Why AV developers should take note of 2000s’ Internet companies
Autonomous vehicles are poised to become one of the most transformative technologies of the 21st Century. Just in the past few years, the number of companies with self-driving vehicle permits in California increased from eight in 2015 to 56 in 2018. Large and small companies are throwing their hats in the ring with designs on becoming a category leader for every aspect of a highly fragmented logistics and mobility industry. However, this is not the first time that technology companies have scrambled to win localized and specialized use cases. We have witnessed this phenomenon in the early part of this millennium when the Internet first disrupted our daily lives.
In the early 2000s, we witnessed the birth of several Internet businesses all over the U.S. and some parts of the world. These were new companies building meaningful products that addressed a plethora of applications and solved problems. However, this was also a time when these companies had to build everything in-house—from the backend server stacks down to the diagnostic software tools. The capital required to set up a new Internet business was significantly high and, when the companies were unable to reach break-even in time, the capital dried up and many closed their doors. The ones that succeeded in becoming profitable survived, and many of these same companies now dominate large sectors: think e-commerce and web search.
By the mid-2000s, new software and services started unbundling and becoming available to large developer ecosystems. Amazon noticed the trend and decided to open access to their ultra-scalable servers, hardware, and system software in the form of Amazon Web Services (AWS). This marked the birth of cloud services – where primitive infrastructure building blocks delivered through a services interface triggered a whole new world of innovation as developers no longer needed to focus on buying, building and maintaining infrastructure. Several internet companies took advantage of AWS and built massively profitable businesses with minimal upfront capital requirements.
Switching gears now to the new and fascinating world of autonomous driving, history is bound to repeat itself. The formula for success will be very similar: companies that focus on their core product/use-cases and outsource everything else that isn’t a core competency, will have the best shot at surviving and thriving. One example of an unbundled offering is HD maps-as-a-service. Maps are a critical infrastructure for autonomous vehicles and bear many similarities to AWS. First, by being made available as a service, the cost of access can be cut drastically as maps can be cross-sold to multiple customers. Further, similar to server utilization, road utilization at any given time for any given autonomous vehicle company will be dramatically lower and the cost of internally maintaining up-to-date maps everywhere will not be justifiable. Finally, the upfront cost of building such map infrastructure is prohibitively high and only a handful of well capitalized autonomy companies will be able to introduce mobility products.
Access to maps and associated services in an on-demand fashion while adopting a utility pricing model has the potential to radically change this. It is a good time now for a second wave of autonomy companies to follow in the footsteps of incumbents by leveraging such services to develop autonomous mobility and logistic products in even localized geographies. We’re already starting to see this with product-focused companies like Voyage (that operates self-driving taxi services in Florida retirement communities) and BoxBot (that is developing an autonomous logistics and delivery company for the neighborhoods of Oakland, CA). Such fragmentation will continue to gain steam as bold entrepreneurs develop autonomy products and business models that rely on unbundled infrastructure offerings.
In conclusion, entrepreneurs and developers of autonomous vehicle technologies should learn from the incumbent internet players to unite and mobilize the automotive industry so level five autonomy is within reach.