The Auto Industry and IBM

By Dennis Cuneo

Connected Cars?Is that like a Smart Car?

Not exactly…Connected cars are sort of like smartphones, in that they are

equipped with Internet access, as well as a wireless local area network, allowing the car to share Internet access to other

devices both inside and outside the vehicle.

According to the IT research and advisory firm Gartner, cars will be the next “great connected device” after smartphones. By 2020, they predict that one in three cars on the road will be connected, and a $47 billion industry will become a $270 billion industry.

While the connection might not seem immediate, the current state of the auto industry is extremely similar to

that of IBM 30 years ago.

Wait, what?

IBM, 1985:• Over 400,000 employees (five times more than Apple does today). • Competition from other tech companies was minimal, with Digital

Equipment a fraction of the size and Apple going into a tailspin after firing Steve Jobs.

• Dominated the then-small personal computer (PC) market.

But then…

• Microsoft introduces Windows, as well as the term “software”, to the general public.

• Microsoft replaces IBM as the PC king.

10 years later…

• Windows dominates the PC game. • Microsoft has $72 billion market cap, compared to IBM’s $60

billion. • IBM is a technological dinosaur.

What happened?• IBM only operated the manufacturing side, so they

gave the operating system to Microsoft. • Without control over the platform itself, PC hardware is

nothing more than a commodity with negligible margins.

Could that happen to the automobile industry?

• Tech companies such as Apple and Google are pushing for more participation in automobile dashboards.

• Tech companies have been making inroads into the domain of automakers’ in-house proprietary systems.

• Cars could become the PCs of the late 80s and early 90s, where consumers are more interested in what software the car runs, as opposed to what kind of car they’re driving.