The Fast Race in Automotive: Digital Transformation

Digital transformation is reshaping every industry. With the emergence of new technologies and systems that deliver faster and better service, the influence of major players, particularly in the manufacturing sector, is steadily diminishing. In the past, high capital requirements posed a barrier to new entrants in the sector and allowed manufacturers to operate with virtually no competition. This has undergone a major transformation with digital technologies such as cloud, artificial intelligence (AI), and the Internet of Things (IoT).

Particularly in the automotive industry, new market players offering innovative smart mobility alternatives and connected vehicle features are forcing manufacturers to keep up with a rapidly evolving competitive landscape to stay afloat. Staying in the game requires open collaboration and real-time data exchange with backend partners to deliver smarter and more personalized services. This is increasing demand for direct and private traffic exchange, that is, interconnection, with key business partners.

Where Is the Automotive Industry Heading?
As the industry rapidly evolves toward an inclusive and service-oriented model, McKinsey and PwC foresee significant changes in the automotive value chain. According to McKinsey, by 2023, 46 percent of revenue growth in the automotive industry will come from digital services. According to PwC's research results, by 2030, the share of profits from traditional car sales, spare parts, and after-sales services will decline from 70 percent to 55 percent of total automotive market profits, while new profit shares will rise from 5 percent to 25 percent. Therefore, it becomes critical for automotive companies to undergo a transformation based on factors such as agility in IT infrastructure and company operations, real-time customer engagement, collaboration toward a common goal, and scalable service delivery in order to stay in the game and meet customer demands.

So How Should Change Happen?
With the entry of technology companies into the game and the acceleration of innovation pace, digital transformation in the automotive industry is accelerating. While new business models such as electric mobility, shared mobility services delivered through mobile apps, and drone-based product delivery are being developed, traditional manufacturing giants are also trying to adapt to the connected vehicle model. Original Equipment Manufacturers (OEMs) need to consider several factors for new connected vehicle product groups, such as customer expectations and data communication and security.

In this digitally driven future, OEMs need to both ensure compliance of customer data with regulations and manage the critical data analytics workload. This change will require many players in the automotive industry to collaborate on architecture and security. Additionally, OEMs must collect and share data in a way that not only protects users and delivers a superior customer experience but also ensures that vehicle connectivity remains seamless even when customers travel with their vehicles across different countries. This requirement is becoming both a major catalyst for overall growth and one of the industry's greatest challenges.

Connected, autonomous, shared, electric (CASE) vehicles are creating a transformation in the global automotive industry. Although connected vehicles have been on the market for more than 20 years, until relatively recently their features were largely limited to emergency assistance, location tracking, remote diagnostics, and audiovisual entertainment. But there is much more.

Automotive companies have to work with many business partners to meet all the expertise requirements for producing and maintaining CASE vehicles. OEMs, meanwhile, face some challenges in transitioning from an independent product to a platform structure. Accelerating innovation and gathering data in a platform environment conflicts with decades of rigid workflows, stable supply chains, and long-term R&D and production planning. Given the uncertainty about business models and revenue opportunities in CASE developments, it is neither realistic nor cost-effective for OEMs to build private data centers worldwide. Digital infrastructure incorporating hybrid and multi-cloud usage not only provides access to the platforms needed but also enables companies to interconnect within an Equinix data center. Connecting directly and securely with business partners in this way provides a significant business advantage while also being of great importance for long-term success in a sector where competition and challenges are constantly increasing.

Managing Change
The 2020s will be remembered as the era when connected and autonomous vehicles finally hit the road. While this creates a great opportunity for the industry, it also means facing a massive challenge. Industry players need to move beyond existing technology to digital platforms with many cloud providers, product suppliers, and technology service providers.

At Equinix, we believe that connecting companies directly and securely and exchanging private data are critical for autonomous manufacturers looking to successfully leverage digital infrastructure. As a result, automotive businesses can eliminate the distance between data sources and access ''digital edge'' level via Platform EquinixTM, benefiting from our 210+ data centers and interconnection solution portfolio, which hosts more than 1,800 network providers, 2,900+ cloud and IT solution providers, and many potential business partners.

Equinix Cloud Exchange FabricTM (ECX FabricTM) offers an alternative to internet-based software delivery by providing private and secure global interconnection for data transfer. ECX FabricTM directly and dynamically integrates distributed infrastructure by connecting data centers in more than 52 metros worldwide via software-defined interconnection. In this way, it not only improves data flow and increases application performance but also ensures data security and offers scalability.

Companies continue to prepare for the CASE (connected, autonomous, shared, and electric) vision. The rise of new technologies such as artificial intelligence, analytics, new data management, and platform strategies in the industry signals important changes in network architectures. With the global digital platform delivered through Equinix's data center and interconnection services, the automotive world can rely on us fully for developing, testing, and delivering digital and mobility solutions. To learn more about how we will contribute to the future of the automotive world with our data center in Istanbul, contact us.

Learn more: 

• By listening to our Autonomous Driving webinar recording, you can discover how a hybrid IT infrastructure used by Magna Electronics Europe is accelerating the development of innovative advanced driver assistance systems (ADAS).
• Review the Automotive Infobite to discover how interconnection and data sharing through the right platform improves the value creation process.
• Additionally, if you'd like to see how industry leaders are leveraging digital ecosystems to meet growing demand for connected vehicle features and digital services, the Digital Edge Strategy book for the Automotive Industry may also be of interest.

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