The art of mastering code – between budget overruns and future opportunities - Berylls

ew business models and services in the software-defined vehicle environment are posing challenges for the supplier industry.

Just as with the end product, the product portfolio is also changing towards more software-based services while at the same time maintaining traditional products. The depth of added value and the development of new skills are important for remaining competitive going forward. The degree of change required and the effort involved in digital transformation are largely underestimated. Budget overruns and underestimated investments and costs, such as for licenses, are a part of everyday life. As a result, current projects with a software focus are getting out of control. Recent examples show that budget overruns of several hundred percent are not uncommon and – apart from the profitability of a given project – they can also jeopardize the existence of the entire company.

Increase in costs for software projects

Source: Berylls by AlixPartners

The successful implementation of software projects therefore requires more than the widespread introduction of agile methods at operational level. Overall, there are three key fields of action for the art of mastering code:

1. Processes, methods, and tools (PMT)

In addition to the principle of “software as a product”, changes are also taking place in the working environment. Software development is being transformed into software production, which involves a change in processes. The introduction of agile working methods alone does not increase the operational ability to develop, integrate, and release software. Activities and artifacts need to be adapted to enable the operating model to produce software.

Requirements

Traditional development processes in the automotive industry take three to five years and sometimes specify requirements right up to the end of the project. Releases to customers every two weeks do not allow this. In addition to the technical challenges, it is also essential to apply the RFLP logic consistently throughout and to derive a centrally controlled architecture from it for the regulatory aspects. Consequently, a holistic requirements structure (Requirement) would take precedence over a functional architecture (Function), in which the regulatory, technical, and customer-oriented requirements are collected, clustered, and hierarchized. This is followed by the design of the systems (Logical) on which the final physical architecture (Physical) is based.

Artifacts

As processes and tools from the hardware environment already exist, these are often applied to the software. The shift to more software means questioning processes from two perspectives: a) context and b) linkage. With regard to the context, activities and artifacts need to be adapted to the software products, such as release management. Otherwise, necessary processes will be ignored and the required process fidelity not achieved. In terms of linkage, the availability of data and stringent versioning is essential to contribute to success. Products such as Codebeamer make it possible to track activities without significant media disruptions.

Integration and Testing

When talking about testing, CICD pipelines – automated processes that enable Continuous Integration (CI) and Continuous Deployment (CD) – are part of the conversation. The latest version of a software product can thus be (virtually) checked for the current status of the hardware for testing purposes. This requires partners who develop data models and provide the necessary infrastructure – an essential make-or-buy decision. In operational terms, the direct transfer of test results to development is crucial to success. Establishing DevOps on the basis of automated workflows not only reduces the management effort, it also accelerates the pace of development.

Industrialization

The processes surrounding CICD and DevOps can be described as software production, as functions are produced and provided on a large scale. To ensure quality and production reliability, a clear release process is of key importance. Defined categories for customer capability and the monitoring of release processes are recorded to ensure the transfer of functional software to the customer vehicle.

2. Capability Management: Quality versus quantity

Automotive suppliers face the challenge that in many cases development teams and management do not have the right or the sufficient skills to be successful in the software business. This challenge is exacerbated by the critical importance of quality over quantity in software development and architecture, as high-performing software engineers are up to 10 times more productive than their average colleagues. It is essential for suppliers to consider the key success factors.

First, suppliers need to identify the level of core software performance and strategically leverage partnerships or acquisitions in order to strengthen it.

A comprehensive understanding of the necessary roles and skills in the software field is critical to developing targeted recruitment efforts, customized training programs, specific career paths for experts, and strategic workforce planning initiatives. In view of rapidly developing technologies, continuous capability improvement is also of the utmost significance. Top tech companies, for example, give employees time each week to devote to specially selected side projects and expert groups. This practice not only promotes innovation, but also fosters a culture of continuous learning and the exploration of diverse technical alternatives.

Due to the fierce competition for top talent, suppliers need to think beyond traditional recruiting channels when it comes to attracting new people. This includes alternative talent pools such as coding boot camps, top committers to open source projects, and hackathons. In addition, the opportunity must be created for top developers to earn top salaries without necessarily being pushed into management careers.

Finally, it is crucial to create a working environment that prioritizes the “developer experience,” for example through access to state-of-the-art technologies, a collaborative culture, and flatter decision-making hierarchies to provide an attractive workplace for both new and existing employees.

3. Leadership

Nowadays, organizing software development in agile teams is standard practice. But while software is being developed in new structures at operational level, managers often have problems leading these teams to sustainable success. Many of them were successful in traditional hardware development scenarios and are now faced with the challenge of adapting their management style and continuing to develop. Software managers should therefore take the following levers to heart when managing employees.

First of all, managers need the assessment skills to be able to evaluate and manage software projects. This is the basis for making effective and efficient decisions, taking technical, commercial, and strategic aspects equally into account. Current trends towards “code-first” or “everything-as-code” reinforce this requirement.

Moreover, managers must be prepared to leave day-to-day business decisions to the agile project teams. For example, the short-cycle reprioritization of features within a defined framework should be left up to the teams to ensure the best output. Since software development is more dynamic than hardware development, rigid control against originally defined specifications and milestone plans rarely leads to successful products. Instead, managers should instruct their teams to first generate deliverable software versions that meet the minimum customer requirements and regulatory stipulations. Extensions to the software can be provided via continuous over-the-air updates.

Finally, managers should see themselves as bridge builders and systems integrators between software and hardware development. They should clarify questions such as: Which software requirements really need to be defined when determining the hardware (usually a long time before the first line of code is written)? What are the critical milestones that need to be provided with initial software versions at an early stage? Or: How can software and hardware teams work better together? The smooth synchronization of long-cycle hardware development and short-cycle software development is increasingly becoming a critical task that managers are required to manage.

time to act

These days, software projects that get out of hand are not uncommon in the automotive industry and can cause significant financial damage. In addition to structural levers such as the standardization of processes, methods, and tools, the right internal and external capabilities are required. Managers – today often with a mainly hardware-related background – need to adapt their management practices to meet the software-specific requirements.

Due to the growing trend towards software-defined vehicles, suppliers need to act now to ensure their future viability.

Authors

Christian Grimmelt

Partner

christian.grimmelt@berylls.com

Sebastian Böswald

Associate Partner

sebastian.boeswald@berylls.com

Sebastian Bräuer

Associate Partner

sebastian.braeuer@berylls.com

Altan Yamak

Associate Partner

altan.yamak@berylls.com

Christian Grimmelt

Christian Grimmelt has been an integral member of the Berylls by AlixPartners (formerly Berylls Strategy Advisors) team since February 2021. Previously, he gained extensive professional experience in top management consultancies and in the automotive supplier industry.

During his time at the world’s largest automotive supplier, he drove the establishment of a central unit to optimize the company’s global logistics and production network.

Christian Grimmelt’s consulting focus is logistics and production network optimization, purchasing and (digital) operations including launch and turnaround management for OEMs and especially suppliers.

Christian Grimmelt holds a university diploma in industrial engineering from the Karlsruhe Institute of Technology.

Sebastian Bräuer

Sebastian Bräuer (1982) joined Berylls by AlixPartners (formerly Berylls Strategy Advisors) in 2022 as Associate Partner. He started his career in consulting where he led and supported assignments with focus on operational excellence programs primarily in automotive but also in consumer goods and chemicals. Later Sebastian worked for an German OEM in leadership roles regarding organizational development, digital product offering and digital car strategy. At Berylls Sebastian focuses on topics regarding Digital Car.

Sebastian graduated in economics and engineering at the Technical University of Dresden.

Sebastian Böswald

Sebastian Böswald (1991) joined Berylls by AlixPartners (formerly Berylls Strategy Advisors) in April 2021. He is an Associate Partner and an expert in both transformation and operations. Over the last decade, he has focused his work on strategy and organizational design, as well as on two megatrends shaping the automotive industry: software-defined vehicles and CASE (connected, autonomous, shared, and electrified mobility). In these fields, he has advised our global OEM clients as well as Tier-1 suppliers and tech companies.

Prior to joining Berylls, he worked for PwC Strategy& and started his career at BMW as a project manager for product strategy and digital charging services.

He received a Bachelor of Science in Automotive Computer Science at the Technical University of Ingolstadt as well as a Master of Science in Management from the Technical University of Munich.

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