Friday, April 17, 2009

Motoring as a Service

Listening to Power Drive, a BBC radio programme on electric cars. (I heard the live broadcast yesterday evening, and I have now downloaded the podcast from the BBC website to listen again).

I fully expected to hear the voice of Shai Agassi, and I was not disappointed. Until a couple of years ago, Shai was the rising star at SAP: the founder of Netweaver, the champion of service-oriented architecture (SOA) within SAP, frequently talked of as a future CEO. Then he suddenly quit the software industry to work on electric cars.

Shai was one of the first software executives to get the concept of business as a platform of services. (See my post dotBiz from January 2005). He is now talking about motoring as a service, with what he calls a platform-based approach to create a new business model. Shai's company Better Place is building a network infrastructure for rapid charging and battery replacement. (Coverage from about 17 minutes into the BBC programme.)

Shai makes five important points about a service-based approach to motoring.

  • Establish a separation between car and battery - when you reach a charging spot, you swap your empty battery for a fully charged battery.
  • Don't solve mileage problem by bigger batteries but by better infrastructure - put charging spots closer together.
  • We're getting the infrastructure right before we expect people to buy the cars.
  • Motorists pay for real service (mileage not car)
  • Shift the industry, not one car at a time. Car-makers should be able to make more profit with electric cars than gasoline-based cars.

The business model is copied from the mobile telephone business. The consumer has a choice between a pay-as-you-go model and a contract model. You can buy a low-mileage contract or an unlimited mileage contract. If you are willing to sign a 24 month contract, you get a better deal for your miles, and you may find a supplier willing to give you a free car.

Of course, this is only economically viable if you can get a large-scale adoption of the new technology. Shai talked about computer simulation models they are using to calculate the business case for a whole country (in terms of reduced oil imports) and to plan the distribution of capacity.

"You're still a software person at heart." says the interviewer and Shai agrees. "At the core of this is a huge software system", he says.

See also Shai Agassi: A bold plan for mass adoption of electric cars (TED Talks)

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