Ford makes a big investment in its software with Pivotal

Big data meets the auto industry as car companies recognize that the future of their business may lie outside traditional car ownership.

Big data is partnering with an ally that would have seemed unlikely a few years ago: the auto industry.

On Thursday, Ford Motors announced that it had invested $182.2 million in Pivotal, a cloud computing company based in Silicon Valley, during Pivotal’s recent $253 million funding round. Microsoft also participated in this funding round as a new investor, focused on Pivotal’s cloud computing software. 

Ford said that it’s strengthening its partnership with Pivotal to improve its technology offerings and deliver an improved customer experience. Ford has been working with Pivotal on a three-year collaboration in software development. Through the ongoing partnership, Ford will work with Pivotal to improve FordPass, a smartphone app that was launched in April. The app provides remote vehicle access, parking, and car-share options.

In a press release, Ford president and CEO Mark Fields said, “Expanding our business to be both an auto and mobility company requires leading-edge software expertise to deliver outstanding customer experiences. Our investment in Pivotal will help strengthen our ability to deliver these customer experiences at the speed of Silicon Valley.”

It’s also a move that could help Ford stay competitive against tech-forward rivals like Tesla Motors, whose Model 3, a much more affordable offering than the automaker's previous vehicles generated 276,000 preorders by April alone.

Under the terms of the agreement with Pivotal, Ford CIO Marcy Klevorn will join Pivotal’s board of directors. In the United States and Europe, the two companies also plan to open labs together focusing on software development. Pivotal works with traditional businesses to speed up their software innovations, and the company has been expanding. It generated $83 million in revenue in the first quarter of 2016, up 56 percent year-over-year. 

Ford isn’t the first car company to tap Pivotal in an effort to refine its software capabilities. Last October, Mercedes-Benz partnered with Pivotal to build a connected car app designed to bring a more immersive driving experience to Mercedes vehicle owners. The app lets users understand and control all different aspects of their drive, from heating and locking the car to navigation, on a simple, intuitive platform. BMW has also utilized Pivotal’s expertise to improve car maintenance predictability.

The Ford partnership is the latest example of the car industry’s recognition that people are beginning to engage with vehicles in different ways than they did even a decade ago. As ride-sharing and ride-hailing apps like Uber and Lyft become the norm, car ownership has fallen, especially among young adults. In response, established automakers are taking early steps to diversify their business models beyond simply manufacturing and selling cars to individuals.

General Motors, for one, has invested heavily in self-driving car space. It acquired Cruise Automation, a San Francisco-based autonomous car startup, for approximately $1 billion in March. Carsharing is also a huge area of interest. Ford has a long-standing partnership with ZipCar, and GM launched its own car-sharing service, called Maven, earlier this year. 

Data from Pew shows that, in 2007, 73 percent of households headed by an adult younger than 25 owned or leased at least one vehicle; that number slipped to 66 percent in 2011. But it wasn’t just a desire to shed vehicle-related debt in the wake of the Great Recession that prompted Millennials to get rid of their cars. The number of young adults getting their licenses is also dropping, from 86 percent in 2001 to 83 percent in 2011.