Capping IT Off

Capping IT Off

Opinions expressed on this blog reflect the writer’s views and not the position of the Capgemini Group

Cloud Migration in the Automobile Sector

Category : Digital Strategies
According to Visiongain, the cloud computing market will represent $240 billion worth of revenue by 2016, up from $77 billion in 2011, and Gartner forecasts that more than 50% of Global 1000 companies will have stored customer-sensitive data in the public cloud by 2016. This and other data indicate that the cloud market will move from the Early Adopter phase to the Early Majority phase around 2017, which implies that in 2017 there will be 500 Global 1000 companies that have not yet migrated to the cloud.

Many of these Late Adopters and Laggards will be automobile companies. Although the results from some cloud migration projects show significant improvements in areas such as cost management and transparency, most car companies are not planning to migrate their premise-based systems to the cloud. Forrester predicts that only 40% of car companies will be cloud companies in 2025. Instead of moving premise-based systems to the cloud, most car companies see the cloud as a platform for building new services such as infotainment or delivering new customer experiences like self-parking vehicles.

There are several reasons few automobile companies are planning to migrate their legacy systems to the cloud. Here is an overview of some of the factors that make it difficult for some companies to adopt.

Interoperability.  The automakers and their respective dealer networks have multiple incongruous systems in place. The legacy IT landscapes are very complex. Adding another technology makes the landscape even more complex. In one case, an automaker diclosed it had 80 systems in place from 18 vendors, and they were all configured differently to reflect regional preferences. Harmonizing these data models and processes in order to migrate them to a single cloud and establishing interfaces to legacy systems would be a daunting task, and creating multiple new regionalized orgs in the cloud would be counter-productive and exacerbate the current de-centalized situation.

Policy.  Some automakers have strict procedures that forbid or restrict the implementation of cloud for many functions. At one major car company, the process for obtaining a security certification for a cloud solution takes more than a year.

Legislation.  Some countries have laws that forbid the storage of some data in the cloud.

Cost.  The sunken costs in legacy systems is very high and, in many cases, these systems are already fully amortized so that the automaker or dealer only has management costs. A new cloud solution represents additional incremental operating costs at a time when the auto-makers are trying to cut these costs. The TCO of a cloud solution is in many cases higher after 3 years than a premise-based system. At one car company, the current premise-based CRM system was purchased 7 years ago and the total cost of managing it today are less than €100.000 per year. Migrating from this premise-based CRM to a cloud solution would cost more than €400.000 for configuration and integration of the cloud solution in the legacy landscape and then €200.000 per year for user licenses and administration.

Observability.  There are few success stories that motivate automakers and the dealer networks to migrate from permise-based systems to the cloud. Cloud purveyors promise more flexibility, agility, user acceptance and innovation, but the business impact is difficult to quantify and has yet to be validated. Some auto-makers have told us that the cloud projects they did implement were shadow IT projects funded by discrete departments. The departments told us that the cloud improved their productivity and agility, but could not quantify these results.  

Transferability.   Automakers and the dealer network lack the know-how to design, implement, and manage cloud solutions. Their IT teams are typically veterans who are competent with legacy systems. Cloud know-how is expensive to develop or acquire. Outsourcing is an option, but many automotive companies fear they may lose control through outsourcing.

There, of course, are solutions to all of these issues, which we will explore in subsequent articles.

About the author

Michael Capone

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