Microsoft increases stake in auto industry

Having reshaped a big piece of the world's economy around its Windows software, Microsoft Corp. now wants to do the same thing in the car business.

What the Seattle giant sees there says as much about the future of cars as it does about itself.

"The part we want to play in the future," says Pranish Kumar, group program manager for the Seattle-area software giant's Windows Embedded Automotive business, "is creating a unifying experience -- bringing together all the features and technologies into one common platform. But it will also provide a platform that can be easily upgraded and improved as time passes."

Microsoft is part of a wave of computer industry titans -- with Apple, BlackBerry, Google and others -- competing to play a more critical role in cars. The prize, as they see it, is the expanding and highly profitable part of the car that is evolving as an operating system.

Today that business is largely confined to vehicle infotainment systems, which allow drivers to speak by phone, hear traffic conditions, receive e-mails and find restaurants. But in Microsoft's vision of the future, vehicle intelligence will get more sophisticated.

As smartphones, information apps and other consumer devices perform more ambitious functions, software providers will take a bigger role in vehicle development. And when that happens, software companies will begin to influence other component decisions, including steering, seating and interior cabin functions.

Software companies see another potential line of automotive business. When cars have a single, unified operating system somebody will have the opportunity to regularly update the vehicle systems -- ideally for a fee -- in the same way that computer industry firms now update phone apps and software programs.

Cash-rich player

Microsoft wants to pull the auto industry in this direction. And with revenues of $74 billion and net profits of $17 billion for the fiscal year ended last June 30, Microsoft is a cash-rich force to be reckoned with.

It has been promoting Windows to automakers for a decade now. Ford Motor Co., Fiat Group and Kia Motors Co. rely on Microsoft platforms to coordinate functions such as radio and music storage, e-mail delivery, navigation and personal schedule updating.

Microsoft helped to develop Ford's popular Sync hands-free communications system, which is spreading across Ford's portfolio, as well as Fiat's Blue & Me system.

But Microsoft's automotive engineers and designers say that they are just warming up, and that their future product offerings will help cars move into a new era of smart technology.

The company was expected Monday to launch an online video marketing campaign directed at automakers promoting the idea of "the intelligent car" -- and Microsoft's preparedness to deliver it.

Last fall, CEO Steve Ballmer said that in addition to being a software company, he now wanted Microsoft to become known as a maker of "devices."

"We've been in the automotive arena for a while already," Kumar said. "But we think we can take it a lot further."

That might include working with third-party manufacturers to produce intelligence and detection components, he says -- such as vehicle optics, voice recognition devices and head-up display units. More than likely, Microsoft will never produce windshield wipers, he says. But it might move the wiper controls into a common Microsoft touch screen configuration that they share with headlights and temperature controls.

Plenty of competition

Microsoft is not alone in its vision of an expanded role for software suppliers. QNX Software Systems Ltd., a subsidiary of BlackBerry, sees the same industry trajectory, with automakers turning to software suppliers to unify and coordinate various vehicle controls. Although QNX has little name recognition, it already has global contracts with the likes of General Motors, BMW, Audi and Volkswagen.

Google Inc., through its Android operating system, is hot to expand its role in vehicle technology. Google is now committing r&d resources to driverless car technology. And offstage, one of the fiercest competitors in the computer world, Apple Inc., is emitting signals that it, too, wants to get into the car business. The normally secretive innovator has said barely a word -- except to let slip a phrase in public comments that has auto industry software merchants buzzing: "iCar."

No one knows exactly what Apple meant. And Apple isn't amplifying. But the company is known primarily as a product maker rather than a software supplier -- iPhones, Siri, iPads, Mac laptops. GM just began integrating Siri into the 2013 Chevrolet Sonic and Spark small cars through the Chevrolet MyLink system. At the other end of the price spectrum, Siri is also going into the $300,000 Ferrari FF supercar, along with Apple iPad Minis built into the backs of the front-seat headrests for rear passenger use.

Speculation is that Apple would never be content supplying operating systems for a car. It would be more in keeping with its corporate history to someday produce entire Apple-brand components for the car, suggests Anna Buettner, who follows the vehicle infotainment sector as an analyst for IHS Automotive. It helps that Apple is respected for dependability, she says.

"The most important issue for having advanced software platforms in cars is that they have to be reliable," Buettner says. "It's one thing for a software glitch to occur in your navigation system. It will be a more serious issue in the future if one occurs in your brakes.

"This is what some automakers are still afraid of: Can these software operating systems be completely reliable?"

Automakers back nonprofit

Buettner predicts that still another significant competitor will rise in the emerging software segment: the GENIVI Alliance. The untested nonprofit consortium plans to offer an open-sourced Linux software platform that can be adapted from brand to brand. But unlike the established giants, GENIVI is backed by a string of automakers -- GM, Peugeot, Renault-Nissan, Hyundai, BMW and others, and more than a dozen global suppliers, including Bosch, Continental, Denso, Aisin and Valeo.

One factor nudging the auto industry closer to the computer giants is that product innovation moves so much faster in cell phones and laptops than it does in autos. Cars are traditionally redesigned every four to eight years, and at enormous expense. Electronics and software routinely change within two years.

Andy Gryc, QNX's senior automotive product marketing manager, says the goal of a unifying software platform is to permit auto companies to upgrade their cars' features without replacing hardware.

"The desire is for automakers to do less and less customizing," Gryc says, referring to designing the components of individual models. "The more you have to do, the more time it takes and the further you are from reaching the market.

"You really don't have to rip out all the plumbing every time you redesign a car."

Lucrative upgrades?

Being able to upgrade a car's features through its software brings up another hot point for the industry: The money to be made performing upgrades will be up for grabs.

This will become increasingly significant as vehicle operating systems flourish. IHS forecasts that by 2018, nearly 25 million infotainment operating system platforms will be sold. Not all will be single unified systems like Microsoft and QNX propose; many cars will carry two or more platforms. IHS estimates that just under 12 million were sold last year.

"When a vehicle owner updates his car today, it's really something that occurs in the aftermarket," Kumar says. "Car companies make all their money when the vehicle is sold the first time -- anything after that is really the province of the dealer."

But in the future, automakers could sell software-based enhancements and new features through the vehicle's life.

"We're looking at something of a revolution," he says. "You can monetize the upgrades, and they will go on through the life of the vehicle."

In the past year alone, Microsoft has delivered four upgrades for Ford's Sync system, including added features. A team of designers at Microsoft's multibuilding suburban Seattle campus steadily turns out new versions of vehicle programs. In the basement garage of the design building, mixed in among employee cars, are a fleet of 30 vehicles wired for testing new ideas.

New products can move from idea to working prototype in just two weeks. Testing can be completed and validated in another week.

"We might make a product change in as little as an hour," Kumar says. "We can run a battery of tests in an afternoon. That's a little hard for automakers to get their head around.

"This technology moves very fast, and we're trying to reassure our customers that this is how it works," Kumar says. "It's a lot of change coming at the auto industry."

(Microsoft wants to become key player in auto software originally appeared on Automotive News, sub. req.)

By Lindsay Chappell- Automotive News