Automotive firms must look toward partnerships that meld startup mentality with global scalability—as Accenture makes another big acquisition

The automotive sector is changing: electric cars, autonomous cars, and digital in-car experiences. The industry’s historical precedent of slow development cycles and painful negotiations with suppliers of both products and services, can’t continue. Automotive firms want their partners to act like startups—Agile, design thinking, spotting new customer-centric business opportunities—but also have the global scale to match. Accenture’s Industry X.0 practice recently made its umpteenth acquisition—German automotive software developer ESR Labs— to bring the startup mindset to its global reach and experience. Other providers like HCL, Wipro, and Infosys, to name but a few, are also in the game. Automotive leaders are well-positioned to find themselves a partner with the perfect blend of scale and mindset; service providers have certainly realized the criticality of the transition facing the automotive industry in the decades to come.

Global automotive competition—especially from China—means many automotive firms are struggling, whether they are manufacturers, suppliers, or servicers

Service providers are boosting their innovation capabilities to match their global reach. This trend could not have come at a better time for an industry that, in Germany’s case, employs close to a million people, makes almost half-a-trillion euros, and contributes 5% of the country’s GDP while exporting 77% of its cars. Worldwide, the automotive competition is ramping up from sources as diverse as Tesla’s innovation and trade tensions in China.

Providers other than Accenture are looking specifically at the German automotive market: HCL acquired H&D International in 2018 to enhance its delivery capabilities in Germany and automotive expertise globally. Simultaneously, providers are going in hard on embedded software similar to ESR Labs; KPIT Technologies, heavy in the automotive space, has the majority stake in Vayavya Labs, an embedded software company focused on hardware-software interface (HSI) tools and methodologies.

Startup mindsets are accelerating an automotive sector that’s historically lingered in long development cycles and negotiations

The automotive sector is a nightmare in some respects—many firms change their suppliers frequently but also face long project and development cycles and even longer negotiations. But, throughout the industry, service providers and vendors are changing their attitudes, and they are adopting a more Agile or design thinking approach (akin to those of successful startups) as they try to keep up with the industry’s rapid transitioning toward electric vehicles, autonomous driving, and digital in-car experiences. While many of the conversations HFS has had with automotive firms and those who service them signal this shift, Accenture’s recent acquisition of ESR Labs hammers home the point—and the words of both firms’ executives prove it.

ESR Labs develops embedded software for German automotive firms and will bring 130 software engineers and architects into Accenture’s already acquisition-heavy Industry X.0 practice; this arm of Accenture has been vacuuming-up design agencies and similar nimble firms as all industrial sectors look to transition from their past slow-to-change states (more on this later). BSR Labs will boost Accenture’s capability to meld startup skills and mindsets with its existing experience and global reach for automotive clients…

Andrew Smith, a managing director for Accenture Industry X.0 in Germany, said, “Manufacturing companies need to put software at the core of their business. They also need to adopt and nurture a technology company-like ‘pure developer culture.’ ESR Labs will put us in a great position to help our clients accelerate their plans to do just this.”

Axel Schmidt, a senior managing director and Accenture’s global automotive lead, added, “With ESR Labs, we can help our clients in the automotive sector embrace and implement new technologies much faster.”

It’s about combining agility with scalability in partnerships

Wolfgang Köcher, CEO of ESR Labs, said: “We’re excited to become a part of Accenture Industry X.0, which will allow us to create groundbreaking technology solutions for clients faster than ever. Accenture’s truly global organization will also offer new opportunities to our people.”

Automotive firms need to leverage partnerships that provide the startup mentality and global scale in one. Established providers have the scale, and the ones who’ll attract the big automotive contracts will come armed with the partners to match the industry’s modern desire for agility.

Emphasizing the importance of innovation in automotive electronics as a differentiator, a Tesla teardown recently showed that Tesla’s electronics are six years ahead of Toyota’s and VW’s.

The Bottom Line: Accenture is acquiring an insane amount of design thinking and agile development skill into its Industry X.0 practice—its competitors had better watch out, as automotive firms, especially, will turn their heads in Accenture’s direction.

ESR Labs joins Accenture Industry X.0 alongside two other German acquisitions: strategic design consultancy designaffairs and technology consultancy Zielpuls. This isn’t just an Industry X.0 project for Accenture; in February 2020, it bought VanBerlo, a Dutch product design and innovation agency, and in 2019, it acquired US product innovation and engineering company Nytec and UK innovation firm Happen. In 2018, it bought US embedded software specialist Pillar Technology and US hardware engineering firm Mindtribe.

Accenture isn’t the only service provider going big on the design acquisitions, but it is certainly trying to show its might. In addition to HCL and KPIT, Wipro might be looking over its shoulder to see its acquisitions of Appirio, Cooper, and Designit (which we cover, along with its wider design capability, here) will stack up.

The whole manufacturing space is changing its tune, and every service provider is trying to react; for example, Concentrix, Infosys, OnProcess, and Cognizant, whose ability to create new automotive (and wider manufacturing) business models we recently pitted against each other. Accenture’s acquisition of ESR Labs and its plethora of other design-based acquisitions won’t stop in the automotive sector, as its competitors will find out soon enough. But for automotive enterprises right now, the prospects of finding the right partner with both the mentality and global scale to help with whatever version of digital transformation they want has never been better.