When she learned that it was the parent of premium brand Mercedes-Benz, her curiosity was piqued. She decided to apply for a role as a systems developer — not at the automaker, but at the group’s captive financial services business. “They were impressed that I was more interested in the position itself than simply working for Daimler,” she recalled in Stockholm last September during the Me Convention, which was co-sponsored by Mercedes.
New-generation worker
VW Group CEO Herbert Diess is leading a “massive expansion” of the automaker’s software expertise.
“Those auto manufacturers that prefer to sit in their own walled garden thinking they can bring these guys in, control them and then throw them out in two years, they are the ones most at risk,” Bearing Point analyst Angus Ward said. Contrast this with companies such as Google that club together with rivals to co-innovate, which slashes capital requirements and time to market. “They [carmakers] have to beat the tech giants at the tech giants’ own game,” Ward said. Craciunescu’s story, however, is symbolic of the dilemma facing automakers. Even if they have finally discovered the “ecosystem,” not every software developer has discovered them.
One of the first priorities of Herbert Diess after taking over as VW Group CEO last April was to address the skills shortage at Europe’s largest automaker. “There is no time to lose, especially when it comes to amassing digital know-how,” Diess said last August, calling for a “massive expansion of our software expertise.” Roughly 90 percent of all future innovation in the car will take place in the electric/electronic area. The bulk of that will be in software, according to VW Group. This field will increasingly be a competitive differentiator as the number of lines of code in vehicles could grow to 300 million from the 50 million to 100 million they have today. This doesn’t even include all the IT systems needed to provide connected services outside the car.
The problem in Wolfsburg is that VW Group has about 10,000 engineers, but only a few hundred programmers. “You need people who can migrate to SAP Hana [database management system], who can work in cloud computing and who are proficient with artificial intelligence,” VW Group Chief Information Officer Martin Hofmann said. “The skills shortage is a problem that is growing exponentially.” This wasn’t really an issue in the past because carmakers tended to contract out software development to third parties. But now Hofmann is bringing some of this work in-house, in part to react faster to customer demands, for example for app-enabled services. “Under a conventional tender, there are specific processes and compliance that need to be observed. By the time a contract can be awarded, six or seven months will have already expired before work could even begin,” he said.
Daimler calls its software center in Lisbon, Portugal, “The Jungle” because workers share the office with more than 1,000 plants.
From a vehicle IT perspective, an area for which the brands themselves are responsible for rather than the group, greater in-house expertise would also help to reduce procurement costs. The share of software in an electronic control unit, for example, makes up 25 percent of the cost and that figure is expected to increase in the future. Further costs come from integrating the various ECUs and time is spent removing the inevitable bugs that arise. VW aims to reduce that by developing the software and hardware separately. That way replacing one doesn’t force VW to change the other. In Davos, Diess added that VW Group will separate software and hardware development at the board level to “really speed up the software focus” at the automaker.
To better control vehicle IT as automobiles become connected, the VW Group recently spent about 110 million euros to buy a controlling 75 percent stake in truckmaker Volvo Group’s WirelessCar unit. Acquiring tech companies, however, can entail high execution risk. Valuations can soar, negotiations can break down, or other bidders can join the fray. For that reason, simply buying economic interests in several providers is not a viable strategy to master the transition. The core business needs to adapt, too, and software expertise must be developed in-house if carmakers are to remain competitive. To ensure that their employees think more like workers at tech companies, the entire mindset has to change.
That’s where people such as Ludwig Maul enter. Formerly an engineer at Porsche, this digital evangelist joined a Daimler subsidiary created to marshal the combined ingenuity of the company’s entire workforce to help with the tech transformation. “At Porsche, I built up a small virtual community of 200 employees where we discussed technical issues, and I loved the idea of encouraging others throughout Daimler to get involved and spur technical innovation,” said Maul, who worked at DigitalLife@Daimler until late 2018. He is now with toy maker Lego.
DigitalLife aims to link employees with entrepreneurial ideas to coaches at the company’s own startup incubator, Lab1886, to help bring their concept to fruition. DigitalLife also performs outreach in the programming community, sponsoring 24-hour hackathons. One promising team wanted to help advise customers configuring a new Mercedes X-class pickup. Using a popular Java script called C-sharp, they programmed an online chatbot, a digital assistant capable of teaching itself how to better answer customer queries.
Volkswagen has taken a somewhat different approach, founding late last year Faculty 73 to teach employees who have completed vocational training at VW how to develop software if they exhibit an affinity for IT. The best programmers, after all, share a key trait with automotive engineers and mechanics: they have the mind of a tinkerer, said Pablos Holman, a futurist invited to speak at the Me Convention in Stockholm. Given a device, whether it’s a smartphone or engine block, they don’t ask what it does but instead pick it apart to find out what problems they can solve with it. “No one ever invented anything by following the instructions,” Holman said.
Ghost in the machine
But talent cannot always emerge from within, and carmakers know better than to expect developers to come and work in a city such as Wolfsburg. Rather, they must put their vanity aside, leave their comfort zones and actively recruit developers who hadn’t seen them as potential employers, setting up displays at key industry events such as the popular Web Summit in Lisbon, Portugal. Here participants walk around with conference IDs where their first name is printed in oversize bold letters accompanied by a scannable QR code and designation such as Investor. While there are designated lounges for meetings with prospective startups, some entrepreneurs looking to gain a wealthy backer for their ideas simply walk up and introduce themselves to funders. Among them was Nick James, an Alpha according to his badge, who serves as chief marketing officer for new UK startup Tomorrow’s Journey. His firm was looking for seed capital to realize its plans of linking logistics supply with demand using a customer’s own platforms, rather than theirs, like Uber does. “We don’t want to be famous,” he said. “We want to be the ghost in the machine.”
A few halls away, Daimler came up with a particularly unique way to meet the fresh talent it needed to fill at least 16 different positions at The Jungle, its Lisbon software center that has more than 1,000 plants. Front-end developers, digital analytics experts, cloud operations engineers and enterprise software architects could jump into a vintage 1960s Mercedes taxi, start the meter and spend three minutes speed dating with one of the local recruiters. “The brand is very strong in Portugal. Everybody knows us,” said Goncalo Sequeira, a human resources specialist at Mercedes-Benz.io, a wholly Daimler-owned, IT services company. “But nobody thinks about us when it comes to software. With our support here, they are starting to.”
Sequeira will have even more competition to battle. To provide content for its upcoming ecosystem, VW just opened its largest software development center worldwide in the historic Rato district in central Lisbon, practically next door to The Jungle. The 300 jobs that need to be filled are more than the combined total that VW has at German software centers in Berlin, Wolfsburg, Dresden and in Pune, India.. Even Portugal’s head of state came to help open the new VW site. “The traditional thinking among carmakers in the past years was that people should go to work where we have the assembly plants. In the digital economy, however, you have to go to the people.” VW’s Hofmann said.
