The US automotive industry has paid dearly for leading the charge
towards OEM e-business, while European and Japanese firms have been
able learn from their mistakes. But circumspection is unlikely to
pay dividends in the long-term, says Kevin Prouty of AMR
Research
Numerous announcements flood the wires each week about some
software vendor winning a deal at an Automotive Original Equipment
Manufacturer (OEM). Each one of these deals claims to be changing
the way OEMs operate. In most cases, it only changes the way the
software company operates.
My favourite saying is that the two best days in a software
vendor's life are the day he gets his first OEM contract and the
day the company is finally kicked out of the OEM.
The most interesting aspect of OEM e-business is how regional
differences are quite clear in attitudes towards e-business. Using
e-business spending per vehicle produced, while not perfect, gives
a good relative measure by region: North America at $625 per
vehicle, Japan at $220 per vehicle, and Europe at $300 per
vehicle.
The numbers seem to reinforce the belief that American companies
are much more willing to use IT and e-business to solve problems.
Japanese companies tend to use IT only where absolutely necessary.
European companies fall somewhere in between jumping on the
e-business bandwagon and being IT minimalists.
While the numbers seem to reinforce these beliefs, AMR Research
believes that it is much more complicated than that. A pilot
precedes any major systems purchase by a North American OEM. These
pilots generally are lengthy and chew up resources. Pilots are also
conducted in a fragmented manner. North American OEMs are in many
ways piloting themselves to death. Software vendors are becoming
increasingly wary of becoming involved in pilots where the project
lacks executive visibility or a clear end vision. On the other
hand, relationships like the ones Ford has with Synquest, e-Steel,
and WhereNet would never have made it to funding without someone at
Ford willing to take a chance on the pilots.
In contrast, European OEMs rarely pilot large projects. While
riskier, this approach speeds introduction of proven technology and
usually guarantees executive approval and commitment. This is why
established vendors like SAP, EDS, and IBM wrap up big deals in
European OEMs.
European companies are buying into a relationship based on history.
The downside is that this approach tends to keep European OEMs from
adopting technology that is not proven. They have to wait until SAP
folds the new technology into its product.
Japanese OEMs continue to focus on the process; they use technology
only after a process is made as efficient as possible. These
companies also don't use any technology that doesn't have a proven
track record. Japanese OEMs have large research organisations in
the United States that monitor what North American OEMs are doing
and learning from the North American OEMs' mistakes. This keeps the
number of pilots low, resulting in lower IT spending per
vehicle.
But these are generalisations and as companies become increasingly
global they lose their regional identity and are forced to adapt to
new ways of doing business. Still, the companies that have the
solid business processes in place and can then utilise technology
to become more profitable will be valued appropriately. In the end,
the foundation business process is important, but ignoring
technology can be just as risky as being on the bleeding edge.