Transportation is one of the world’s largest industries. The five largest automotive companies in the world generate more than 750 billion euro in annual revenue. The names in the industry are global brands – BMW, Ford, Daimler. Yet despite its size and stature, it’s also an industry in the midst of transformation. Today, new transportation vendors like Uber, Lyft, Zipcar, and Grabtaxi are changing our relationship with cars.
Few other industries with such a pervasive and tangible impact on each of our lives have gone through recent periods of similar upheaval. Information technology, however, is one of those industries. We all interact with computers on a near daily basis, and like cars today, the IT industry has been undergoing its own transformation over the past 15 years.
Some of the same factors that have driven the transformation in IT help point the way toward the future of transportation. Namely, four themes from the growth of cloud computing help us understand why a shift to “cloud transportation” is underway.
1. Renting is almost always cheaper than owning.
Historically, renting infrastructure has been relatively expensive. Any renter needed to both cover the profit offered to rental companies and settle for less customized infrastructure. That changed in the world of computing over the last decade – mostly due to the sheer growth in consumers of IT infrastructure.
Today’s cloud IT vendors have both the buying power and the operational discipline to minimize the cost to the customer of a unit of data storage or computing power. With the addition of self-service infrastructure, powered by scalable web interfaces, the cloud IT vendors are also able to provide incredible variety to their customers without dramatically increasing their costs.
The same shift can be anticipated in transportation. Huge vendors of cloud transportation — just like their counterparts in IT — have every incentive to optimize their fleets against cost per mile driven. Unlike the average consumer, cloud transportation vendors will attempt to ensure they (or their drivers) buy the most efficient cars per mile, service them optimally, and retire them on the best schedules. (Ever wonder why Hertz doesn’t have many cars with more than 30,000 miles?)
2. Network effects will be critical to performance.
In a world of cloud infrastructure (whether in software or transportation), there are a number of advantages to scale. Beyond purchasing power, scale helps companies establish strong network effects. In software, these network effects help draw new developers and consumers to a given platform, simplify application deployment and service, and streamline the act of finding relevant talent.
In transportation, networks create value in a couple of ways. The first is convenience. The more Zipcars in your city, the more compelling it is for people to sign up for Zipcar, and the more Zipcar locations can be supported. Similarly, the more Uber drivers there are in a city, the more likely people are to sign up for Uber, and the more likely drivers are to opt into it.
A dense network also limits transaction costs. Every mile driven by a ride-sharing driver with no customer in the seat is a mile of costs that need to be covered. But once a ride-sharing company has built meaningful network density, a driver might leave you on one corner and pick up his next rider only a block down the road.
In cloud computing, we’ve seen these network effects help solidify the position of massive players – locking new entrants out of the market. In the world of transportation, this is definitely a possibility and one of the primary reasons so many next generation companies are trying to expand so quickly.
To read more at: https://hbr.org/2015/07/what-the-auto-industry-can-learn-from-cloud-computing
Few other industries with such a pervasive and tangible impact on each of our lives have gone through recent periods of similar upheaval. Information technology, however, is one of those industries. We all interact with computers on a near daily basis, and like cars today, the IT industry has been undergoing its own transformation over the past 15 years.
Some of the same factors that have driven the transformation in IT help point the way toward the future of transportation. Namely, four themes from the growth of cloud computing help us understand why a shift to “cloud transportation” is underway.
1. Renting is almost always cheaper than owning.
Historically, renting infrastructure has been relatively expensive. Any renter needed to both cover the profit offered to rental companies and settle for less customized infrastructure. That changed in the world of computing over the last decade – mostly due to the sheer growth in consumers of IT infrastructure.
Today’s cloud IT vendors have both the buying power and the operational discipline to minimize the cost to the customer of a unit of data storage or computing power. With the addition of self-service infrastructure, powered by scalable web interfaces, the cloud IT vendors are also able to provide incredible variety to their customers without dramatically increasing their costs.
The same shift can be anticipated in transportation. Huge vendors of cloud transportation — just like their counterparts in IT — have every incentive to optimize their fleets against cost per mile driven. Unlike the average consumer, cloud transportation vendors will attempt to ensure they (or their drivers) buy the most efficient cars per mile, service them optimally, and retire them on the best schedules. (Ever wonder why Hertz doesn’t have many cars with more than 30,000 miles?)
2. Network effects will be critical to performance.
In a world of cloud infrastructure (whether in software or transportation), there are a number of advantages to scale. Beyond purchasing power, scale helps companies establish strong network effects. In software, these network effects help draw new developers and consumers to a given platform, simplify application deployment and service, and streamline the act of finding relevant talent.
In transportation, networks create value in a couple of ways. The first is convenience. The more Zipcars in your city, the more compelling it is for people to sign up for Zipcar, and the more Zipcar locations can be supported. Similarly, the more Uber drivers there are in a city, the more likely people are to sign up for Uber, and the more likely drivers are to opt into it.
A dense network also limits transaction costs. Every mile driven by a ride-sharing driver with no customer in the seat is a mile of costs that need to be covered. But once a ride-sharing company has built meaningful network density, a driver might leave you on one corner and pick up his next rider only a block down the road.
In cloud computing, we’ve seen these network effects help solidify the position of massive players – locking new entrants out of the market. In the world of transportation, this is definitely a possibility and one of the primary reasons so many next generation companies are trying to expand so quickly.
To read more at: https://hbr.org/2015/07/what-the-auto-industry-can-learn-from-cloud-computing
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