That’s what Raj Desai, Director of Worldwide Automotive Solutions at IBM, is shooting for. He’s not trying to put an IBM PC in your next car—fortunately. He is, however, hoping that telematics—as the bulk of computer-based systems for cars have come to be called —will turn into a huge new market for technology products and services. And IBM is bullish on what it is creating—essentially an open platform for the development of pervasive computing applications in the car. The opportunity that Desai’s 800-person automotive group is tackling promises to be a big business. According to McKinsey, some analysts and executives have predicted that by 2010, total annual U.S. telematics revenues alone could reach $40 billion.

“I’m helping to position IBM to lead across the board in the pervasive area of computing. It’s a new set of standards and the new paradigms of computing in the next five years. Moving away from the desktop world to the Internet world and now to the wireless and the non-standard computing world, is a significant change and opportunity,” says Desai. “This is not a job for me, it’s a cause.”

In the short term, when evangelizing his vision for technology in the car, Desai has somewhat of a PR battle facing him. The wider public has been introduced to telematics systems through simple in-car computers with a few buttons that offer content such as GPS-aided driving directions and easy roadside assistance. GM’s OnStar system is the early name brand. But OnStar has reportedly suffered low renewal rates for its costly subscription service (see “Traffic Reports — On Tap” p.30 ).

Is the telematics industry going the way of the wireless data boom of 1999-2000? A much-hyped attempt at delivering a mass-market technology that failed to garner consumer adoption? That idea, in Desai’s eyes, is based on a total misunderstanding of the space, and therein lies his near-term PR task.

For Desai, taking high-tech as IBM sees it into the heart of the auto industry is only peripherally about the gadget appeal of in-dash interactive street maps and the subscription fees that luxury car owners might pay for the services. It’s much more complicated than that.

Early Days

For Desai, starting out on a new and pervasive application for technology is familiar ground. In his 20-year career with IBM, he first worked on the development of the ATM machine — working on the microprocessor and the software in those machines at a time when the ATM was just being conceived.
Desai also spent 4.5 years developing the bar code-based scanning technology that now graces every supermarket checkout counter. Independent of his current automotive focus, he is a firm believer in the technological and business virtues of pervasive computing.

“I believe that as we move forward technology is going to get embedded into various things around us — appliances, gadgets, vehicles,” he says. “A lot of these things are going to be connected in a network that will be easy to use — and almost invisible.” By invisible, Desai means totally blended into the fabric of our lives.

So what technology and applications does Desai want to bring to the car that will invisibly transcend the limitations of current consumer on-board computer offerings and unlock the potential of a system like OnStar in the future?

Java Mechanic

This is perhaps not the question to ask, since Big Blue isn’t, according to Desai, in the business of developing a better consumer telematics application. IBM is looking at the problem more from the auto manufacturer and business application side than from the more glamorous consumer vantagepoint.

Desai’s team is in the business of providing the platform on which telematics applications can be created.

A system like OnStar, in Desai’s eyes, is like a computer where the user is only allowed to run three applications over the course of the computer’s life. The Java-based platform that IBM has developed under Desai is an open platform (which in future will have a significant Linux component) that facilitates the development of any number of present and future applications for the car.

The platform was launched at the most recent Frankfurt auto show, incorporated into the Audi A8 luxury sedan. “There is no other pervasive client that is as integrated into lifestyle or business processes as the vehicle. That is why it will have a big impact,” says Desai.

And the scope of the project goes well beyond personal cars. “We believe that in commercial trucking fleets there are tremendous opportunities,” Desai explains. “If trucks had the right parameters to have optimum fuel efficiency based on the altitude at which they are driving, then in North America alone trucking companies would save hundreds of millions of dollars in fuel costs.” And, according to Desai, through wireless technology and GPS, this application can be executed without much trouble.

Desai believes that for automakers, the financial windfall from telematics is not at all inherent in the subscription fees car users might potentially pay for a set of compelling applications in an in-dash computer. He explains, “If you take a look at the warranty costs of automotive companies they are anywhere from two to five percent of revenues. That’s in the billions. And if you have wireless connection and you get data from the car directly you could have significant reduction in those costs through diagnostics and early detection.”

He adds that telematics can also be used for capturing a defect in the car much earlier, so that manufacturers can avoid costly recalls.

All this translates into major savings. Today, automakers lose anywhere from $500 million to $3 billion per platform in defects alone, according to Desai.

Furthermore, insurers, for example, could become aware through telematics that a user uses his or her car an average of only two times per week (perhaps due to the owner’s heavy travel schedule the car spends its time parked at the airport). That particular user could then pay a lower premium.

According to Desai, insurance fraud is becoming an increasingly difficult problem in America, and, as a result, premiums have skyrocketed in areas like New York City. Insurance companies could determine the validity of some claims on auto accidents by knowing when a driver hit the breaks, how fast he or she was driving, and so on, rather than relying on the same kind of hand-written police report that has been in existence for more than 50 years.

These kinds of diagnostics are achievable through telematics. Desai assures that IBM is also working on mitigating the privacy concerns that this kind of monitoring technology creates.

Clearly, other companies—perhaps Oracle, or HP, or even Microsoft—will try to compete with IBM in the effort to wire cars for the information era. Desai will have to convince automakers and other businesses to work with him.

“It’s not easy and it takes time,” he predicts. “Telematics is not going to skyrocket but it’s going to have a steady climb.”

Room For More?

Desai is hoping that he can develop the necessary relationships with insurers, automakers, petroleum vendors and others who will make some of the synergies he is talking about a reality. “Value chain partnerships are essential,” he insists.

But assuming that all of that comes into place as Desai is envisioning it, what remains for entrepreneurs in the telematics space? Quite a lot, given that most of the applications that will be critical to the future of the digitally networked car have yet to be developed.

“A significant amount of applications and content has to be created that the consumer and the business community will find compelling,” says Desai. “That field is wide open. That market is as big or bigger than the infrastructure — a tremendous opportunity for entrepreneurs to get into this market.”

Desai adds, “If you take a look at the entire end-to-end solution space — all the way from technology consulting to the car to Internet stuff — there are a lot of technologies that are missing right now. Sensors inside the vehicle is an example. There is a lot of room for innovation.”

Legislation may even come into effect at some point that requires cars to be able to self-diagnose their emissions levels — so that problems are fixed immediately instead of after yearly tests. This is just one possible application that needs new technology to emerge.

Indeed, IBM is ready, according to Desai, to invest in or partner with small companies developing innovative applications in the space, since IBM is going to stay out of the content creation business entirely.

Generation Gaps

Desai joined IBM in 1972 after getting a masters at Brooklyn Polytechnic. In India he had gone to undergraduate college in Pune, and then did his engineering training in Nagpur. Clearly the technology industry has come a long way since then. Even Desai’s U.S. alma mater has changed its name to Polytechnic University. But he is intent on guiding young professionals at IBM in their effort to build equally impressive careers.

From his start in research, Desai made the classic moves of a star employee, to engineering management, then sales management, and then into more senior management positions.

Today, when he mentors young Indian employees, he also has to be “reverse mentored.” In other words the new generation spends time explaining to Desai the new set of issues that they face in their climb through the corporate ranks.

When it comes to Indians growing out of engineering and into more diverse positions, he offers his thoughts.

“Frankly if you take a look at it, initially because of our education we are focused on engineering and we get labeled as engineers and software. Part of it is because that’s where a majority of people came in. Part of it is because we really have not had role models who have really taken different paths and gone into marketing and other business areas. That is beginning to change. It takes a little time to have some role models and have people feel comfortable taking the risk of leaving the comfort zone of the technical community. You also have to wipe out the mindset in the rest of the community that Indians are engineers or programmers.”

Desai has himself moved beyond the purely technical into the technologically strategic. “To me this is not just a job. My head is in it and my heart is in it,” he says. “That’s very important because when you get both you can make things happen that take more than normal energy.”

Desai’s advice to younger Indians entering the corporate world: “Be passionate about what you do and all else will follow.”

With, according to Desai, up to 45 percent of the value of high-end cars soon to be made up of technology components and software, the market will be large. Desai will have to continue to deliver innovation beyond expectations to assure IBM’s prominent future position in the market.