software-as-a-Service (SaaS), and now with the increasing digitalization and connected automation of the automotive experience, a new paradigm has arrived: the Vehicle-as-a-Digital-Service (VaaDS).

Increasingly automakers see the car as a digital platform. That includes BMW. Its spokesperson comments that BMW’s focus is now on the overall digital experience in and around the vehicle. This goes beyond sensors, radar and LiDAR. Digital services are a crucial part of the new product mix, and so the challenge is to provide customers with the most relevant offers to enhance their digital experiences, including infotainment, GPS navigation, vehicle leasing, and location-based services.

Stefan Imme, chief digital officer of Volkswagen Financial Services, adds: “The term “Vehicle-as-a-Service” (VaaS) has become increasingly central in the automotive industry in recent years. The core of VaaS offerings is that customers are able to book a vehicle for a certain period of use via a digital platform such as an app. This development is based on the fact that more and more people would rather use vehicles than actually own them. The desire for high flexibility meets the all-inclusive idea, which is known for example from the area of streaming services. For this reason, car leasing is becoming increasingly popular for many private customers, especially for e-vehicles.”

New subscription models have subsequently emerged from VaaS, which could also be known as VaaDS. Imme says they are increasingly popular as they include car-sharing, ridesharing and ride-hailing. The core principle behind this model is that the vehicles are used rather than owned and so VaaS offerings take these developments into account. He adds: “The new mobility platform that we at Volkswagen Financial Services are developing for the brands of the Volkswagen Group aims to bundle a wide range of mobility offerings. By doing so customers will get access to mobility solutions from one hour to several years via an app, depending on their individual needs.”

Services and collaboration

To what extent should automakers collaborate with big parties or should they create services themselves? Well, BWM explains that it performs a significant of its software engineering in-house, while also offering third-party offerings. They include “valuable own services and seamless integration of third-party services, content and devices – also regionally specific and updateable,” reveals the automaker’s spokesperson.

Imme says they should do both: “In an increasingly complex world, it is important to enter into suitable partnerships. Individual mobility services do not necessarily have to be operated by the company itself. What is important is a bundled offer to the customer.” This can involve co-operating with several other parties as following a co-operative and collaborative strategy can contribute to business success in the area of IT solutions. Yet success requires access to the customer. He advises automakers to avoid allowing customers to be taken out of their hands. Without them, there can be no success.

‘Ownership’ models

This leaves the question of what customer want: do they want flexible or on-demand ownership? BMW’s spokesperson seems to suggest that the key is to offer customers choice, various forms of mobility and ownership models. This very much depends on personal preference, and so customers tend to have the choice between a flexible leasing model or financing options.

The problem with offering a high level of flexibility raises its head in the form of higher costs, which will lead to higher prices. They might be affordable by BMW customers but Volkswagen Financial Services finds that few of their own customers are willing to pay a premium for this flexibility. They, instead, find that customers prefer to have “a low monthly all-inclusive rate”. However, Imme predicts that the “sweet spot of flexibility and price willingness will develop” over the course of time.

He adds: “However, we can already see that customers will not only travel within the framework of micro-mobility in the future. After all, the monthly mobility costs are the decisive factor. For example, the holding period for our car subscriptions is more likely to be over a year than three to six months.”

Cyber-security

As vehicles become increasingly connected and software-defined, there is also the need to ensure that they are safe and secure. Trevor Neumann, general manager and vice-president, automotive and transportation at Jabil, emphasizes that attention to cyber-security is critical to the overall evolution of the software-defined vehicle. He explains: “Connectivity provides risk and opportunity to vehicle security, and connectivity is a portal into the car but it also allows rapid changes over-the-air (OTA).”

This can help automakers to address issues such as cyber-security, which is an ever-evolving and dynamic space. This requires automakers and their ecosystem to have the ability to enable data-sharing, and the ability to inform customers to prevent accidents and to uphold maintenance standards. This has to occur at an industry level rather than falling on each individual manufacturer. Collaboration going forward is therefore key to the development of the automotive industry.