WEBVTT

90015b15-b10a-4850-881f-a56b143a2fa1-0
00:00:00.280 --> 00:00:02.840
Hey, so we are joined today by
my colleague Thomas Weber.

c19ccc41-717f-4a5e-ab5e-b42decf94c90-0
00:00:03.160 --> 00:00:05.193
He's a partner colleague and
we're jointly looking into

c19ccc41-717f-4a5e-ab5e-b42decf94c90-1
00:00:05.193 --> 00:00:05.520
software.

b3de88ce-b89c-4866-9e8b-ccd346da0670-0
00:00:05.920 --> 00:00:07.760
Hey Thomas, great to meet you
today here.

e335fe37-bbb0-4347-8a1d-82fb12c3a360-0
00:00:07.920 --> 00:00:09.400
Hey Alex, good seeing you too.

d1a2630f-435e-4f1a-a256-16157647ec47-0
00:00:09.720 --> 00:00:12.182
So software is obviously
redefining how the cars are

d1a2630f-435e-4f1a-a256-16157647ec47-1
00:00:12.182 --> 00:00:12.880
being designed.

86ebc014-0739-47c6-889f-4a975800d91c-0
00:00:12.920 --> 00:00:16.520
It's defining more than 90% of
new functionalities.

3d7cb40a-45ba-4829-9238-4ddedab6c73b-0
00:00:17.400 --> 00:00:20.488
At the same time, we do see
battery electric players putting

3d7cb40a-45ba-4829-9238-4ddedab6c73b-1
00:00:20.488 --> 00:00:23.374
a ton of pressure now on the
traditional OEMs as well as

3d7cb40a-45ba-4829-9238-4ddedab6c73b-2
00:00:23.374 --> 00:00:25.400
suppliers to really drive this
forward.

c5c7b16b-36c9-4494-af9f-e49cafda72bf-0
00:00:26.120 --> 00:00:28.833
Now we have been trying to
investigate in a lot of detail

c5c7b16b-36c9-4494-af9f-e49cafda72bf-1
00:00:28.833 --> 00:00:31.171
what this means for the
traditional suppliers who

c5c7b16b-36c9-4494-af9f-e49cafda72bf-2
00:00:31.171 --> 00:00:34.118
obviously delivering hardware,
but what is their right to play

c5c7b16b-36c9-4494-af9f-e49cafda72bf-3
00:00:34.118 --> 00:00:34.680
in software?

39ff05a8-6dce-47ca-b69b-88b0e1390235-0
00:00:35.520 --> 00:00:37.680
I mean software and electronics
is a big business.

06331692-7e67-4194-90b6-4b2651894a2b-0
00:00:37.680 --> 00:00:40.680
It's been 350 billion U.S.

1a9982a4-4764-4550-8e3f-8a16b430ec77-0
00:00:40.680 --> 00:00:43.120
dollar business in 2023.

f95d4bfa-4106-46e2-9d4f-f7e19d4c5323-0
00:00:43.120 --> 00:00:45.400
It's going to double until 2030.

cc68f5d9-7f73-45ef-95c5-8872abb83e14-0
00:00:45.400 --> 00:00:47.560
It's going to be over a trillion
U.S.

1ccb6dc5-465a-4ee3-b499-d7a65f950266-0
00:00:47.560 --> 00:00:50.480
dollar business in 2035.

3f7869f5-4a1f-48a0-8d2a-2f7883670e75-0
00:00:51.000 --> 00:00:54.357
So there is big business, 60% of
this should be addressable for

3f7869f5-4a1f-48a0-8d2a-2f7883670e75-1
00:00:54.357 --> 00:00:57.400
suppliers, 40% is direct
monetization with end customers.

d0f90a9a-c996-4548-b525-b0ca2313a6d8-0
00:00:58.000 --> 00:01:01.253
If you think about suppliers,
there's sensors, there's sport

d0f90a9a-c996-4548-b525-b0ca2313a6d8-1
00:01:01.253 --> 00:01:04.400
rim electronics, there's ADAS,
there's compute platforms. 

2fd7d344-10b4-4715-bd00-65276807dc88-0
00:01:04.400 --> 00:01:05.560
So a lot to do.

d1a83abe-82a8-425a-9a16-f3046dadd572-0
00:01:06.160 --> 00:01:09.040
However, also I see that many of
the players are struggling to

d1a83abe-82a8-425a-9a16-f3046dadd572-1
00:01:09.040 --> 00:01:10.640
really make money out of
software.

a4b5f448-a0db-4b3f-bb1d-3bf24229fc52-0
00:01:10.640 --> 00:01:11.240
Why is this?

17e78023-4a65-49bb-a7e1-22f96ce3c0e8-0
00:01:11.680 --> 00:01:14.060
It's it's quite surprising
because actually there are quite

17e78023-4a65-49bb-a7e1-22f96ce3c0e8-1
00:01:14.060 --> 00:01:16.640
a few players who do make ton of
money already in the new space.

53e21b24-ac62-4db0-9c52-c14a118f58e9-0
00:01:16.640 --> 00:01:19.112
Think about semiconductor
players, think about

53e21b24-ac62-4db0-9c52-c14a118f58e9-1
00:01:19.112 --> 00:01:22.057
hyperscalers, also technology
players that come in with

53e21b24-ac62-4db0-9c52-c14a118f58e9-2
00:01:22.057 --> 00:01:23.320
software bundled offers.

e7929590-fc5c-4d0c-b81f-909d19399371-0
00:01:23.760 --> 00:01:26.412
But then also if you think about
the OEMs, because at the end of

e7929590-fc5c-4d0c-b81f-909d19399371-1
00:01:26.412 --> 00:01:28.860
the day they commercialize the
software based functionality

e7929590-fc5c-4d0c-b81f-909d19399371-2
00:01:28.860 --> 00:01:29.880
already to end customers.

e7e344ec-4a13-4684-bb99-a3848424d436-0
00:01:30.040 --> 00:01:31.920
So there are players out there
who do make money.

af5683a8-040c-4246-b34c-3eb70c179caf-0
00:01:32.320 --> 00:01:35.219
However, we do see that there
are rules of the game and there

af5683a8-040c-4246-b34c-3eb70c179caf-1
00:01:35.219 --> 00:01:37.697
are two main rules that
definitely define if you can

af5683a8-040c-4246-b34c-3eb70c179caf-2
00:01:37.697 --> 00:01:38.960
make money out of software.

be872a6f-8a03-492d-a861-8437164a6355-0
00:01:38.960 --> 00:01:41.950
One is you need to own IP and
the technology stack, you need

be872a6f-8a03-492d-a861-8437164a6355-1
00:01:41.950 --> 00:01:44.891
to have your own intellectual
property and the other one is

be872a6f-8a03-492d-a861-8437164a6355-2
00:01:44.891 --> 00:01:45.480
about scale.

7f394e26-cd86-4eaa-b197-b88fb4e9fd9a-0
00:01:45.720 --> 00:01:47.280
So you need to be really
defining it.

6f2af168-bfa0-410e-966b-a39f7c08b844-0
00:01:48.040 --> 00:01:49.800
Now there's another item that is
very interesting.

ab03a9a9-0e9c-41ab-8035-f5b5fcb212ec-0
00:01:49.800 --> 00:01:53.344
We also asked industry
executives what is the impact of

ab03a9a9-0e9c-41ab-8035-f5b5fcb212ec-1
00:01:53.344 --> 00:01:55.560
software on the value of
hardware.

3fac1177-d96f-4163-bcc9-2e2bc5ae6660-0
00:01:56.040 --> 00:01:59.585
And surprisingly, actually 75%
of people were saying that they

3fac1177-d96f-4163-bcc9-2e2bc5ae6660-1
00:01:59.585 --> 00:02:02.961
believe that software will
increase or at least keep steady

3fac1177-d96f-4163-bcc9-2e2bc5ae6660-2
00:02:02.961 --> 00:02:04.200
the value of hardware.

21678b93-6973-4c4f-b990-b677333b7fff-0
00:02:04.200 --> 00:02:07.560
Only 25% were expecting some
detrimental effects from it.

b542c873-e549-42c5-a87c-70ef3e065429-0
00:02:08.000 --> 00:02:10.160
So we should actually be very
optimistic.

bc9e9f68-4f0d-4d3f-927a-bbbf93dab220-0
00:02:10.480 --> 00:02:13.171
And going forward, I expect that
there will be a couple of new

bc9e9f68-4f0d-4d3f-927a-bbbf93dab220-1
00:02:13.171 --> 00:02:14.240
business models emerging.

c64558e2-847f-44f4-9502-776ad3c66b7a-0
00:02:14.680 --> 00:02:18.031
So one will be around platform
place, it's a very horizontal

c64558e2-847f-44f4-9502-776ad3c66b7a-1
00:02:18.031 --> 00:02:20.120
play more like semiconductor
players.

bdb7d123-ef79-454a-9f90-bc3f6fbed330-0
00:02:20.480 --> 00:02:23.660
Then the second one is going to
be more vertically integrated

bdb7d123-ef79-454a-9f90-bc3f6fbed330-1
00:02:23.660 --> 00:02:26.840
solution place like think about
ADAS type of business models.

5036492d-b00d-45d9-8cd2-59988bee066b-0
00:02:27.200 --> 00:02:30.035
And then the third one is going
to be more product place, very

5036492d-b00d-45d9-8cd2-59988bee066b-1
00:02:30.035 --> 00:02:32.600
particular elements out of the
overall technology stack.

3d37cd8f-589f-4659-9371-5158d565532e-0
00:02:33.000 --> 00:02:36.460
So I do think that if you bring
together the IP and the scale

3d37cd8f-589f-4659-9371-5158d565532e-1
00:02:36.460 --> 00:02:39.865
that it will turn out into a
good monetization, but there is

3d37cd8f-589f-4659-9371-5158d565532e-2
00:02:39.865 --> 00:02:42.600
a lot of business model
transformation going on.

b5354f65-92d7-4d39-843b-0e4034d1e77e-0
00:02:42.600 --> 00:02:44.800
Then if you need to reposition
in the tech stack.

68b6f386-4c1a-4df5-8785-ef95d7c61668-0
00:02:45.240 --> 00:02:48.275
And I think this repositioning
and this transformation of

68b6f386-4c1a-4df5-8785-ef95d7c61668-1
00:02:48.275 --> 00:02:51.153
business models is the big
challenge that everyone has

68b6f386-4c1a-4df5-8785-ef95d7c61668-2
00:02:51.153 --> 00:02:52.200
ahead of themselves.

f0a4193e-3412-4425-ab1b-3827fabe1e12-0
00:02:52.720 --> 00:02:56.029
We recently asked suppliers how
they feel about their software

f0a4193e-3412-4425-ab1b-3827fabe1e12-1
00:02:56.029 --> 00:02:59.181
competencies and actually they
don't feel too bad about it,

f0a4193e-3412-4425-ab1b-3827fabe1e12-2
00:02:59.181 --> 00:03:02.490
producing software, embedding
software, but most of them still

f0a4193e-3412-4425-ab1b-3827fabe1e12-3
00:03:02.490 --> 00:03:05.484
do it in a very traditional
customer project development

f0a4193e-3412-4425-ab1b-3827fabe1e12-4
00:03:05.484 --> 00:03:05.800
basis.

cc7adbda-76c7-4c9b-a2b7-370ac845516e-0
00:03:06.160 --> 00:03:10.068
So what's really needed then is
investing, building into

cc7adbda-76c7-4c9b-a2b7-370ac845516e-1
00:03:10.068 --> 00:03:13.840
platforms, building into
capabilities to do continuous

cc7adbda-76c7-4c9b-a2b7-370ac845516e-2
00:03:13.840 --> 00:03:16.240
upgrades and of course scaling
up.

5e9a4094-7041-4e54-8cbb-8658f2953ffa-0
00:03:17.000 --> 00:03:19.606
And this is exactly also what I
would say in terms of the

5e9a4094-7041-4e54-8cbb-8658f2953ffa-1
00:03:19.606 --> 00:03:20.280
scaling effect.

07195f7a-aaf7-45a1-b6de-ad85c8a82456-0
00:03:20.280 --> 00:03:22.920
It's all about scale and there
are multiple lenses to this.

487f9f72-5a85-4302-b1a9-a2705b33444f-0
00:03:23.240 --> 00:03:24.960
The first one is very simply
volume.

c7f614d5-c0ad-45b6-b819-7318aef67c98-0
00:03:25.480 --> 00:03:28.130
So when we look at pureplay
software companies, they

c7f614d5-c0ad-45b6-b819-7318aef67c98-1
00:03:28.130 --> 00:03:31.080
actually took in many cases a
decade to become profitable.

72cf4941-3347-4145-b545-be506ca7c075-0
00:03:31.320 --> 00:03:33.792
And it's all about building that
volume that allows you to then

72cf4941-3347-4145-b545-be506ca7c075-1
00:03:33.792 --> 00:03:34.720
spread your fixed costs.

a465cc1f-45d2-48a7-8ccf-33b4218c2ca5-0
00:03:35.120 --> 00:03:38.424
Then the second one is around
scaling the capabilities because

a465cc1f-45d2-48a7-8ccf-33b4218c2ca5-1
00:03:38.424 --> 00:03:41.257
you need a huge depth and
breadth at the same time of

a465cc1f-45d2-48a7-8ccf-33b4218c2ca5-2
00:03:41.257 --> 00:03:43.880
capabilities and skills to
actually deliver this.

54adea45-0c6d-41e3-96ad-a0349a732ba1-0
00:03:44.200 --> 00:03:46.658
And then there's the third
dimension to this, which is

54adea45-0c6d-41e3-96ad-a0349a732ba1-1
00:03:46.658 --> 00:03:47.240
partnerships.

79e0a24a-c0ce-4f2c-9dad-d8dd80e25861-0
00:03:47.560 --> 00:03:50.142
So you really want to make sure
that you don't try to go it all

79e0a24a-c0ce-4f2c-9dad-d8dd80e25861-1
00:03:50.142 --> 00:03:52.200
alone because the stack is way
too large for that.

82700002-7a65-45d7-981a-94cde8c81ae6-0
00:03:52.440 --> 00:03:53.880
So you need to establish your
network.

cb441c47-0424-4d6c-a754-d9a7cb769c90-0
00:03:54.240 --> 00:03:56.809
So as long as you manage to
learn those three lenses, you

cb441c47-0424-4d6c-a754-d9a7cb769c90-1
00:03:56.809 --> 00:03:59.600
will actually get to the skill
that you need for the business.

c47fbba0-2f10-4153-a20e-003f169562f6-0
00:03:59.840 --> 00:04:00.200
Great.

d620ee25-5ee6-4783-ab6e-84567c09ac3c-0
00:04:00.200 --> 00:04:02.915
So lots of opportunities for
suppliers, but also lots of

d620ee25-5ee6-4783-ab6e-84567c09ac3c-1
00:04:02.915 --> 00:04:04.440
transformation work ahead of us.

114da102-b916-4ee0-8478-90a1b1e38a86-0
00:04:04.560 --> 00:04:05.160
Yes, it is.

f8d3c84e-9451-4baa-acb0-7b06d91ac98d-0
00:04:05.520 --> 00:04:06.040
Thank you so much.

cc27ddc8-d8ff-46ba-9272-ee9c4ee47b55-0
00:04:06.320 --> 00:04:06.880
Thanks, Alex.