Renault-Nissan-Mitsubishi Announces New Cloud Platform on Microsoft Azure as OEMs Shift toward Public Cloud Platforms

This March, the Renault-Nissan-Mitsubishi Alliance announced the upcoming launch of their Alliance Intelligent Cloud Platform. The platform is a result of joint development efforts between the alliance and Microsoft, utilizing cloud, AI, and IoT technologies provided by Microsoft Azure. The Azure platform will provide the Alliance with a global data platform that will enable the capture, management, and analysis of vehicle data to deliver intelligent services on a global scale across the 200 markets served by the Alliance.

The announcement of this partnership follows numerous recent wins for Microsoft Azure, which announced partnerships with Volkswagen Daimler and BMW in 2018. With an increasing number of OEMs choosing to partner with Microsoft, there has clearly been a remarkable shift away from on-premises and toward public cloud platforms over the last year. Public cloud platforms offer several advantages to OEMs and could also equally provide numerous opportunities for public providers to provide additional services beyond platform development.

Similar to virtually every big corporate company at the time, several years ago, automotive OEMs began to invest heavily in their own on-premises data centers. However, as the amount of data has continued to grow exponentially, more and more OEMs have begun to hit the limits when it comes to these on-premise environments. Flexibility and scale are key for AI applications and advanced analytics, and most OEMs do not have on-premises operations that can meet these requirements.

While on-premises data centers are unlikely to go away anytime soon, it is expected that a significant portion will be shifted to public cloud platforms.

Public cloud platforms offer several benefits:

• Lower Costs: Rather than building their own platform from nothing, OEMs can instead partner with public cloud platform providers and focus resources on building services for that platform. Building a connected car platform requires significant CAPEX and ongoing maintenance costs.
• Scale: Public cloud services can provide a connected platform that scales across the complete operations of an OEM across the complete supply chain from leveraging consumer data for marketing and sales services to research and development.
• Flexibility: Public cloud platforms enable OEMs to quickly and continuously deploy, update, and change connected services in an efficient manner.

For Microsoft and others, the shift toward public cloud platforms is clearly a huge opportunity that also enables them to sell additional cloud-based services and products in the future.

Microsoft’s strategy in automotive has focused on emphasizing its strict role as a business-to-business (B2B) partner. As such, there is limited Microsoft branding on the front end for consumers. Rather, Microsoft is aiming to provide a platform on the back end to allow OEMs to develop their own products and services with their own branding and features on the Microsoft Azure platform, providing crucial flexibility to OEMs. The relationship between OEMs and technology companies has often been strained over concerns of data ownership and brand management. Therefore, this new type of approach has sat well with OEMs, with Microsoft gaining big wins with Volkswagen, Daimler, BMW, and now the Renault-Nissan-Mitsubishi Alliance. In these partnerships, the interaction model for OEMs has not changed from their preferred model. That is, they are looking for suppliers to help them build their own services and products with their own specific functionality, branding, and features. In this case, Microsoft has provided the underlying technology, expertise, and tools to enable OEMs to build their own connected services.

This type of partnership is in many ways in stark contrast to rival Google, which has adopted an aggressive business-to-consumer (B2C) strategy in automotive in hopes that its comprehensive offering of Google Assistant Google Auto OS, Google Maps, and Google Play Store can win over consumers and OEMs alike. Currently, Google has announced partnerships with Volvo and the Renault-Nissan-Alliance for select models over the course of 2021 to 2022. This strategy relies on OEM weakness in designing and developing their own services/products and effectively outsourcing design and development to Google. The product/service shifts from being OEM-provided to being Google-provided. Clearly, this approach relies on Google being able to oust in-house competition and competition from the traditional supply automotive chain. OEMs then hope that they can use the Google branding as a way of differentiating their vehicles, in the same way PC manufactures used “Intel inside” as a method of differentiation for their hardware.

Meanwhile, Amazon, another rival from the technology space that is increasingly moving into automotive, has chosen to adapt its business-to-business-to-consumer (B2B2C) approach used in its e-commerce business towards the automotive business. Amazon has chosen to provide open application programming interfaces (APIs) and software development kits (SDKs) to Amazon Alexa, enabling key suppliers further down the supply chain to integrate Amazon Alexa into their products. Amazon is effectively selling Amazon Alexa to automotive vendors to gain customers, expand its brand, and gain valuable data through a backdoor. On the front-end, subtle Amazon Alexa branding remains, as is evident with its first OEM-level partnership that will enable Alexa without a handset. In 2018, Audi announced it would be integrating Amazon Alexa in-vehicle in the upcoming 2019 E-Tron model, and from the demonstration it was clear to see that Amazon Alexa distinctive branding was subtly integrated into the user interface (UI).

While the chance to develop platforms is clearly an opportunity itself, there might be a much bigger potential play from Microsoft here. In addition to OEMs building their own services on the Microsoft Azure Cloud and IoT platform, Microsoft also has its own cloud-based and software services and products it can offer to OEMs. Microsoft is clearly looking to leverage its existing relationship with the OEM to sell Microsoft products and its own cloud services. In essence, the B2B strategy enables Microsoft to better position itself to sell Microsoft products and services, using the Azure platform as the starting point for the relationship.

In the Volkswagen partnership, the new Volkswagen Cloud will be powered by Microsoft Azure and IoT edge platform and will also integrate Skype. BMW, meanwhile, has also integrated Office 365 and Skype with its own BMW Intelligent Voice assistant, which in itself uses Microsoft conversational technologies in the cloud. These partnerships help demonstrate that, for Microsoft, partnerships with OEMS go beyond platform development and can also be a useful tool to cross-sell additional, more lucrative applications and services, such as Office 365, Cortana, Azure Maps, and other services.

As OEMs shift away from on-premises and toward public cloud platforms, there is clearly an opportunity for public cloud providers to capitalize. The traditional approach by technology companies has often led to a clash of brands between the OEM and technology companies. Microsoft’s approach, meanwhile, has in many ways gone back to the traditional role of a supplier in the automotive market, but with the added caveat of working directly with an OEM rather than a tier-one supplier. It is therefore no mystery as to why Microsoft has had success with this strategy, announcing numerous partnerships over 2018. For Microsoft, the cloud platform is the starting point to sell other services and products in the future and other public cloud providers such as Google and Amazon should perhaps also take note, so that they can also get a slice of the pie before it’s too late.