MUNICH, Germany Microsoft Corp.'s latest foray into auto electronics has generated a dual response in the industry. While car makers tend to eye the newcomer and industry outsider with distrust, analysts said the software giant's telematics platform could make inroads in the market.
But the race is far from over.
By its own account, Microsoft is pursuing a volume strategy with its telematics platform introduced last week. Working with partners Italian partners Fiat and Magneti Marelli, the company plans to provide telematic services for compact cars that were previously reserved more for high-end vehicles.
Luxury car makers such as BMW and Audi therefore view Microsoft's foray with suspicion. A BMW spokesman played down the issue, saying it wasn't worth commenting on. In any case, the Munich-based auto manufacturer still considers its telematics services a unique selling point. BMW's strategy is a top-down one in which new services are introduced first in the luxury class, then gradually rolled out to economy models.
Another BMW executive also appeared to be unaffected by the Microsoft-Fiat strategy. "We don't see any reason to react to announcements," he said.
Volkswagen and Audi spokesman also declined to comment on Microsoft's telematics strategy.
IT service provider Gedas AG was less defensive. The VW subsidiary develops IT solutions for the auto industry. Dimitros Horozidis, product manager for fleet management products, predicted Microsoft will be successful with its products and with motor vehicle manufacturers.
Still, the complexity of the solutions demanded cannot be underestimated. "With commercial vehicles, particular customers insist on considerable individuality for their solutions," Horozidis said.
The Microsoft platform does have interfaces to the controller area network, or CAN-Bus, and can therefore access internal vehicle data. But implementation of the standard is not the end of it, Horozidis said. "Many manufacturers, primarily in the market for commercial vehicles, are intent on preparing customized information exclusively for their customers. In doing so, their solutions frequently exceed the CAN standard. A promising platform must therefore be freely programmable, so that service providers can use and implement additional messages on the bus."
Market researchers Ovum IT said Microsoft could make a significant dent in the auto telematics market "After all, you see Windows everywhere these days. The automotive market was an obvious candidate," said Dario Betti, a senior analyst at Ovum.
In contrast to other manufacturers, who have had only a fleeting interest in Microsoft's advances, partner Fiat committed itself to installing the platform. "It is probably true that Fiat's position in the automotive market is rather weak at the moment, but at the same time the company is one of the most active and successful players in the European telematics landscape," Betti said.
Betti cited the fact that Fiat's telematics service, "Targa Sys," is already profitable and is used by other automakers. That is one clear indicator of the service's success.
The other side of the coin, according to Ovum analysts, is that Microsoft's first generation of products are frequently sub-par. "Just think about Microsoft's first smart phones and set-top boxes," said Betti. The worst thing that could happen to Microsoft after its high-profile entry into the telematics market would be flawed first-generation products.
"Competition in this sector is brutal. Successful providers in the car-entertainment market, such as Pioneer, are already in the process of successfully claiming this market for themselves. The race is not over yet," Betti said.
Christoph Hammerschmidt is editor-in-chief of EET.de.