How can automotive CPOs crack commercial optimization of 'Digital' spend under procurement such as powertrain EMS, driver-assist software etc.

Given the rise in the conversion of cars into smart electronic driving devices is already underway and will further accelerate in upcoming years this is becoming an important concern for CPOs in auto industry.

Here is an expert view on how you can tackle this:

1. Gain transparency on software and data in components and their supply chains: A substantial amount of in-vehicle software is embedded in hardware and/or mechanical parts. OEMs today source hardware components, which already contain the code provided by the component supplier as a black box. It is critical for procurement functions of the future to be able to understand and evaluate which specific software features they need so that they can control the quality and cost - as opposed to having buy blindly. The same need applies for 'Data'' (eg: traffic, parking data). Who generates the data? (usually vehicle owner), who may collect, aggregate and standardize the data? are there further analytics and services provided to refine the data? which new regulations about data protection needs to be considered?
2. Be able to control the software and data supply chain: Once this transparency is provided, development and procurement business function must conduct detailed make-or-buy considerations. On the one hand, this poses questions such as: which elements are strategically relevant and must be developed in-house or with exclusive cooperation partner (eg. autonomous drive algorithm)? Which software elements are commodities and can easily be outsourced (eg. mobile app development)? on the other hand, questions arise concerning system complexity and data ownership: How can the "remaining" hardware elements of the embedded system be more standardized, modularized and commercially bundled (eg: ECUs for vehicle 2-X communication)? How and by whom should vehicle data be managed i.e stored, analyzed and if possible - monetized?
3. Establish new collaboration models with suppliers and enable your teams: software and data providers are less dependent on individual customers (like automotive OEMs), as they are not locked in by capital-intensive, client-specific investments (eg. plant, machines and tools). Therefore "Hardball" procurement methods must be supplemented by more collaborative, incentivizing approaches. Revenue sharing for data-driven services or co-development and subsequent licensing of software are two common examples. All these new requirements necessitate through the enablement of procurement organizations and processes. New tools and processes for source code, data quality assurance and cybersecurity must be developed. Legal expertise and contractual standards for intellectual property management and licensing models must be established. New supplier scouting processes in a fast-paced innovation environment must be setup

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