Nuance’s Automotive Summit, which took place in Detroit last week, highlighted the leadership position Nuance and one of its most prominent customers, Ford Motor Company, now command in the area of automotive interfaces. While battles may continue to be fought over voice, touch, haptic, and other in-vehicle interfaces, these two companies are positioned at the vortex of the debate leading the charge to develop and deliver safe vehicle interfaces and redefining the automotive branding process. The assumption of this leadership mantle occurs at a time when car makers and their suppliers have been running for cover under heavy fire from regulatory powers in Washington, DC. And the Feds have taken on the added support of lobbying groups and some research organizations. The Federal government’s regulatory arm has stepped into the roadway seeking – like a speed-gun wielding traffic officer – to impede the industry’s headlong advance toward connectivity and smartphone integration in cars. Car makers and the supplier community, by and large, have taken one of two courses. Most have remained silent on the issue of the day – driver distraction – hoping it will either go away or that some white knight, such as the Alliance for Automobile Manufacturers or some other group will calm the waters for them. Others, such as General Motors’ OnStar division, Volkswagen, and QNX have chosen to hit the accelerator. In recent weeks, OnStar has announced its plans to enable Facebook connectivity in the car. Volkswagen and QNX have posted YouTube videos showing early executions of terminal mode smartphone connectivity. These videos show all forms of smartphone images displayed in-dash with no context – ie. no discrimination between what will and won’t be accessible when the vehicle is in motion. In contrast, Ford has been reaching out to regulatory authorities on multiple fronts. The very same week OnStar was announcing Facebook connectivity, Ford representatives – together with Nuance executives – were meeting on Capitol Hill in Washington with legislators explaining the state of the art in voice-based in-vehicle interfaces. Prior to this outreach effort, which is ongoing for both legislators and regulators within the Department of Transportation’s National Highway Traffic Safety Administration, Ford also responded to complaints from the DOT’s now-famous director, Ray LaHood, and altered some of its advertising imaging and messaging. This was LaHood’s first missile fired across the bow of Ford’s Sync interface. The advertising messages are critical. Both Ford and OnStar are running some of the most highly visible television ad campaigns in the U.S. showing off their in-vehicle systems – at a time when both firms are fighting their way out of the steep sales decline of 2009. It is absolutely essential that both companies communicate effectively with so much unwanted attention being focused on these systems and with important sales and market share on the line. OnStar bears the added burden of embedded telematics industry leadership. No other auto maker has taken the embedded telematics approach as far as OnStar which now, after 15 years, has nearly six million subscribers. But with diminished vehicle sales and a virtually unchanged renewal rate, OnStar is facing a potential erosion of its subscriber base. In spite of all it has done to offer compelling solutions to consumers, the company now feels pressure to do more to boost its subscription renewal rates. The company is also swimming against a strong demographic current as GM’s historical customer base has aged. The company is clearly looking to OnStar to not only maintain its previous status as a profitable division by maintaining and adding to its existing subscriber base, but also as a potential source of demographic stimulus to reach out to younger car buyers. GM is not alone in reaching out to younger buyers. Almost every car maker is in a perennial campaign to tap into the next generation of car buyers. And with smartphone purchasing demographics corresponding with this target market, the smartphone connectivity proposition has become essential. (GM and OnStar are somewhat limited by the current vehicle offering which lacks for a robust line-up of small cars targeted toward a younger demographic.) The advertising targets can hardly be missed in the existing television spots which show young people interacting with OnStar systems to obtain location or vehicle information. (A minor pet peeve of this analyst is that it seems that not all these young people, even when they are in the front seat, are seatbelted in the ads – but company executives insist they are all safely secured.) The OnStar television campaign dovetails nicely with GM’s parallel social networking marketing initiatives on Facebook, Twitter and other Web-based communication channels. The smartphone application for controlling vehicle functions and accessing vehicle data on the Chevrolet Volt is another manifestation of these efforts. What is lost in this campaign, though, is the rock solid safety and security message that brought OnStar to this industry leadership position in the first place. Ford has also been youth-oriented in its embrace of connectivity technology. Ford’s ads emphasize the safe use of technology in cars using voice interfacing technology. Watching these ads as a participant in the industry is mesmerizing given the degree of focus on the human machine interface in the car. (While this analyst would prefer the driver not touch the display while the vehicle is in motion, Ford has made clear its adherence to AAM guidelines and the limitations of this functionality in a moving vehicle.) What OnStar and Ford both realize is the need to reach out to younger car buyers. The key motivator here is the need to provide for smartphone connectivity, both for safety and functionality. Younger smartphone, and car, buyers are primary targets for location-aware applications ranging from traffic and navigation to social networking, according to Strategy Analytics research. The drive to connect smartphones is behind the enthusiasm for Nokia’s Terminal Mode initiative along with Apple’s iPod Out, Delphi’s D-Connect, Ford’s AppLink and similar solutions. But only Ford has stepped to the forefront with a vision and implementation of a walled garden-type approach to application deployment. There is a recognition in the industry of the appeal of both smartphone connectivity and application deployment. Ford talks about the beamed in, brought in and built-in strategies for delivering content, applications and services, but the underlying philosophy is control. The power of the Ford solution lies in five value propositions: Distraction mitigation: The voice-based interface minimizes eyes-off-the road time. Demographic targeting: The smartphone interface appeals to social networking young people. Future proofing: The Microsoft-based platform allows for application development and deployment thereby enhancing the value of the solution over the life of the vehicle. Subscription anxiety: The connectivity solution allows the consumer to defer the subscription decision and places the burden of data transport on the consumer’s existing wireless subscription. Branded HMI statement: Ford IS Sync. Ford IS MyFord Touch. The interface has become the brand. A new era in the automotive industry has arrived. At last week’s Automotive Summit, Nuance emphasized all of these points. Whether the solution being shown was the company’s touchpad character recognition, hybrid on-board/off-board speech recognition, enhanced echo cancellation/noise reduction, or focused search all were targeted at reducing distraction while providing a branding pallet for car makers and their suppliers. Presenters at the event, including Nuance executives and partners, pointed to research demonstrating the efficacy of voice and touch interfaces for specific types of tasks. Presenters raised questions regarding interfaces such as BMW’s i-Drive and touch screens generally, favoring voice and console-mounted touchpads (ie. the Audi A8). The consensus opinion appeared to be that touchscreens will survive, thanks in part to Ford’s success in proving the value of the solution. On the other hand, i-Drive-like interfaces will likely continue to come under fire as what one executive described as a “linear keyboard.” Now more than ever, though, rigorous research is being applied to weigh critical HMI decisions and eyes off the road time is more than ever a deciding factor. Conclusions: The next step in the process of realizing the potential of smartphone integration is enabling application downloads. Several solutions have been proposed including: Direct handset display: Nokia Terminal Mode approach. Walled garden: Ford application deployment approach. Application validation: Delphi et. al. provide application validation. Single application: Handset application controlling access to all apps. App store validation: Apple, Blackberry et. al. provide application validation. Carrier validation: See above. What is likely to emerge is a hybrid of on-board/off-board application control shared between the vehicle and the mobile device within the context of an OEM’s walled garden. When available, server resources will assist with application functionality such as search or streaming data or content. But regardless of the source of data or service, the entire solution on-board and off-board will be encompassed by the OEM’s walled garden. The vehicle and data security associated with OEM control will increasingly be non-negotiable. Challenges to this ecosystem are already emerging as application developer candidates for the Ford platform are expressing frustration with the process of putting the Ford software developer kit to work. Ford is seen as slow to respond to developer needs, a problem that is not expected to be resolved soon. OEMs will never be able to move at developer speeds especially where vehicle safety, security and integrity are at stake. So, new voice-based interfaces and Bluetooth wireless connections have enabled a new branding proposition in the industry coinciding with growing demand for safe mobile phone connections, a youth-oriented demographic outreach (particularly in compact car segments), and the need to future proof cars to keep up with consumer electronics market advances. More than ever cars are defined by their human machine connections. Ford and Nuance have much for which to be thankful and many of those thanks ought to be directed to Ray LaHood in the Department of Transportation. Much as most industry executives are want to complain and criticize the DOT for its single-minded anti-distracted driving campaign (when drunk drivers are actually responsible for more damage), the effort has focused consumers on their risky behaviors, opened the door to creative solutions, and stimulated demand following the industry’s worst ever downturn. Additional insight: http://bit.ly/c0OLhT - Consumer Implications for Smartphone-Vehicle Connectivity  - Chris Schreiner - Automotive Consumer Insights http://tinyurl.com/34hidb5 - Smartphone Market Evolution and the Automotive Opportunity Implications - Mark Fitzgerald - Automotive Multimedia and Communications Service http://tinyurl.com/2qx88eo - Automotive Connectivity: Beyond Bluetooth Solutions - Mark Fitzgerald - Automotive Multimedia and Communications Service http://bit.ly/c1nvTq - Consumer Interest High for Connected Safety and Security Services - Chris Schreiner - Automotive Consumer Insights http://bit.ly/aGJHDj - Smartphone Market Evolution and the Automotive Opportunity Implications -Fitzgerald - Automotive Multimedia & Communications

The arrival of Nokia’s Terminal Mode technology for smartphone integration and ATX Group’s downloadable application for Mercedes-Benz’s TeleAid telematics service has highlighted the intensifying battle between OEMs and third-parties over car owners and the in-vehicle experience. OEMs are being forced into the business of certifying applications for use in the car at the risk of losing control of both the customer and the user experience. And the encroachment of third-party apps is raising serious security concerns. The introduction of the ATX downloadable app is perhaps the worst case scenario for an OEM given the existing relationship with Mercedes TeleAid subscribers. The application was neither created by Mercedes nor was it certified or approved by Mercedes. The result is the first instance in the industry of a service provider competing with an OEM for the OEM’s customers. The clever application allows for the wireless transmission of destinations to Mercedes navigation systems equipped with TeleAid connections and also allows for remote door unlock among other features. The purpose of the application is to extend and maintain the existing ATX relationship with legacy TeleAid subscribers. But it is an intrusion most unwelcome at Mercedes headquarters. Most of the functions offered by the ATX app were made available in a similar app launched by Mercedes last Fall as part of its mbrace telematics service launch. The difference between the two is that mbrace, launched on November 16, 2009, is part of Mercedes’ introduction of a new telematics service relationship with Hughes Telematics. Aside from the relevance of the ATX announcement to the ongoing contretemps between Mercedes and its service provider (the two have yet to resolve their legal differences), the implications for the industry, telematics and the app store model are critical including: Management of the telematics service Ownership of the customer Control of the telematics marketing message Control of dealer marketing and incentives Certification of vehicle related applications Control of the in-vehicle user experience But these issues are inherent in the app store model itself. For Mercedes, the mbrace app, for select iPhone and Blackberry smartphones, enables a similar feature set as the ATX app and also sets up the ability for Mercedes to create its own app store. The mbrace app was groundbreaking because it was the first from an OEM to enable remote functions from a handset – demonstrated but not delivered by others – while simultaneously changing the telematics service provider and call center phone numbers – effectively transferring existing TeleAid customers (now using ATX) to the mbrace service. Mercedes even stated plans to introduce new applications periodically, the first of which are expected to arrive later this summer, propelling Mercedes to the front of the automotive app store class, where it is now joined by Ford (which seems to introduce new applications monthly). The ATX announcement, however, reveals the proverbial fly in the app store ointment. If ATX can divert Mercedes’ TeleAid customers, which OEM will be the next to see an app divert their customers? ATX’s app allows the existing TeleAid subscribers, of which there are an estimated 400,000, to maintain their relationship with ATX and provides them with functionality similar to that offered by the new mbrace service. Since customers are paying ATX in total nearly $100M for the service, this is important. To help drive the message home, ATX is offering Mercedes dealer sales personnel $100 spiffs to communicate the message to existing Mercedes owners. (The only service being offered by dealers on new vehicles is the mbrace service.) Meanwhile, Mercedes is offering a 20% commission - worth about $100 - to dealer F&I and sales executives to promote longer-term (18 month) initial mbrace subscriptions. (Customers already get six free months of the basic service and three free months of the Plus service which includes concierge support among other functions.) There is the potential for a mixed message here, although the ATX message is only for existing owners, while mbrace is targeted at both existing owners and purchasers of new Mercedes cars. (A recent visit to a Mercedes dealer revealed no visible onsite literature or POP materials for either TeleAid or embrace – ie. telematics is still not part of the core Mercedes message. To top of the lack of telematics enthusiasm at the dealership, the F&I exec said he didn’t see the need for telematic services since he owned an iPhone!) Because of the terms of its now concluded agreement with ATX, Mercedes cannot promote, sell or install the mbrace service for any Mercedes vehicles purchased between Nov. 16, 2008 and Nov. 16, 2009 until after Nov. 16, 2010. It is also for this reason that Mercedes is hampered in its marketing and promotion of mbrace, although various Mercedes Websites make clear that the only service currently endorsed by the company is mbrace. The irony in this battle for customer ownership between ATX and Mercedes is that the average Mercedes customer is likely not purchasing the vehicle for the telematics service. Little or no advertising activity is committed to conveying the telematics message. And, yet, with an estimated 400,000 subscribers paying upwards of $240 per year, the revenue stream is valuable to ATX, Hughes and Mercedes. Although unique, the ATX-Mercedes situation is analogous to the emerging automotive app store proposition. Nearly every OEM is scrambling to demonstrate or introduce an app store strategy of some kind following the perceived success of Ford’s Sync model. But no one is pondering the potential for an application to commandeer an OEM’s marketing, sales and telematics strategy as well as the user experience in the vehicle. Nokia’s Terminal Mode capability has raised similar questions of control of the user experience in the car. It is for this reason that Delphi introduced its own alternative to terminal mode which provides for a Delphi application certification process and OEM control of the HMI (http://bit.ly/94Mn1V). The broad industry perception of the Nokia solution, which reproduces the display of a mobile device into the vehicle and enables the use of on-board interfaces, is that it fundamentally alters the carefully crafted vehicle HMI. There is no doubt that no single company – Nokia, Delphi, RealVNC, Airbiquity, Continental, Parrot, etc. – will control the critical smartphone interface. But what is clear is that it has become a critical battleground Not surprisingly, Apple must be watching these developments and snickering. Apple’s iPhones have enabled a wide range of services, application and content delivery to drivers with marketing, revenue and HMI implications outside of the scope of the OEM’s plans. Customers enter dealer showrooms on a daily basis looking for cars with which their devices can connect – the classic case of the tale wagging the dog. The Mercedes-ATX situation provides a glimpse of a brave new world where car makers are simple pawns in a chess match controlled by carriers, handset makers, application developers and service providers all seeking to extract revenue from car owners. The good news is there is opportunity for those companies able to offer a secure smarthone interface that enables an OEM’s brand definition. OEMs have already taken steps to create certification procedures along with their own in-house development teams. Car makers will never have complete control over applications such as Internet radio or location-based services. But applications that tap into vehicle data and functions, such as remote door unlocking or vehicle starting, are areas that OEMs will demand control. Mercedes’ new telematics partner, Hughes, was once the ultimate embodiment of the external third party seeking to implant a revenue-generating module in consumer vehicles. The automotive industry rejected the Hughes model – particularly its hardware platform – opting instead, as in the case of Mercedes, to leverage the Hughes back-end infrastructure. What could help to make all parties play nicely together is revenue sharing. OEMs clearly want a cut from the stream of revenue flowing from off-board applications. The long-term winners will be those solution providers that provide for that OEM piece of the action and, most importantly, bullet-proof security. Hughes had the right idea: to create a platform in the vehicle for accessing revenue-generating content, services and applications. Little did Hughes know at its inception that the smartphone would replace its embedded module. OEMs know now that they must take the steps today to create the connections and define the relationships that will allow for mobile device connectivity while keeping the OEM in a secure user experience/revenue producing loop. Additional Insights: http://bit.ly/94Mn1V - Delphi Emerges at SAE with Answer to Nokia Terminal Mode - Lanctot - blog - Strategy Analytics http://bit.ly/b5W8ZS - Nokia and RIM Push Into Automotive as 'Apps' Competition Mounts - Joanne Blight - AMCS http://bit.ly/aIm4vK - Global Automotive OE Telematics Market 2008-2016 - Joanne Blight - AMCS

Just as companies such as Delphi, Nokia and Apple are enabling in-vehicle HMI control of smartphone applications, Ford Motor Company is turning interface implementation up a notch with its new Sync AppLink, which will allow voice control of Android and BlackBerry smartphone apps. Sync AppLink will be available as a downloadable software program on the 2011 Fiesta, due later this year. The launch will test the limits of in-vehicle HMI technology for enabling safe access to social networking applications. Reading text messages or emails and responding with predetermined messages has already been enabled in Ford vehicles, but demonstrations of OpenBeak, which allows steering wheel controls to scroll through Twitter messages, suggest a more potentially distracting proposition though safer than using the mobile device's own voice controls or touchscreen. First demonstrated at the Consumer Electronics Show in January of this year, AppLink will enable voice control of the Pandora music service, Stitcher Internet radio content manager and Orangatame’s OpenBeak Twitter interface. Ford is simultaneously launching its Mobile Application Developer Network (www.syncmyride.com/developer) for enabling the development of Sync-enabled applications. Ford says it will introduce AppLink on all Sync-equipped vehicles next year, as well as provide interoperability with the iPhone and other smartphones. The company also says updated versions of each app, incorporating the Sync application programming interface (API), will be available through Android Market and BlackBerry App World for customers to download. Ford’s delivery platform, therefore, includes both its own syncmyride.com Website and the handset maker app stores. Ford says that as Sync-enabled versions of existing apps are released into the app stores, users will be prompted to download the latest version upon connection. Ford’s strategy clearly indicates that the company will handle the certification of application for use with Sync even if it is not the creator of all of the applications. While Ford’s 2M vehicle addressable user population is the largest in the automotive industry, the launch of developer support will be the ultimate test of Ford’s ability to attract third parties to its platform. Ford says interested developers can submit innovative ideas, and sign up for the latest information and news about the Sync application programming interface (API) and software development kit (SDK). The package will allow developers to modify existing applications and create all-new apps that can successfully interface with Sync. Ford says it is completing beta-testing on the SDK. Once beta-testing is complete, a broader release of the development tools is planned for later this year. The company says one of its development partners created a Sync-enabled version of its app just three days after receiving the development tools. Conspicuously missing from the Ford announcement is a provision for safe operation or more limited use of a smartphone in a vehicle. The recent CTIA show in Las Vegas highlighted a range of applications intended to restrict or modify smartphone usage in a moving vehicle. Ford may want to consider fast-tracking one of these applications in deference to concerns expressed in Washington. Ford has embraced the anti-distracted driving messages emanating from the National Highway Traffic Safety Administration. Ford’s 911 Assist application actually received an early endorsement from the National Emergency Number Association (NENA). But whether this new applications will be blessed by government safety authorities remains to be seen. According to a report in USNews, NHTSA director Ray LaHood contacted Ford CEO Alan Mulally directly to have a particular ad removed, which depicted what appeared to be a distracted driver using Ford's Sync (http://bit.ly/aTbVvv). Ford complied with the request, but USNEWS says LaHood is still opposed to the Ford Sync solution. Additional Insight: Nokia and RIM Push Into Automotive as 'Apps' Competition Mounts

http://bit.ly/cJ6dDF - #Ford’s Bite of the #Apple Shows One Path to Automotive #AppStore Success - Lanctot - blog - Strategy Analytics http://bit.ly/b9oVAt - CTIA 2010: Distraction Mitigating Apps on Display - Schreiner - Strategy Analytics

The battle to dominate automotive connectivity has finally been taken on by Research in Motion (RIM) with the announced acquisition of Harman International's QNX Software Systems, a real-time operating system supplier focused on the automotive market. RIM had appeared to be sitting on the sidelines in recent months as fellow handset maker, Nokia, announced its terminal mode strategy and Apple grabbed multiple headlines for innovative in-vehicle connections from marketing partners. The acquisition of QNX gives RIM instant credibility as a leading automotive connectivity player and promises a spirited battle for automotive market share. The acquisition was announced this morning. The announcement says the two companies have reached an agreement for RIM to acquire QNX. The deal is subject to regulatory approval and is anticipated to close within 35-45 days. This strategic move is expected to further strengthen QNX's penetration in the automotive market and foster innovation for markets served by all parties. The move solves marketing challenges for both organizations. QNX's software is used in instrument clusters, head units and automotive Bluetooth solutions. The company had found tremendous success as part of Harman, which in recent years has come to dominate the luxury and near luxury segments of the automotive market. QNX is best known for its high-end infotainment software solutions used by Mercedes-Benz, Porsche, BMW, PSA, Hyundai and Chrysler, among other OEMs. As part of Harman, though, QNX's ability to break out into larger volume market segments was somewhat limited, and Microsoft had been winning most of the highest profile (and higher volume) automotive connectivity platforms including Fiat's Blue&Me, Ford's Sync and Kia's Uvo. At the same time, Apple was increasingly emerging as the automotive connectivity device supplier of choice for consumers and, by extension, OEMs as both the iPod and iPhone helped establish the iTunes App Store model as a compelling content, application and service delivery platform for the automotive market. It is true that some OEMs, such as Mercedes with its mbrace smartphone app, made allowances for Blackberry connectivity along with Apple's iPhone. But a growing number of OEMs, such as BMW, have been going out of their way to provide proprietary Apple connectors to enable the use of in-vehicle interfaces to access smartphone content. With few exceptions, Blackberry has been receiving no such support from OEMs and its devices remain enterprise-focused and ill-suited to automotive infotainment uses. While QNX's partnership with Alcatel-Lucent promises to target the complete spectrum of in-vehicle connectivity, a partnership with RIM opens up wider market opportunities for both QNX and RIM. The timing of the deal is ideal given that several OEMs participating in volume segments of the market have yet to launch branded, high-profile connectivity solutions. There is still time for a RIM-QNX collaboration capable of helping RIM vault into contention with both Nokia and Apple for automotive connectivity leadership. RIM also brings its unique global managed network added value to the proposition promising enhanced capabilities for in-vehicle applications that other handset suppliers are unable to match. It also presents a potential challenge to telematics service providers such as WirelessCar, Airbiquity and Telecommunications Systems. The importance of the in-vehicle connection has become increasingly important as consumers seek to use their smartphones in a growing variety of settings ranging from the home to the office and the car. QNX's existing position in the automotive market will instantly bring credibility to RIM's initiatives. It also introduces an entirely new value paradigm combining the virtues of device connectivity with the advantages of the managed network. The move is also a positive for Harman as it frees up the company to work with a wider range of software providers. Harman cannot afford to ignore the Genivi Alliance operating system, favored by its largest customer BMW. But Harman may also find it expedient to bid on Android- or Microsoft-based projects. Harman gains greater flexibility by decoupling itself from QNX. Of course, in reality the two companies will be virtually joined at the hip for the foreseeable future with a wide range of programs already underway and in the pipeline expected to extend for more than five years into the future. RIM, though, is likely the bigget winner. The company has been confronted with pressure to extend its operating system software to other industries such as netbooks, consumer electronics devices and, yes, automotive applications. The acquisition of QNX is an excellent door opener to these potential avenues of growth. QNX is in a similarly advantageous position to profit from wider market opportunities. Of course, while the move gives RIM a strong hand in contending for automotive connectivity opportunities it is likely that the merged company will continue to collaborate with Apple. QNX has a long history of supporting Apple in the automotive market including the most recent announcement of enhanced support for Apple iPods in the QNX Aviage Multimedia Suite.

Lately industry observers have been predicting the arrival of the automotive app store along the lines of the Apple model. The predictions seem to suggest that this is a simple and obvious proposition with a single business model and development path. In fact, it is a complex and evolving proposition with no single solution or magic bullet. Ford Motor Company and Mercedes-Benz have already learned how challenging this proposition really is. Both organizations have successfully developed – in-house – their own applications – an expensive, labor intensive, and time consuming proposition. But application development is only part of the challenge. Here is the complete list: 1.         Platform selection – Which handsets will be supported? Which carriers will be partners? Which operating systems (versions!) will be adopted? 2.         App store selection – Which app-store(s) will be supported or used? Carrier? Handset maker? Third-party? Own branded? 3.         Pricing model – Free? Free for limited time? Free with premium add-ons? Free with paid premium version? Subscription (monthly, annual, lifetime)? Pay per use? Sponsored or ad-supported? 4.         Application acquisition – Download? Activate on-board app? Access cloud-based service? Access device-based app? Dealer install? 5.         Handling of upates – Automatic wireless? Customer self-service with USB drive or direct connection of handset? Dealer? Recently announcing the sale of its second million cars equipped with Sync, Ford appears to be having the most success, early on, in the automotive app business. Ford appears to prefer to distribute its Sync application directly from its www.syncmyride.com Website. This makes sense since some of the applications, such as 911 Assist, require a dealer installation. The Website also provides detailed phone and media device compatibility information along with software upgrade information, application demos and FAQs. Most of the Sync services are available for free for the first three years, and some require a data plan. The data plan requirement reflects an industry-wide inclination to leave data charges to the customer. The provision of free applications to Ford customers reflects a market decision to leverage Sync to sell more Fords – a game plan torn straight out of Apple’s playbook. Based on Strategy Analytics analysis of the Apple business model, the app store is positioned either as a loss-leader or breakeven proposition. The primary purpose of the Apple app store is to sell more iPhones, iPods, iTouches and, now, iPads. Similarly, Sync is intended to sell Fords and, judging from the fact that 2M Fords have been sold with Sync the strategy appears to have traction with consumers. The Sync proposition also has traction with dealers and fits well with the existing Sirius Travel Link services both of which are enabled by Nuance speech recognition. Both offer an effective customer demo. At Mercedes-Benz, the mobile application is called mbrace, which is also the name of the company’s new telematics service, which replaces Tele Aid. While Ford’s Bluetooth-enabled application works with most Bluetooth-enabled phones, mbrace is compatible with a narrow list of iPhones (OS 2.2.1 or later) and Blackberries (4.5 or later) including GPS models for customers that want to access location-aware applications. The mbrace application can be obtained from Apple’s iTunes store or Blackberry App World and the only carriers that are supported today are AT&T and Verizon Wireless. The mbrace service is $240/year or $480/year (@$20/month) for mbrace Plus which includes concierge and other location-aware services. Of course, Mercedes could always vary this pricing depending on its marketing objectives. Mercedes has not yet positioned mbrace as a service offering designed to sell more cars. The immediate purpose of mbrace was to replace the existing telematics service provider and create a mobile phone integration platform. And since Mercedes is also focused on providing premium telematics services first, as opposed to simple infotainment tasks, the company does recommend that the customer have an unlimited data plan. This is not a big deal considering most smartphone customers are required to purchase data plans. Like Ford, Mercedes is interested in rolling out additional applications from third parties on a regular basis. Ford has gotten a head start on this effort with the release of its software developer kit. For now, Mercedes has been content to continue to do most of its development in house. The latest application from Mercedes, also for the iPhone, is intended solely for the Smart vehicle line and includes a full suite of infotainment applications. There is no announced plan to bring this application, which works with a separately purchased cradle, to Mercedes-branded vehicles. The real challenge for car makers is that the mobile market is a moving target. Market leadership between handset makers, operating system suppliers and carriers is a dynamic environment ruled by supplier innovation and consumer preferences. Ford’s choice of a combined Bluetooth and USB interface to enable Sync has made it easier to keep pace with the changing array of available phones. But testing for compatibility remains a substantial undertaking. (The current Ford Sync compatibility chart is nine pages long.) Apple’s influence on this market has been to add a couple of layers of complexity or, to be charitable, opportunity. By opening up its app store to third-party developers, Apple signaled a key turning point in the app store model. Developers are now able to choose the platforms they want to develop for based on criteria such as size of addressable market, amount of revenue share, variety of available revenue models, and ease of doing business. With its rapid rate of customer acquisition and the flexibility of its application revenue models, Apple has raced ahead of competing app stores in attracting application developers and applications. (Apple has even gone so far as to provide a tool for developers to target pricing tiers to specific date triggers: http://bit.ly/a4ETQw.) Strategy Analytics has estimates of revenue shares (available to clients) with the caveat that these percentages vary and change. Ford’s decision to offer Sync for free for an extended period of time along with additional free applications reflects the desire to build an attractive addressable market. While handset makers such as Nokia (with its Ovi store) and carriers can target massive user populations, car makers are more challenged in rapidly building a sufficiently large user community. Ford has a significant jump on competitors with its 2M unit addressable market. App stores are coming to the automotive market, but the path will be a crooked and expensive one. There is no single model that will work for every player. Ford and Mercedes are pursuing similar paths with completely different approaches. Every car maker will have to find its own way. Two things are clear: The investment in an automotive application store is a multimillion dollar proposition involving significant and ongoing costs in development, support and marketing. The potential upside, though, is the opportunity to redefine a brand and increase sales and market share. Ford’s apparent success to date is a demonstration that at least one version of the Apple model can work in the automotive market. Further Insights: Wireless Media Strategies: How Apple Changed the Market for Mobile Applications – David MacQueen – http://bit.ly/9KSuVL Automotive Bluetooth: Profile Strategy Key to Infotainment Success – Mark Fitzgerald – http://bit.ly/9qEXbU CES 2010: The Arrival of Converged Automotive Multimedia Products – John Canali – http://bit.ly/9gp4yo

No, not really. But it seems as if that headline could be written any day now. Apple’s influence inside the car has become as pervasive as Google’s influence outside it. Apple’s iPods and iPhones have fundamentally altered the automotive audio experience and are speeding the demise of the in-car CD player.

 

The electronics industry may be abuzz regarding the impending arrival of the Apple “iSlate” tablet computer, but auto makers and their suppliers are wrestling every day with the impact of hundreds of millions of iPods and millions of iPhones. Even telecommunications companies have felt Apple’s touch, causing them to re-evaluate flat rate data plans as iPhone users tune in to Internet radio and streaming video applications en masse.

 

But Apple’s influence began 6-7 years ago. Apple’s iPods arrived on the market around the same time aftermarket companies were toying with the idea of removable and dockable storage drives in cars. Companies from Seagate to Kenwood, Phatnoise and Rosen Entertainment, among others, dabbled in this area to the extent of bringing products into the marketplace only to discover that the iPod had become the de facto portable storage device for in-vehicle use.

 

A similar reality is unfolding today as car makers seek to bring Internet access into the car via embedded modules, while iPhone users are bringing Internet applications to the car via their iPhones. Today, iPhone users can access Internet radio, podcasts, navigation and location-related applications all from their smartphones. In fact, many car makers provide proprietary Apple connectors with their new cars. (The salesman who sold me my car last year provided these connectors - which are now jammed into my console for storage - even though I use a Blackberry.)

 

We have Apple to thank/blame for the proliferation of AUX IN and USB connectors in cars and, soon, we may have Apple to thank/blame for the demise of the automotive CD drive. For now, CDs persist out of convenience, low cost and wide consumer acceptance. But retail sales are in freefall even as downloads continue to gain, particularly, of course, for iTunes. When it comes to low cost, a properly connected iPhone delivers as much value as the average multifunction head unit – and more.

 

The latest iPhone vehicle connectivity developments revolve around transferring control of the device to the in-vehicle HMI. Most Tier Ones have mastered this task enabling steering wheel and other controls to manage iPhone functions. The next step in the works is to transfer the images displayed on the iPhone screen to the center stack display, if there is one. But the convergence of Apple devices and automobiles will continue especially as the installed base of devices continues to grow.

 

That installed base fuels a massive aftermarket. Apple’s presence in the mobile electronics industry was never more obvious than at the Consumer Electronics Show earlier this month where dozens of companies showed devices for connecting or mounting Apple products in cars. The Apple automotive aftermarket alone is probably bigger than the rest of the automotive aftermarket combined - roughly speaking.

 

Rest assured that OEMs and their suppliers are laboring furiously to get out in front of Apple’s next move that may influence the car buying public. Maybe the iSlate will alter the automotive aftermarket in some fundamental way. Is an Apple head unit next? Not likely. Not now, after Apple has forever altered the in-car audio experience. For the foreseeable future, every head unit maker will have to make a pit stop in Cupertino before bringing their next product to market.

 

http://www.fastcompany.com/blog/chris-dannen/techwatch/ford-will-open-sdk-car-apps

Ford has announced that it plans to open its SYNC platform to third party app developers. Though no timeline is given for implementation, Ford has indicated that it will announce future SYNC features during the CES show in January 2010.

Though the SYNC system can be upgraded with new features or apps, only features developed by Ford are available for downloading on the syncmyride website.

Prasad Venkatesh, Vehicle Design & Infotainment at Ford is quoted in the article: "The way we're developing the toolkit, you could sit in the comfort of your home and plan a roadtrip," he says. Using a smartphone or computer, you'd then add points of interest or other plans. "At the click of a button, the cloud would make all that available to you in the car, and it would broadcast it to your social networking groups."

The quandary OEMs face is their inability to control the downloadable application marketplace. However, there is an opportunity for OEMs to leverage that the app space by testing and approving applications before release and in the case of Ford, working with partners to develop specific applications specifically for their vehicles.

An in-depth look at downloadable telematics apps can be found in the following Strategy Analytics report: Telematics as a Downloadable App. Arrives

http://www.strategyanalytics.com/default.aspx?mod=ReportFormatsViewer&a0=4973

Smartphone apps are popular downloads but are not necessarily a source of revenue. This has implications for automotive telematics app opportunities.

Prasad stated that “Ford doesn't know whether they will pursue an app store model ala Apple, and no firm plans have been made about monetization. The potential is there, however; he says he is encouraging the students at UM to pursue their apps with an entrepreneurial mindset.”

It is important for app store owners to provide the right balance between free content as an enticement for consumers to buy from the stores, and paid-for content to realize revenue.

A simplified app purchasing process, such as that perfected by the Apple App Store, is critical to the launch and overall success of an app store. According to Strategy Analytics’ Wireless Media Labs smartphone survey research, over two-thirds of iPhone and over half of BlackBerry respondents in the US have installed all or the majority of the applications on their phone for free.