The Evolving Auto Industry Means That More Old School Models Have Become Expendable

Index Ventures General Partner, Mike Volpi, has an unusual distinction in the world of venture capital: he sits on the board of one of the oldest and largest automotive companies in the world, Fiat Chrysler Automobiles (the company was actually formed in 2014, but the parts that came together are each quite old), and on the board of companies like Aurora, which provides self-driving car technology. As such, he understands and is helping to shape autonomous driving from the supply and demand sides deeper than most.

Born in Italy, raised in Japan, and educated in the United States, Volpi spent time at Cisco during times of extraordinary growth. As Chief Strategy Officer for the company he led corporate strategy, strategic alliances, and business development. During the seven years in which he held that role (spanning from 1994 through 2000), Volpi oversaw the acquisition of over 70 companies. 

He started Index's San Francisco office in 2009, ahead of the curve on tech's move up the peninsula of Silicon Valley and into the city. Since then, he has led investments Arista Networks, Cloud.com, Hortonworks, Pure Storage, Sonos, and Zuora, among many other companies. We discuss the future of self driving cars, and several other topics in this far reaching interview.

(To listen to a podcast version of this interview, click this link. To read future articles like this one, follow me on Twitter @PeterAHigh.)

Peter High: You have been a General Partner with Index Ventures since you joined the firm in 2009. One of the most prominent technologies you are involved in is the technology that powers autonomous vehicles. As you are an investor in that space, you have sat on the board of startups, such as Aurora, as well as the board of Fiat Chrysler. Could you elaborate on the different perspectives you gain from these diverse experiences with both digital native and digital immigrant organizations? Furthermore, can you talk about the progress that has been made in this industry now that the innovation that has been hyped up for years is becoming a reality?

Index Ventures General Partner Mike VolpiCredit: Index Ventures

Mike Volpi: There are two important messages to take away. The first is that the use of technology is enormously transformative and important to the business world, various segments of the industry, and society in general. There are 38,000 deaths in traffic accidents in the United States per year while places such as India see close to half a million deaths a year. This technology is built to change that and to create a safer environment for people to drive in. Additionally, this technology has a wide variety of ancillary benefits, such as the reduction of parking lots, the creation of urban driving environments, commute patterns, reduction of traffic, among others.

For roughly one hundred years, the reduction of cars has been based around the experience of driving. Over time, I believe the experience of driving a car will not be central to the purchase of one, similar to what we saw with the use of horses. This is in part because self-driving in its mature state will be a significantly cheaper way for vehicles to be driven around. Many of the ride-hailing companies such as Uber, Didi, and Lyft will change their business model and become heavy consumers of autonomous driving technology. Due to this, I believe there is a great deal of validity to the attention and scrutiny that it is getting in the market today, as it is hugely impactful.

That said, this is an enormously complicated technology, and it still needs a long time before it reaches maturity.

I was educated and worked as an engineer for some time, and now, I am a business person. As a venture capitalist you have to try to objectively evaluate how ready some of the technology is, and self-driving is not ready. This is because several new technologies must converge for it to become a reality. Some of the technology is advanced, such as the artificial intelligence [AI] and machine learning components, which experienced transformative changes in 2014 and 2015 and became useful for self-driving. Other technologies such as LIDAR - the eyes and ears of the self-driving cars - are novel and young.

In its most basic form, a self-driving car needs to see the world and have those eyes and ears integrated with the creation of a map of the world as we understand it. We then have to make numerous decisions about where we want to go and how we want to get there. Because this is how a human driver operates, that is how autonomous cars need to work, which involves numerous pieces coming together tightly. Since each piece is evolving rapidly but at a different pace and because it must be loaded onto a car with a fifteen-year life cycle, the readiness is not close to being where it needs to be.

Another factor that needs to be determined is where these vehicles are being used. If you go to a predictable environment such as Phoenix, with principally straight and wide roads and principally good weather, it will be less challenging than a place such as Boston. In Boston, the weather is unpredictable, and the traffic is a mess with crazily-shaped roads and extremely narrow streets making it significantly harder for self-driving cars. There are many numbers that are thrown out there as to the timeframe to which this technology will be ready. In places such as Phoenix, I would say that timeframe is 18 months to roughly three years, in Boston, I would say at least four years, and places such as India are even further out than Boston. There are gradations of time, but because of this combination of the immaturity of the technology, the fact that you have to integrate these different forms of technology, and difficulties of specific locations, self-driving is a few years away from being mainstreamed.

High: Another hurdle companies will face is the role that governments will play in either helping or hindering the progress made. Could you elaborate on the progress you have seen as well as issues that still may be around?

Volpi: While there is currently not much in the way of legislation due to its complexity, there is a great deal of scrutiny. Similar to aspects that come with regulation, there are different sets of incentives that occur in different geographies and denominations of that regulation. I do believe that ultimately there will be some type of regulation that will likely represent an equivalent of a driver's license. In the United States, we get the privilege of having a temporary driver's license at the age of 16 and then at 18, we get a full driver's license. To receive a license, we have to pass a written and a driving test, and I believe there will be an equivalent for this with self-driving cars at some point. Those frameworks will need to be defined either state-by-state or at the federal level. The complicated part of this is figuring out how to define the driver’s test for a self-driving system. There is a great deal of complexity and unknown in this area, and therefore, it is going to require significant collaboration between both the technology providers and the original equipment manufacturers [OEMs] in that space as well as regulatory bodies to make it happen. Moreover, there are important regulations that are going to come about in the general scheme of things which will take time because of the underlying complexities of the technology.

High: Naturally, the switch to autonomous vehicles is about the driver giving up control. In your mind, to what extent does the technology need to be as close to flawless as possible? Furthermore, there will be a period where there will be a combination of both traditional and autonomous vehicles. Can you elaborate on the difficulty of getting a near perfect system in this difficult environment where not all vehicles will have access to each other’s data?

Volpi: There are a certain amount of traffic deaths in the United States per year, and there are a certain number of miles driven per year. These numbers give us a ratio of how many miles are driven per death in the United States, and this is considered a valid and accepted statistic among society.

The question is, “What is an acceptable comparable ratio for a self-driving vehicle?” That number can range from one less death to a quarter fewer deaths. Those numbers are achievable depending on two concepts.

  1. How much infrastructure you put into the car, as cars with more sensors and computing power will result in fewer accidents, but they will be more expensive.
  2. The caution with which the self-driving systems operate, ranging from whether the car can exceed a speed limit to how many unprotected left turns they can make.

Despite this, it is unclear what is acceptable from a societal perspective, and we do not have parameters around how that will get decided. Those are the concepts that the regulatory regime will have to wrap its arms around and decide on. I believe it is worth it if you can even save one person’s life, but I would assume the expectation of autonomous vehicles is substantially higher than that.

Regarding mixed environments, I do not believe you can completely remove the human's ability to drive for the foreseeable future, so it is likely going to be the reality for the next thirty years. There may be some locations in the world that may decide to have no human drivers sooner than that, but in the United States, that is not realistic in the short term. Because of this, the creators of the self-driving cars will be fully prepared to work for this. Since we will have these mixed environments for a while, I hope that self-driving vehicles will be designed and built in such a way that they can accommodate for that.

High: As someone on the board of the traditional automaker, Fiat Chrysler, and not just startups, what is your thought process as to the amount of creativity, investment, and mindshare that is applied to autonomous driving from the traditional auto industry worldwide?  

Volpi: I believe that the traditional auto manufacturers see the evolutionary path to autonomous vehicles. This path involves the so-called level one, two, and three systems that are becoming available or are available. These systems are generally categorized as driver-assistance systems as they help the driver do a better job driving. One of our portfolio companies, Aurora, is building level four and above systems, which take it a step further and do not require a driver. There is a large transition involved in these steps and most auto manufacturers will go up that ladder over a period of time. They will all view it as an important technology that they need to embrace.

However, these companies have different perspectives on how they choose to embrace it. FCA has elected to partner with providers of the technology because they view that as outside their current core competency. Therefore, they feel that partnering with the best-of-breed will produce the best result. The company publicly announced that they have developed a partnership with Waymo, the subsidiary of Alphabet, because they perceive them as the market leader to collaborate with. Waymo is procuring over 60,000 vehicles from FCA, and they will integrate their self-driving systems into the Chrysler-Pacifica platform. Other companies have decided to either develop the technology in-house or acquire entities that own the technology and control it close to their core. This represents both the importance they associate with it and the belief they can do a better job than somebody who is assisting multiple players in the industry. As a director of FCA, I tend to agree with the view that partnering with companies is the better approach in the short-term. As mentioned, there is no denying that all auto manufacturers believe that this is extremely important and transitional. Instead, the main question is whether to do it themselves or to partner with another company, as either result will bring far different outcomes.

High: Cities have been constructed based on the assumption of the ownership of vehicles and everything that comes with it, such as traffic, parking lots, and driving. With the evolution you have described regarding how ownership and technology will evolve, how do you believe cities will evolve with it?

Volpi: Traffic patterns and urban design will change significantly. You will have different dynamics around parking lots and where self-driving vehicles are located. Autonomous vehicles can serve people whether it is through a personal service or part of a ride-hailing suite as opposed to being parked near the proximity of the driver. The average utilization of a given vehicle on the road today is roughly four percent, meaning 96 percent of the time, it is parked. Furthermore, you will see an environment where people and cars can co-exist in a safer manner.

Another interesting aspect is that most fleets being autonomous, traffic patterns will be designed in different ways. With today’s freeway system, the allocation of lanes is fixed on the assumption that there are a certain number of vehicles coming each way, but if humans are not driving, lanes can become dynamic and adjust based on the needs of the traffic flow at that time of day. Additionally, with autonomous vehicles, people can become more productive because rather than focus on the road, they can work on other tasks. This will result in significant shifts in productivity and even people deciding to live in different places.

The most relevant aspect in my mind is that autonomous driving is likely to bring a significantly lower cost to the consumer. Similar to any other commodity when prices drop, people use more of it. Because of this, people may move around more than today without the friction or the cost of moving. These are just some of the changes that we can envision, and we will learn more along the way. It goes without saying that I see a much different world when self-driving vehicles become most of the majority of the fleet on the road.

High: Regarding the software infrastructure space, much has evolved in the realm of digital-immigrant organizations as opposed to digital-native organizations.  There is now the opportunity to mimic some of the magic of digital-native organizations who had the benefit of a blank slate from a technology perspective. The migration for older organizations, however, can be quite challenging in terms of time, expense, and change management. Could you reflect on where you see infrastructure evolving?

Volpi: Technology infrastructure is dramatically transforming, but there are a few high-level points that I would underline. One is that when I started in the technology business in the 1990s, technology itself was the domain of the IT department since IT provided technology to the other parts of the organization. Today, as technology becomes more pervasive in both our personal and professional lives, every part of an organization is now a participant in the usage, the selection, and in the embracement of technology. As a provider of an enterprise technology suite, you used to talk exclusively to the IT department, but now, everyone is a buyer, and you must talk to all parts of the company. As a result, all departments are learning to become fluent in the use of technology to create a competitive advantage. This includes HR, Customer Service, Engineering, Finance, Marketing, Sales, and all other areas of the business. Therefore, IT organizations become focused on the usage and deployment of technology, which is an enormous shift compared to the previous role of IT.

The second shift is that there used to be a high tax that was associated with the deployment of technology, where the IT department had to build servers, storage, networks, and all types of low-level infrastructure that was needed for the basics of running a technology suite. Today, you do not need to build the plumbing anymore as you can leverage plumbing from cloud service providers. It is increasingly important to focus on the true value as an organization as opposed to where and how many servers are needed. Over time, the attention is focused more on the application layer rather than the private clouds, which provide value but are fundamentally plumbing that most people do not need to worry about anymore. While some organizations will continue to deploy some amount of private clouds, the growth of Amazon [Web Services], [Microsoft] Azure, and Google Cloud Platform indicate companies are migrating their infrastructure to the cloud in substantial portions, which is an irreversible trend that will continue. Organizations that have chosen to move infrastructure to public clouds will continue to focus their attention in areas where they gain a competitive advantage from technology.

High: Regarding software as a service (SaaS) and some of the evolution there, how do you see adoption, creativity, and innovation on the provider's side evolving?

Volpi: Most applications that are being developed these days are SaaS. The first-generation of SaaS software that emerged was aligned with the primary functions of a corporation, the customer. Salespeople were some of the first to adopt the SaaS CRM, principally offered by Salesforce. You then saw marketing technologies that developed into SaaS offerings, as well as financial solutions, customer support solutions, human resource solutions, IT solutions, among other functions. Each one of these gave rise to one or two large players, such as Salesforce, ServiceNow, Workday, NetSuite, among others. Those companies occupy a strong position, but there are a few key areas that I believe are still on an evolutionary path.

One is that there are several smaller functions in the corporate environment today that are still in the process of adopting SaaS. For example, one of our portfolio companies, Zuora, is a provider of SaaS-based billing systems. Billing is part Finance function, part Sales function, and part Marketing function. While it is not one of the major groups that you would think of in your company, billing is extremely important, as is relationship management for subscriptions. That is the space that Zuora occupies, and they have become a mature public utility company serving that portion of the market.

The second is that there is still a wide chunk of software that exists on-premise around enterprise resource planning [ERP]. There are many organizations that run Oracle or SAP-type ERP solutions, and those solutions are heavily customized by large system integrators. I believe that those will gradually be replaced by SaaS offerings, whether that be by the current incumbents or not. Likewise, you will see many of these highly integrated, highly customized legacy applications transform into SaaS solutions. The classifications of those old-school ERP systems will be challenged over the next decade.

Finally, while the first-generation of SaaS providers did great work, they will see new competition. If you tear those aspects apart and look at the innards, their basic construct is that they have a large database with a UI on top of it with rows and columns. We will see challengers emerge to those first-generation SaaS providers that will attempt to innovate around that using technologies such as machine learning and AI to augment, enhance, and improve what the first-generation of SaaS providers do. Some of the incumbents will respond to that and provide their own variant while others will remain unchanged and will face threats and challenges from new providers. Because of all this, I believe that SaaS will continue to be one of the most interesting segments in the enterprise for the next decade.

High: Another area you focus on is open-source, as you are on the board of multiple open-source companies. Could you talk about the trajectory of open-source and the evolution of the business model?

Volpi: Our firm started investing in open-source technology ten years ago. We invested in a company called MySQL, which has become a popular database today. Back then and even today, many people are skeptical that it is even a business. Open-source has changed as a movement and as a construct for the building of businesses around it. It started with a community rejection of closed source software, with operating systems, and with the creation of UNIX and its derivatives, such as Linux. Those pieces of software were developed by the community, similar to MySQL. The business models that were constructed were simply support subscriptions, where a company such as Red Hat or MySQL would provide support for those open-source projects.

But today, two major aspects have changed. First, open-source projects themselves are less community-created and are commonly built by companies. You are seeing these projects that are immediately associated with companies, not just from a support perspective, but from a creation perspective, which is significantly different than fifteen years ago. As a result of this change, these companies are at the core of the roadmaps and the evolution of the technology, and therefore, are better suited than the former variants of open-source to have predictable roadmaps, timeframes, and exclusive knowledge of that software base. They can monetize the open-source technology faster than ever before and because they are companies, they are easier for customers to deal with if they want a particular feature. Additionally, these open-source companies are increasingly less purely open source. By this, I mean that you have a core of software which is in the open-source domain, but around it, there are a variety of proprietary software components that customers have to pay vendors for. These companies are becoming hybrid vehicles between open source and proprietary software and while it is still a great deal of effort for customers, it is a little easier to monetize. Whether it is MuleSoft, MongoDB, Hortonworks, or Cloudera, you are seeing more open-source companies achieve success in the public market. It is clear they are becoming real, multi-billion-dollar businesses.

The last component is that enterprises are increasingly expecting that open source is the way to go, particularly for deep infrastructure such as data analytics, databases, or message buses. It is less likely that you see a financial services company, a healthcare company, or a transportation services company select proprietary software as their core infrastructure. This is because they are tired of their vendor lock-in and have concluded that open-source software gives them flexibility and thus comfort.

From a security perspective, contrary to what many may believe, open-source is often more secure because since it is out in the public domain, it has been tested and tried more than proprietary software. Many companies are beginning to realize that open-source software is even more secure. From many dimensions, you are seeing a movement where it is likely that the next generation of core infrastructure software elements will be open-sourced, which is a giant change from where we were fifteen years ago.

High: You spent a formative portion of your career with Cisco where you held multiple roles, such as Chief Strategy Officer as well as SVP and General Manager of the Routing and Service Provider Group. Cisco is a company that many venture capitalists have emerged from. Could you reflect on what it was about that experience that helped provide you with the skills and background that would lead to your current role at Index Ventures?

Volpi: I joined Cisco in 1994, which was the year that Netscape launched its web browser and web server. I did not join Cisco with the mindset that I would end up in venture capital, but instead, because I had the mindset that the internet might become big, which it turned out to be. The big lesson is that when a major technology shift is happening, such as the creation of the internet, the advent of broadband, the creation of the mobile computing environment, the migration to the cloud, or autonomous driving, you see many of the people who are innovators and risk takers take a chance for a big change in the world and migrate to that space.

I was extremely lucky in my early days at Cisco to be surrounded by a group of people who were risk takers and innovators, who wanted to do things differently, and who saw the world as a different place because of the ideas that they were working on. It is not surprising that over twenty years later, the people who had that pioneering mentality ended up being extremely successful. Some of them are venture capitalists while others have led companies and worked on some exceptionally interesting concepts. The core is that when you are in a place where many of the interesting technology waves are hitting, it is not surprising that many of the people surrounding that environment have amazing career paths.

I was fortunate that I saw something amazing happening with the internet and the web. I went to one of the companies that was kind enough to give me an opportunity to work there and sure enough, I was surrounded by a bunch of incredible people who are still my colleagues and friends. When you see what we have developed in Silicon Valley and what has been increasingly adopted around the world, you can take a skeptical view and say that it will not happen for a while, or that it is all hype, or you can embrace it. If you do embrace it, you are going to find a special group of people around you who will become your friends and colleagues for many years to come

.

High: Index has several non-traditional investments, such as Blue Bottle Coffee, where you were a board member. What are your perspectives about investing in the coffee space?

Volpi: Our Blue Bottle investment is an exception, as it is not a core competency of ours. As a venture capitalist, we oftentimes get asked the question, "What sectors do you invest in and why?" It is a relevant question, but it is important to note that what truly makes a business go is the entrepreneur, especially when you are an early-stage investor like us where seventy percent of our investing is Series A investing. You find that businesses shape, evolve, and change to adapt to what the market needs and wants, and much of that adaptability and velocity of change is dependent on the entrepreneur.

Generally, at Index, we have areas that we prefer to invest in, such as the cloud, enterprise, SaaS, marketplaces, fintech, or the gaming industry. We love the space of mobility, including autonomous vehicles or electric scooters, as we see exciting developments happening in those areas. On the flip side, there are areas we do not typically invest in, such as life sciences. However, what drives us at the end of the day is finding that special entrepreneur that identifies the same trend we do and takes all the smart steps to create that.

Blue Bottle was off-theme for us, and it is unlikely that we will ever do another coffee investment. However, we did find an extraordinary entrepreneur in Bryan Meehan, who leads the company. As a venture capitalist, you sometimes must have as much conviction about the person and the founding team as you do about the space. One important takeaway from that investment for us is that while it was a great decision financially, it is not that we invested in the coffee business, but that we followed the instinct of a great entrepreneur. Instead of asking which sectors to invest in, people should be asking whether certain people are great entrepreneurs or not. The true judgment of whether we see success or not often depends on the co-founding team and what they can do rather than specifically what sector they are in.

>Peter High is President of >Metis Strategy, a business and IT advisory firm. His latest book is Implementing World Class IT Strategy. He is also the author of World Class IT: Why Businesses Succeed When IT Triumphs. Peter moderates the Forum on World Class IT podcast series. He speaks at conferences around the world. Follow him on Twitter @PeterAHigh.

" contentScore="27804">

Index Ventures General Partner, Mike Volpi, has an unusual distinction in the world of venture capital: he sits on the board of one of the oldest and largest automotive companies in the world, Fiat Chrysler Automobiles (the company was actually formed in 2014, but the parts that came together are each quite old), and on the board of companies like Aurora, which provides self-driving car technology. As such, he understands and is helping to shape autonomous driving from the supply and demand sides deeper than most.

Born in Italy, raised in Japan, and educated in the United States, Volpi spent time at Cisco during times of extraordinary growth. As Chief Strategy Officer for the company he led corporate strategy, strategic alliances, and business development. During the seven years in which he held that role (spanning from 1994 through 2000), Volpi oversaw the acquisition of over 70 companies. 

He started Index's San Francisco office in 2009, ahead of the curve on tech's move up the peninsula of Silicon Valley and into the city. Since then, he has led investments Arista Networks, Cloud.com, Hortonworks, Pure Storage, Sonos, and Zuora, among many other companies. We discuss the future of self driving cars, and several other topics in this far reaching interview.

(To listen to a podcast version of this interview, click this link. To read future articles like this one, follow me on Twitter @PeterAHigh.)

Peter High: You have been a General Partner with Index Ventures since you joined the firm in 2009. One of the most prominent technologies you are involved in is the technology that powers autonomous vehicles. As you are an investor in that space, you have sat on the board of startups, such as Aurora, as well as the board of Fiat Chrysler. Could you elaborate on the different perspectives you gain from these diverse experiences with both digital native and digital immigrant organizations? Furthermore, can you talk about the progress that has been made in this industry now that the innovation that has been hyped up for years is becoming a reality?

Index Ventures General Partner Mike VolpiCredit: Index Ventures

Mike Volpi: There are two important messages to take away. The first is that the use of technology is enormously transformative and important to the business world, various segments of the industry, and society in general. There are 38,000 deaths in traffic accidents in the United States per year while places such as India see close to half a million deaths a year. This technology is built to change that and to create a safer environment for people to drive in. Additionally, this technology has a wide variety of ancillary benefits, such as the reduction of parking lots, the creation of urban driving environments, commute patterns, reduction of traffic, among others.

For roughly one hundred years, the reduction of cars has been based around the experience of driving. Over time, I believe the experience of driving a car will not be central to the purchase of one, similar to what we saw with the use of horses. This is in part because self-driving in its mature state will be a significantly cheaper way for vehicles to be driven around. Many of the ride-hailing companies such as Uber, Didi, and Lyft will change their business model and become heavy consumers of autonomous driving technology. Due to this, I believe there is a great deal of validity to the attention and scrutiny that it is getting in the market today, as it is hugely impactful.

That said, this is an enormously complicated technology, and it still needs a long time before it reaches maturity.

I was educated and worked as an engineer for some time, and now, I am a business person. As a venture capitalist you have to try to objectively evaluate how ready some of the technology is, and self-driving is not ready. This is because several new technologies must converge for it to become a reality. Some of the technology is advanced, such as the artificial intelligence [AI] and machine learning components, which experienced transformative changes in 2014 and 2015 and became useful for self-driving. Other technologies such as LIDAR - the eyes and ears of the self-driving cars - are novel and young.

In its most basic form, a self-driving car needs to see the world and have those eyes and ears integrated with the creation of a map of the world as we understand it. We then have to make numerous decisions about where we want to go and how we want to get there. Because this is how a human driver operates, that is how autonomous cars need to work, which involves numerous pieces coming together tightly. Since each piece is evolving rapidly but at a different pace and because it must be loaded onto a car with a fifteen-year life cycle, the readiness is not close to being where it needs to be.

Another factor that needs to be determined is where these vehicles are being used. If you go to a predictable environment such as Phoenix, with principally straight and wide roads and principally good weather, it will be less challenging than a place such as Boston. In Boston, the weather is unpredictable, and the traffic is a mess with crazily-shaped roads and extremely narrow streets making it significantly harder for self-driving cars. There are many numbers that are thrown out there as to the timeframe to which this technology will be ready. In places such as Phoenix, I would say that timeframe is 18 months to roughly three years, in Boston, I would say at least four years, and places such as India are even further out than Boston. There are gradations of time, but because of this combination of the immaturity of the technology, the fact that you have to integrate these different forms of technology, and difficulties of specific locations, self-driving is a few years away from being mainstreamed.

High: Another hurdle companies will face is the role that governments will play in either helping or hindering the progress made. Could you elaborate on the progress you have seen as well as issues that still may be around?

Volpi: While there is currently not much in the way of legislation due to its complexity, there is a great deal of scrutiny. Similar to aspects that come with regulation, there are different sets of incentives that occur in different geographies and denominations of that regulation. I do believe that ultimately there will be some type of regulation that will likely represent an equivalent of a driver's license. In the United States, we get the privilege of having a temporary driver's license at the age of 16 and then at 18, we get a full driver's license. To receive a license, we have to pass a written and a driving test, and I believe there will be an equivalent for this with self-driving cars at some point. Those frameworks will need to be defined either state-by-state or at the federal level. The complicated part of this is figuring out how to define the driver’s test for a self-driving system. There is a great deal of complexity and unknown in this area, and therefore, it is going to require significant collaboration between both the technology providers and the original equipment manufacturers [OEMs] in that space as well as regulatory bodies to make it happen. Moreover, there are important regulations that are going to come about in the general scheme of things which will take time because of the underlying complexities of the technology.

High: Naturally, the switch to autonomous vehicles is about the driver giving up control. In your mind, to what extent does the technology need to be as close to flawless as possible? Furthermore, there will be a period where there will be a combination of both traditional and autonomous vehicles. Can you elaborate on the difficulty of getting a near perfect system in this difficult environment where not all vehicles will have access to each other’s data?

Volpi: There are a certain amount of traffic deaths in the United States per year, and there are a certain number of miles driven per year. These numbers give us a ratio of how many miles are driven per death in the United States, and this is considered a valid and accepted statistic among society.

The question is, “What is an acceptable comparable ratio for a self-driving vehicle?” That number can range from one less death to a quarter fewer deaths. Those numbers are achievable depending on two concepts.

  1. How much infrastructure you put into the car, as cars with more sensors and computing power will result in fewer accidents, but they will be more expensive.
  2. The caution with which the self-driving systems operate, ranging from whether the car can exceed a speed limit to how many unprotected left turns they can make.

Despite this, it is unclear what is acceptable from a societal perspective, and we do not have parameters around how that will get decided. Those are the concepts that the regulatory regime will have to wrap its arms around and decide on. I believe it is worth it if you can even save one person’s life, but I would assume the expectation of autonomous vehicles is substantially higher than that.

Regarding mixed environments, I do not believe you can completely remove the human's ability to drive for the foreseeable future, so it is likely going to be the reality for the next thirty years. There may be some locations in the world that may decide to have no human drivers sooner than that, but in the United States, that is not realistic in the short term. Because of this, the creators of the self-driving cars will be fully prepared to work for this. Since we will have these mixed environments for a while, I hope that self-driving vehicles will be designed and built in such a way that they can accommodate for that.

High: As someone on the board of the traditional automaker, Fiat Chrysler, and not just startups, what is your thought process as to the amount of creativity, investment, and mindshare that is applied to autonomous driving from the traditional auto industry worldwide?  

Volpi: I believe that the traditional auto manufacturers see the evolutionary path to autonomous vehicles. This path involves the so-called level one, two, and three systems that are becoming available or are available. These systems are generally categorized as driver-assistance systems as they help the driver do a better job driving. One of our portfolio companies, Aurora, is building level four and above systems, which take it a step further and do not require a driver. There is a large transition involved in these steps and most auto manufacturers will go up that ladder over a period of time. They will all view it as an important technology that they need to embrace.

However, these companies have different perspectives on how they choose to embrace it. FCA has elected to partner with providers of the technology because they view that as outside their current core competency. Therefore, they feel that partnering with the best-of-breed will produce the best result. The company publicly announced that they have developed a partnership with Waymo, the subsidiary of Alphabet, because they perceive them as the market leader to collaborate with. Waymo is procuring over 60,000 vehicles from FCA, and they will integrate their self-driving systems into the Chrysler-Pacifica platform. Other companies have decided to either develop the technology in-house or acquire entities that own the technology and control it close to their core. This represents both the importance they associate with it and the belief they can do a better job than somebody who is assisting multiple players in the industry. As a director of FCA, I tend to agree with the view that partnering with companies is the better approach in the short-term. As mentioned, there is no denying that all auto manufacturers believe that this is extremely important and transitional. Instead, the main question is whether to do it themselves or to partner with another company, as either result will bring far different outcomes.

High: Cities have been constructed based on the assumption of the ownership of vehicles and everything that comes with it, such as traffic, parking lots, and driving. With the evolution you have described regarding how ownership and technology will evolve, how do you believe cities will evolve with it?

Volpi: Traffic patterns and urban design will change significantly. You will have different dynamics around parking lots and where self-driving vehicles are located. Autonomous vehicles can serve people whether it is through a personal service or part of a ride-hailing suite as opposed to being parked near the proximity of the driver. The average utilization of a given vehicle on the road today is roughly four percent, meaning 96 percent of the time, it is parked. Furthermore, you will see an environment where people and cars can co-exist in a safer manner.

Another interesting aspect is that most fleets being autonomous, traffic patterns will be designed in different ways. With today’s freeway system, the allocation of lanes is fixed on the assumption that there are a certain number of vehicles coming each way, but if humans are not driving, lanes can become dynamic and adjust based on the needs of the traffic flow at that time of day. Additionally, with autonomous vehicles, people can become more productive because rather than focus on the road, they can work on other tasks. This will result in significant shifts in productivity and even people deciding to live in different places.

The most relevant aspect in my mind is that autonomous driving is likely to bring a significantly lower cost to the consumer. Similar to any other commodity when prices drop, people use more of it. Because of this, people may move around more than today without the friction or the cost of moving. These are just some of the changes that we can envision, and we will learn more along the way. It goes without saying that I see a much different world when self-driving vehicles become most of the majority of the fleet on the road.

High: Regarding the software infrastructure space, much has evolved in the realm of digital-immigrant organizations as opposed to digital-native organizations.  There is now the opportunity to mimic some of the magic of digital-native organizations who had the benefit of a blank slate from a technology perspective. The migration for older organizations, however, can be quite challenging in terms of time, expense, and change management. Could you reflect on where you see infrastructure evolving?

Volpi: Technology infrastructure is dramatically transforming, but there are a few high-level points that I would underline. One is that when I started in the technology business in the 1990s, technology itself was the domain of the IT department since IT provided technology to the other parts of the organization. Today, as technology becomes more pervasive in both our personal and professional lives, every part of an organization is now a participant in the usage, the selection, and in the embracement of technology. As a provider of an enterprise technology suite, you used to talk exclusively to the IT department, but now, everyone is a buyer, and you must talk to all parts of the company. As a result, all departments are learning to become fluent in the use of technology to create a competitive advantage. This includes HR, Customer Service, Engineering, Finance, Marketing, Sales, and all other areas of the business. Therefore, IT organizations become focused on the usage and deployment of technology, which is an enormous shift compared to the previous role of IT.

The second shift is that there used to be a high tax that was associated with the deployment of technology, where the IT department had to build servers, storage, networks, and all types of low-level infrastructure that was needed for the basics of running a technology suite. Today, you do not need to build the plumbing anymore as you can leverage plumbing from cloud service providers. It is increasingly important to focus on the true value as an organization as opposed to where and how many servers are needed. Over time, the attention is focused more on the application layer rather than the private clouds, which provide value but are fundamentally plumbing that most people do not need to worry about anymore. While some organizations will continue to deploy some amount of private clouds, the growth of Amazon [Web Services], [Microsoft] Azure, and Google Cloud Platform indicate companies are migrating their infrastructure to the cloud in substantial portions, which is an irreversible trend that will continue. Organizations that have chosen to move infrastructure to public clouds will continue to focus their attention in areas where they gain a competitive advantage from technology.

High: Regarding software as a service (SaaS) and some of the evolution there, how do you see adoption, creativity, and innovation on the provider's side evolving?

Volpi: Most applications that are being developed these days are SaaS. The first-generation of SaaS software that emerged was aligned with the primary functions of a corporation, the customer. Salespeople were some of the first to adopt the SaaS CRM, principally offered by Salesforce. You then saw marketing technologies that developed into SaaS offerings, as well as financial solutions, customer support solutions, human resource solutions, IT solutions, among other functions. Each one of these gave rise to one or two large players, such as Salesforce, ServiceNow, Workday, NetSuite, among others. Those companies occupy a strong position, but there are a few key areas that I believe are still on an evolutionary path.

One is that there are several smaller functions in the corporate environment today that are still in the process of adopting SaaS. For example, one of our portfolio companies, Zuora, is a provider of SaaS-based billing systems. Billing is part Finance function, part Sales function, and part Marketing function. While it is not one of the major groups that you would think of in your company, billing is extremely important, as is relationship management for subscriptions. That is the space that Zuora occupies, and they have become a mature public utility company serving that portion of the market.

The second is that there is still a wide chunk of software that exists on-premise around enterprise resource planning [ERP]. There are many organizations that run Oracle or SAP-type ERP solutions, and those solutions are heavily customized by large system integrators. I believe that those will gradually be replaced by SaaS offerings, whether that be by the current incumbents or not. Likewise, you will see many of these highly integrated, highly customized legacy applications transform into SaaS solutions. The classifications of those old-school ERP systems will be challenged over the next decade.

Finally, while the first-generation of SaaS providers did great work, they will see new competition. If you tear those aspects apart and look at the innards, their basic construct is that they have a large database with a UI on top of it with rows and columns. We will see challengers emerge to those first-generation SaaS providers that will attempt to innovate around that using technologies such as machine learning and AI to augment, enhance, and improve what the first-generation of SaaS providers do. Some of the incumbents will respond to that and provide their own variant while others will remain unchanged and will face threats and challenges from new providers. Because of all this, I believe that SaaS will continue to be one of the most interesting segments in the enterprise for the next decade.

High: Another area you focus on is open-source, as you are on the board of multiple open-source companies. Could you talk about the trajectory of open-source and the evolution of the business model?

Volpi: Our firm started investing in open-source technology ten years ago. We invested in a company called MySQL, which has become a popular database today. Back then and even today, many people are skeptical that it is even a business. Open-source has changed as a movement and as a construct for the building of businesses around it. It started with a community rejection of closed source software, with operating systems, and with the creation of UNIX and its derivatives, such as Linux. Those pieces of software were developed by the community, similar to MySQL. The business models that were constructed were simply support subscriptions, where a company such as Red Hat or MySQL would provide support for those open-source projects.

But today, two major aspects have changed. First, open-source projects themselves are less community-created and are commonly built by companies. You are seeing these projects that are immediately associated with companies, not just from a support perspective, but from a creation perspective, which is significantly different than fifteen years ago. As a result of this change, these companies are at the core of the roadmaps and the evolution of the technology, and therefore, are better suited than the former variants of open-source to have predictable roadmaps, timeframes, and exclusive knowledge of that software base. They can monetize the open-source technology faster than ever before and because they are companies, they are easier for customers to deal with if they want a particular feature. Additionally, these open-source companies are increasingly less purely open source. By this, I mean that you have a core of software which is in the open-source domain, but around it, there are a variety of proprietary software components that customers have to pay vendors for. These companies are becoming hybrid vehicles between open source and proprietary software and while it is still a great deal of effort for customers, it is a little easier to monetize. Whether it is MuleSoft, MongoDB, Hortonworks, or Cloudera, you are seeing more open-source companies achieve success in the public market. It is clear they are becoming real, multi-billion-dollar businesses.

The last component is that enterprises are increasingly expecting that open source is the way to go, particularly for deep infrastructure such as data analytics, databases, or message buses. It is less likely that you see a financial services company, a healthcare company, or a transportation services company select proprietary software as their core infrastructure. This is because they are tired of their vendor lock-in and have concluded that open-source software gives them flexibility and thus comfort.

From a security perspective, contrary to what many may believe, open-source is often more secure because since it is out in the public domain, it has been tested and tried more than proprietary software. Many companies are beginning to realize that open-source software is even more secure. From many dimensions, you are seeing a movement where it is likely that the next generation of core infrastructure software elements will be open-sourced, which is a giant change from where we were fifteen years ago.

High: You spent a formative portion of your career with Cisco where you held multiple roles, such as Chief Strategy Officer as well as SVP and General Manager of the Routing and Service Provider Group. Cisco is a company that many venture capitalists have emerged from. Could you reflect on what it was about that experience that helped provide you with the skills and background that would lead to your current role at Index Ventures?

Volpi: I joined Cisco in 1994, which was the year that Netscape launched its web browser and web server. I did not join Cisco with the mindset that I would end up in venture capital, but instead, because I had the mindset that the internet might become big, which it turned out to be. The big lesson is that when a major technology shift is happening, such as the creation of the internet, the advent of broadband, the creation of the mobile computing environment, the migration to the cloud, or autonomous driving, you see many of the people who are innovators and risk takers take a chance for a big change in the world and migrate to that space.

I was extremely lucky in my early days at Cisco to be surrounded by a group of people who were risk takers and innovators, who wanted to do things differently, and who saw the world as a different place because of the ideas that they were working on. It is not surprising that over twenty years later, the people who had that pioneering mentality ended up being extremely successful. Some of them are venture capitalists while others have led companies and worked on some exceptionally interesting concepts. The core is that when you are in a place where many of the interesting technology waves are hitting, it is not surprising that many of the people surrounding that environment have amazing career paths.

I was fortunate that I saw something amazing happening with the internet and the web. I went to one of the companies that was kind enough to give me an opportunity to work there and sure enough, I was surrounded by a bunch of incredible people who are still my colleagues and friends. When you see what we have developed in Silicon Valley and what has been increasingly adopted around the world, you can take a skeptical view and say that it will not happen for a while, or that it is all hype, or you can embrace it. If you do embrace it, you are going to find a special group of people around you who will become your friends and colleagues for many years to come

.

High: Index has several non-traditional investments, such as Blue Bottle Coffee, where you were a board member. What are your perspectives about investing in the coffee space?

Volpi: Our Blue Bottle investment is an exception, as it is not a core competency of ours. As a venture capitalist, we oftentimes get asked the question, "What sectors do you invest in and why?" It is a relevant question, but it is important to note that what truly makes a business go is the entrepreneur, especially when you are an early-stage investor like us where seventy percent of our investing is Series A investing. You find that businesses shape, evolve, and change to adapt to what the market needs and wants, and much of that adaptability and velocity of change is dependent on the entrepreneur.

Generally, at Index, we have areas that we prefer to invest in, such as the cloud, enterprise, SaaS, marketplaces, fintech, or the gaming industry. We love the space of mobility, including autonomous vehicles or electric scooters, as we see exciting developments happening in those areas. On the flip side, there are areas we do not typically invest in, such as life sciences. However, what drives us at the end of the day is finding that special entrepreneur that identifies the same trend we do and takes all the smart steps to create that.

Blue Bottle was off-theme for us, and it is unlikely that we will ever do another coffee investment. However, we did find an extraordinary entrepreneur in Bryan Meehan, who leads the company. As a venture capitalist, you sometimes must have as much conviction about the person and the founding team as you do about the space. One important takeaway from that investment for us is that while it was a great decision financially, it is not that we invested in the coffee business, but that we followed the instinct of a great entrepreneur. Instead of asking which sectors to invest in, people should be asking whether certain people are great entrepreneurs or not. The true judgment of whether we see success or not often depends on the co-founding team and what they can do rather than specifically what sector they are in.

>Peter High is President of >Metis Strategy, a business and IT advisory firm. His latest book is Implementing World Class IT Strategy. He is also the author of World Class IT: Why Businesses Succeed When IT Triumphs. Peter moderates the Forum on World Class IT podcast series. He speaks at conferences around the world. Follow him on Twitter @PeterAHigh.

Source : https://www.forbes.com/sites/peterhigh/2018/09/04/interview-with-the-leading-investor-in-self-driving-tech/

Terima Kasih for visit my website
Interview With The Leading Investor In Self-Driving Tech
What To Expect From The 2018 Paris Motor Show
A Crazy Plan to Save Detroit Could Help Save Ford Stock
Teaching old tech new tricks
State of baseball: Analytics make it whole new game
EV Mandate Looms Over GM China Surge
Leading Real Estate Companies of the World®: Ready for the Next Stage
Technology is king, so why are so many IT departments playing backseat roles?
One Landlord, One Vote
Traditional Ways Of Judging ‘Quality’ In Published Content Are Now Useless