Ford bought a Silicon Valley startup that will work with the automaker's rivals -- here's why that's a good thing

FordFord CEO Jim Hackett outlined the company’s future at CES in January.

  • In January, Ford outlined a vision for the future that includes technology which connects autonomous vehicles with pedestrians and city infrastructure.
  • Later that month, the company purchased Silicon Valley startup Autonomic, which is developing the Transportation Mobility Cloud (TMC), cloud software that auto and tech companies can use to connect vehicles and apps.
  • The TMC will be available to other auto companies, like Aptiv.
  • Buying a tech startup and allowing it to work with your competitors may seem like a curious move, but the logic behind it points toward a fundamental shift in Ford’s strategy.

Tech companies have learned that there’s more money to be made in software than hardware.

The auto industry is starting to apply that same lesson, beginning a gradual shift from goods to services, like car subscriptions and ride-hailing apps.

At the CES in January, Ford outlined a vision for its future built on connecting people, autonomous vehicles, and city infrastructure. During CEO Jim Hackett’s presentation, he said the Transportation Mobility Cloud (TMC), which will facilitate those connections.

Two weeks after CES, Ford announced that it had purchased Silicon Valley startup Autonomic, which is developing the TMC. (Previously, Ford and Autonomic had worked as collaborators.)

The TMC is cloud software that auto and tech companies can use to connect vehicles and apps. Ford is currently using it for its ride-sharing service, Chariot, so it can place and refuel vehicles efficiently. During his CES presentation, Hackett said the TMC could eventually allow for apps that cities would use to direct autonomous vehicles away from accidents, obstacles, or high-traffic areas.

Autonomic’s work will not be exclusive to Ford

But Ford did not buy Autonomic to get exclusive access to its work. According to Autonomic’s new CEO, Gavin Sherry, no part of the TMC will be available only to Ford.

“There is nothing exclusive or proprietary to Ford about TMC,” he said in an interview with Business Insider. “That makes it very special and unique within the industry.”

Sherry compared the TMC to Amazon’s cloud computing platform, Amazon Web Services. The platform doesn’t have any special capabilities for Amazon, and companies can use it to support a wide range of products.

As Sherry describes it, the appeal of the TMC is simple. It’s designed to send data between vehicles and apps and present it in a clear, standardised form.

“While this seems quite intuitive, and you’d be right to think so, it turns out that homegrown platforms and industry platforms do not take on the complexity of normalizing and standardising this data in the way that we have,” he said.

Ford will make money from rival apps and vehicles

Autonomic’s website lists some of the company’s partners, including Aptiv, an autonomous vehicle company that could become a rival to Ford. Buying a tech startup and allowing it to work with your competitors may seem like a curious move, but the logic behind it points toward a fundamental shift in Ford’s strategy.

Making cars is a complex, capital-intensive business. Creating and selling the right to use software is also difficult, but it doesn’t require global networks of factories and suppliers that must be repeatedly coordinated with precision. By allowing other auto companies to pay to use the TMC, Ford can make money from rival apps and vehicles, while letting its competitors bear the development costs.

“I think it will be transformative for Ford as a company,” Sherry said.

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