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German automaker Volkswagen (VW) revealed a technology roadmap that earmarked $9 billion to software investments over the next three to five years, according to Bloomberg. This massive investment should bolster VW's ability to reach its ambitious goal of bringing 60% of technology development in-house by 2025. The logo of the Volkswagen is pictured during a ceremony marking the end of production of VW Beetle cars, at company's assembly plant in Puebla, Reuters

VW currently only develops 10% of its technology in-house. To facilitate this transition, the company will grow its technology workforce to as many as 10,000 developers. VW plans to structurally reorganize to prepare for this growth: It will merge IT units which currently span the organization's 12 automotive brands, while also concentrating talent in divisions of particular importance to its digital transformation vision.

The digital transformation should enable VW to save costs by streamlining technology development. In terms of streamlining development costs, it certainly makes sense for VW to consolidate operations: The company's 12 brands utilize an estimated 70 control units which operate software from 200 suppliers. Under the new development plan, all of these systems will be united under what the company is calling "vw.os."

However, vw.os will compete directly against the automotive operating systems (OSs) that are being developed by tech giants, such as Google's Android Auto. Consumers are looking for seamless digital experiences that provide them with the same kind of service and access they are accustomed to, regardless of where they are or what type of device they use.

In the US, Google and Apple are the two companies that are best at providing a streamlined experience, as their OSs can be found in phones, computers, tablets, and watches. In 2019, Google controlled 47% of the US smartphone OS market, while Apple controlled the remaining 53%, according to Bloomberg. And with these firms now making more aggressive moves to bring their systems to vehicles, they are threatening the ability of automakers to market their own in-car experiences to customers.

VW would likely struggle to provide a digital experience to the level of Google or Apple, as the company's expertise has predominantly focused on building hardware.Christian Senger, head of digital car and services for VW, stated, "We are professionals for hardware and are now transferring this competence to software development."

Even an investment as large as $9 billion won't be enough to endow VW with the tech capabilities of Apple and Google. Tech companies will still likely collaborate with VW, but the services would be add-ons to vw.os rather than built directly into the infotainment system, introducing friction in the user experience.

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