Thursday, July 26, 2018

Disaggregation Disillusionment

About 15 years ago I wrote a post titled “Websites of Mass Disillusionment”, or maybe it was “Websites of Mass Delusion.”  I can’t recall which and, unusually, I can’t find the original text - I was told, by a somewhat unhappy Minister of the Cabinet Office, to delete the post or lose my job.  At the time I rather liked my job and so I opted to delete the post.  The post explored how, despite there being 1000s of government websites, on which 100s of millions of pounds were being spent, the public, at large, didn’t care about them, weren’t visiting them and saw no need to engage with government (here’s at least a thread of the article, published in August 2009).  I don’t think the Minister disagreed with the content, but he definitely wasn’t keen on the title, coming so soon after the famous missing WMDs in Iraq.

I’m somewhat hesitantly hinting at that title again with this post, though I have less fear of a Minister telling me I will lose my job because of it (I’m not employed by any Ministers) and, anyway, I think this topic, disaggregation, is worth exploring.

It’s worth exploring because the news over recent months has been full of stories about departments extending contracts with existing suppliers, re-scoping and re-awarding contracts to those same suppliers or moving the pieces around those suppliers creating the illusion of change but, fundamentally, changing little.


It looks like jobs for the boys again; there’s very little sign of genuine effort at disaggregation; they’re just moving the pieces around

This feels like a poor accusation - putting to one side the tone of "jobs for the boys" in 2018, it hints at dishonesty or incompetence when, I think, it says more about the challenges departments are facing as they grapple with unwinding contracts that were often put in place 15-20 years ago and that have been “assured” rather than “managed” for all of that time.

But, let’s move on and first establish what we mean, in the context of Public Sector IT, by disaggregation.  We have to wind back a bit to get to that:

IT Outsourcing In The Public Sector (1990 onwards)

In the early 1990s, when departments began to outsource their IT, the playbook was roughly:

Count up everyone with the word “technology”, “information” or “systems” in their job title and draw up a scope of services that encompassed all of that work. 

Carry out an extensive procurement transition to find a third party provider prepared to pay the lowest price to do the same job.    The very nature of government departments meant that these contracts were huge - sometimes £100-200m/year (in the 90s) and because it was such hard work to carry out all of the procurement process, the contracts were long, often 10 years or more.

With them went hardware and software, networks and other gadgets - or, at least, the management of those things.  Whereas the people moved off the payroll, the hardware often stayed on the asset register (and new hardware went on that same asset register, even when purchased through the third party).  This was mostly about capital spending - something with flashing lights went on the books after all.  

There were a lot of moving parts in these deals - the services to be provided, the meaures by which performance and quality would be assessed, legal obligations, plans for future exits and so on.  I’ve seen some of the contracts and they easily ran to more than 10,000 pages. 

Side Effects

There were four interesting side effects as a result of these outsource deals:

  1. Many departments could now recover VAT on “managed services” but not on hardware purchases.  Departments are good at exploiting such opportunities and so the outsource vendor would buy the hardware on behalf of the department, sell it to back to the department as part of a managed service, and the department would then reclaim the VAT, getting 20% back on the deal.   Those who were around in the early days of G-Cloud will remember the endless loops about whether VAT could be reclaimed - it was some years after G-Cloud started that this was successfully resolved.
  2. Departments now had a route to buying more IT services, or capability, without needing to go through a new procurement, provided the scope of the original procurement was wide enough.  That meant that existing contracts could be used to buy new services.  And, as everyone knows, IT doesn’t stay still, so there were a lot of new services, and nearly all of them went through the original contract.  Those contracts swelled in size, with annual spend often double or triple the original expectation within the first few years.  When e-government, now digital, came along and when departments merged, those numbers often exploded.
  3. Whilst all of the original staff involved transferred, via TUPE, on the package they had in government - salary plus index linked pensions etc - any new staff brought on e.g. to replace those who had left (or retired) or for new projects, would come on with a deal that was standard for the private sector.  That usually meant that instead of pension contributions being 27-33%, they were more likely 5-7%.  Instantly, that created an easy save for government - it was 20% or more cheaper, even before we talk VAT, to use the existing provider.
  4. Whilst departments have long had an obligation to award business to smaller players, the ease of using the big players with whom they already had contracts made that difficult (in the sense that there was an easy step “write a contract change to award this work to X” versus “Write the spec, go to market, evaluate, negotiate, award, work with new supplier who doesn’t understand us”).  Small players were, unfairly, shut out.
The Major Flaw

There was also a significant flaw:

  • When a department wanted to know what something cost, it was very hard to figure out.  Email for instance - a few servers for outlook, some admin people to add and delete users etc, how hard can it be to cost?  That’s a bit like Heisenberg’s Uncertainty Principle - the more you study where something is the less you know about where it’s going.  In other words, if you looked closely at one thing, the money moved around.  If something needed to be cheap to get through, the costs were loaded elsewhere.  If something needed to be expensive to justify continued investment (avoiding the sunk cost fallacy), costs were loaded on to it.  Then, of course, there was the ubqiuity of “shared services” - as in “Well, Alan, if you want me to figure out how much email costs, we need to consider some of Bob’s time as he answers the phone for all kinds of problems, a share of the network costs for all that traffic, some of Heidi’s time because email is linked to the directory and without the work she does on the directory, it wouldn’t work” and so on.  Benchmarking was the supposed solution for that - but if you couldn’t break out the costs, how did you know it was value for money?  Or not?  Did suppliers consciously hinder efforts to find true cost?  I suspect it was a mix of the structure they'd built for themselves - they didn't, themselves, know how it broke down - and a lack of disciplined chasing by departments ... because the side effects and the flaws self-reinforced.
Reinforcement

Over the 20 years or so from the first outsourcing until Francis Maude part 2 started, in 2010, these side-effects, and the major flaw, reinforced the outsourcing model.  It was easy to give work to the supplier you already worked with.  It was hard to figure out whether you were over-paying, so you didn't try to figure that out very often.  The supplier was, on the face of it, anyway, cheaper than you could do it (because VAT, because cost of transition, because pensions etc).  These aren't good arguments, but I think they are the argument.

What Do We Mean By Disaggregation?

Disaggregation, then, was the idea of breaking out these monolithic contracts (some departments, to be fair, had a couple of suppliers, but usually as a result of a machinery of government change that merged departments, or broke some apart).

A department coming to the end of its contract period with its seeming partner of the last decade would, instead of looking for a new supplier to take on everything, break their IT services into several component parts: networks, desktop, print, hosting, application support, Helpdesk and so on.

There were essentially three ways of attempting this as in the picture below (this, and all of the pictures here, are from various slide decks worked on in 2013/4):


That is:

1) A simple horizontal split - perhaps user facing services, and non-user facing.   This was rarely chosen as it didn’t pass the GDS spend controls test and, in reality, didn’t really achieve much of the true aim of disaggregation, albeit it made for a simple model for a department to operate.

2) A “towers based” model with an integration entity or partner working with several towers, for instance, hosting, desktop, network and applications support.  This was the model chosen by the early adopters of disaggregation.  Some opted to find a partner as their SIAM, some thought about bringing it inhouse, some did a little of both.  The pieces in a tower model are still pretty large, often far out of the reach of small providers, especially if the contract runs over 5 years or more.  Those departments that tried it this way, haven’t had a good experience for the most part, and the model has fallen out of favour.

3) A fully disaggregated model with a dozen or more suppliers, each best of breed and focused on what they were best at.  Integration, in this case, was more about filling in all of the gaps and, realistically, could only be done in house.  Long ago, and I know it’s a broken record, when we built the Gateway, we were disaggregated - 40+ suppliers working on the development, a hosting provider, an infrastructure builder, an apps support provider, a network provider and so on.  Integration at this level isn’t easy.

In the “jobs for the boys” quote above, the claim is really that the department concerned had opted for something close to (2) rather than (3) - that is, deliberately making for large contracts (through aggregation) and preventing smaller players from getting involved.  It’s more complicated than that.

That reinforcement - the side effects and the flaws - plus the inertia of 20+ years of living in a monolithic outsource model meant that change was hard.  Really hard.

What Does That Mean In Practice?

Five years ago, I did some work for a department looking at what it would take to get to the third model, a fully disaggregated service.  The scope looked like this:



Service integration, as I said above, fills in the gaps … but there are a lot of components.  Lots of moving parts for sure.  Many, many millions were spent by departments on Target Operating Models - pastel shaded powerpoints full of artful terms for what the work would look like, how it would be done and what tools were used.  Nearly all of that, I suspect, sits on a shelf, long since abandoned as stale, inflexible and useless.

If they had disaggregated to this level, they would need to sign more than 20 contracts.  That would mean 20 procurements carried out roughly in parallel, with some lagging to allow others to break ground first.  But all would need to complete by the time the contract with the main supplier came up for renewal.  The end date, in other words was, in theory at least, fixed.  Always a bad place to start.

Procurement Challenge

When you are procuring multiple things in parallel, those buying and those selling suffer.  Combining some things would allow a supplier, perhaps, to offer a better deal.  But the supplier doesn’t know what they’ve won and can’t bid on the basis that they will win several parts and so book the benefit of that in their offer (unless they’re prepared to take some possibly outlandish risks).  Likewise, the customer wants variety in the supply chain and wants to encourage bidders to come forward but, at the same time, needs to manage a bid process with a lot of players, avoiding giving any single bidder more work than is optimal (and the customer is unable to influence the outcome of any single bid of course), keeping everyone in the game, staying away from conflicts of interest and so on.

Roadmap Challenge

The transitions are not equally easy (or equally hard).  Replacing WAN connectivity is relatively straight forward - you know where all the buildings are and need to connect them to the backbone, or to the Internet.  Replacing in office connectivity is a bit harder - you need to survey every office and figure out what the topology of the wireless network is, ripping out the fixed connections (except where they might be needed).  Moving to Office 365 might be a bit harder, especialyl if it comes with a new Active Directory and everyone needs to be able to mail everyone else, and not lose any mail, whilst the transition is underway.  None of these are akin to putting astronauts on the moon, but for a department with no astronauts, hard enough.

We also need to consider that modern services are, for the most part, disaggregated from day one - new cloud services are often procured from an IaaS provider, several development companies, a management company and so on.  What we are talking about here, for the most part, is the legacy applications that have been around a decade or more, the network that connects the dozens or hundreds of offices around the country (or the world), the data centres that are full of hardware and the devices that support the workload of thousands, or tens of thousands of users.  These services are the backbone of government IT, pending the long promised (and delayed even longer than disaggregation), digital transformation.  They may not (and indeed, are not) user led, they're certainly not agile - but they handle our tax, pensions, benefits, grants to farmers and so on.

What Does It Really Mean In Practice?


Writing papers for Ministers many years ago, we would often start with two options, stark choices.  The preamble we used to describe these was "Minister, we have two main choices.  The first one will result in nuclear war and everyone will die.  The second will result in all out ground war and nearly everyone will die.  We think we have a third way ahead, it's a little risky, and there will be some casualties, but nearly everyone will survive."  Faced with that intro, what choice do you think the Minister will make?

In this context, the story would be something like: "Minister, we have two options.  The first is to largely stay as we are.  We will come under heavy scrutiny, save no money, progress our IT not a jot and deliver none of the benefits you have promised in your various policies.  The second is to disaggregate our services massively, throwing our control over IT into chaos, increasing our costs as we transition and sucking up so many resources that we won't be able to do any of the other work that you have added to our list since you took office. Alternatively ... we have a third choice"

Disaggregate a little. Take some baby steps.  Build capability in house, manage more suppliers than we’re used to, but not so many suppliers such that your integration capability would be exhausted before it had a chance.

Remember, all those people in the 90s who technology, IT or systems in their job title had been outsourced.  They were the ones who built and maintained systems and applications.  In their place came people who managed those who built and maintained systems - and all of those people worked for third parties.   There’s a huge difference between managing a contract where a company is tasked with achieving X by Y and managing three companies, none of whom have a formal relationship with each other, to achieve X by Y.

The next iteration tried to make it a bit simpler:



We’re down from more than 20 contracts to about 11. Still a lot, but definitely less to manage.  Too much to manage for most departments though.  We worked on further models that merged several of the boxes, aiming for 5-7 contracts overall - a move from just 1 contract to 5-7 is still a big move, but it can be managed with the right team in-house, the right tools and if done at the right pace.

The Departmental Challenge

Departments, then, face serious challenges:

- The end date is fixed.  Transition has to be done by the time the contract with the incumbent finishes.  Many seem to be solving that by extending what they have, as they struggle with delays in specification, procurement or whatever.

- Disaggregate as much as is possible.  The smaller the package, the more bidders will play.  But the more disaggregation there is, the more white space between the contracts is and the greater the management challenge for the departments.  Most departments have not spent the last 5 years preparing for this moment by doubling up on staff - using some staff to manage the existing contract and finding new staff to prepare for the day when they will have to manage suppliers differently.  The result is that they are not disaggregating as much as is possible, but as much as they think they can.

- Write shorter contracts.  Short contracts are good - they let you book a price now in the full knowledge that, for commodity items at least, the same thing will be cheaper in two years. It isn’t necessarily but it at least means you can test the market every two years and see what’s out there - better prices, better service if you aren’t happy with your supplier, new technology etc.  The challenge is that the process - the 5 stage business case plus the procurement - is probably that long for some departments, and they are just not geared up to run fleets of procurements every two years.  Contracts are longer, then, to allow everyone to do the transition, get it working, make/save some money and then recompete.

- TUPE nearly always applies.  Except when it doesn't - If you take your email service and move it to Office 365, the staff aren't moving to Microsoft or to that ubiquitous company known as "the cloud."  But when it does apply, it's not a trivial process. Handling which staff transition to which companies (and ensuring that the companies taking on the staff have the capability to do it) is tricky.  Big outsource providers have been doing this for years and have teams of people that understand how the process works.  Smaller companies won't have that experience and, indeed, may not have the capability to bring in staff on different sets of Ts & Cs.

On top of that, there are smaller challenges on the way to disaggregation, with some mitigations:

-Lack of skills available in the department; need to identify skills and routes for sourcing them early

-Market inability to provide a mature offer; coach the market in what will be wanted so that they have time to prove it

-Too great an uncertainty or risk for the business to take; prove concepts through alpha and beta so risks are truly understood

-Lack of clear return for the investment required; demonstrate delivery and credibility in the delivery approach so that costs are
managed and benefits are delivered as promised

-Delays in delivery of key shared services; close management with regular delivery cycles that show progress and allow slips to be visible and dealt with

-Challenges in creating an organisation that can respond to the stimulus of agile, iterative delivery led by user need; start early and prove it, adjust course as lessons are learned, partner closely with the business

What Do We Do?

Departments are on a journey.  They are already disaggregating more than we can see - the evidence of G-Cloud spend suggests that new projects are increasingly being awarded to smaller, newer players who have not often worked with government before. Departments are, therefore, learning what it’s like to integrate multiple suppliers, to manage disparate hosting environments and to deliver projects on an iterative basis.  As with any large population, some are doing that well, some are doing just about ok, and some are finding it really hard and making a real mess of it.  One hopes that those in the former category are teaching those in the latter, but I suspect most are too busy getting on with it to stop and educate others.



The journey plays out in stages - not in three simple stages as I have laid out above, but in a continuum where new providers are coming in and processes are being reformed and refocused on services and users.  Meanwhile, staff in the department are learning what it’s like to “deliver” and “manage” and “integrate” first one service and then many services, rather than “assure” them and check KPIs and SLAs.  Maybe the first jump is from one supplier to four, or five.  A couple of years later, one of those is split into two or three parts.  A year later, another is split.

This is a real change for the way government IT is run.  It’s a change that, in many ways, takes us all the way back to the 1980s when government was leading the way in running IT services - when tax, benefits, pensions and import/export was first computerised.  Back then, everything was run in house.  Now, key things are run in house and others outsourced, and, eventually, dozens of partners will be involved.  If we had our time over again, I think we would have outsourced paper handling (because it was largely static and would eventually decline) and kept IT (because it constantly changed) and customer contact (because that's essentially what government does, especially when the IT or the paper processing lets it down) in house.

Disaggregation hasn’t happened nearly as fast as many of us hoped, or, indeed, as many of us have worked for in the last few years.  But it is happening.    The side effects, the flaws, inertia, reinforcement and a dominance of "assurance" rather than "delivery" capability, mean it's hard.

We need to poke and prod and encourage further experimentation.  Suppliers need to make it easy to buy and integrate their services (recognising that even the cheapest commodity needs to be run and operated by someone). And when someone seems to take a short cut and extend a contract, or award to an existing supplier, we need to understand why, and where they are on their journey.  Departments need to be far more transparent about their roadmap and plans to help that

I want to give departments the benefit of the doubt here.  I don’t see them taking the easy way out; I have, indeed, seen some monumental cockups badged as efforts to disaggregate.    Staggering amounts of money - in all senses of the word (cash out the door, business stagnation, loss of potential benefits etc) - have been wasted in this effort.  That suggests a more incremental approach will work better, if not as well as we would all want.

That means that departments need to:


  1. Be more open about what their service provision landscape looks like two, three, four and five years out (with decreasing precision over time, not unreasonably). Coach the market so that the market can help, don’t just come to it when you think you are ready.
  2. Lay out the roadmap for legacy technology, which is what is holding back the increasing use of smaller suppliers, shorter contracts and more disaggregation.  There are three roadmap paths - everything goes exactly as you planned for and you meet all your deadlines (some would say this is the least likely), a few things go wrong and you fall a little behind, and it all goes horribly wrong and you need a lot more time to migrate away from legacy.  Departments generally consider only the first, though one or two have moved to the second. There's an odd side effect of the spend control process - HMT requires optimism bias and so on to be included in any business case, spend controls normally strip that out, then departmental controls move any remaining contingency to the centre and hold it there, meaning projects are hamstrung by having no money (subject to approvals anyway) to deal with the inevitable challenges.
  3. Share what you are doing with modern projects - just what does your supplier landscape look like today

Tuesday, July 10, 2018

It Will Take More than Tesla - Part 5 - The Story So Far And What Happens Next

In the months since August 2017, when I started the "It Will Take More than Tesla" blog posts, much has happened in the world of Electric Vehicles (EV).  Indeed, it's been hard to keep pace with all of the announcements.   This post is aimed at summarising my previous posts and adding in a little new information, ahead of the imminent publication of the UK Government's Road To Zero.

I wrote these posts to help me learn about EVs and how they might shape our modes of transport and our economy.  My sense was that there are some enormous changes coming, facilitated by the move to EVs and I wanted to think through how they would come about, and what it would take to make them come about faster.

In the first four posts, I laid out a thesis of several interconnected trends that, for the maximum value to be realised, needed to be joined together in a strategic plan.  In the UK we are good at giving visionaries room as evidenced by the recent "Mastaba" structure in the Serpentine.  It rarely feels that we give the same room for implementation to visionary infrastructure projects - instead we get stuck in endless reviews and (in)decision processes.  For EVs, and AVs, that needs to change.




The interconnected trends include:

The Flight From Diesel

In Part 1, I wrote "Some day soon, drivers of petrol and, especially, diesel vehicles will be like smokers today.  They won't be welcome at parties, will not be allowed to drive within a mile of a school and will see their health insurance premiums climb, not to mention their driving insurance premiums."

Diesel sales are falling and are down as much as 30% over the last year or so. Nissan, maker of the all electric Leaf, appears to be guilty of the same crimes as VW and has admitted to falsifying emissions data (this after, some two months ago, announcing that they would be withdrawing from the diesel market ... the other shoe has now dropped perhaps).

Other manufacturers are following suit - some abandoning whole segments of the market (Ford with small cars) and others, Porsche, for instance, getting out of diesel.

International Ambition

The drive from countries, and cities, across the world to make the move to EV happen faster with each one racing to outdo the other, variously committing to be petrol and diesel-free anywhere from 2025 to 2040, as I summarised in Part 3 ("This feels like the early days of the gold rush or the Internet boom.  Everyone is rushing to announce a policy or strategy that is bigger, bolder, sooner and more outlandish than everyone else").

In this context it seems odd to hear stories recently that the UK will back away from its own 2040 target and declare it an aspiration only - perhaps fearing that in this time of Brexit uncertainty, doing more to scare the car makers won't be good for investment.

Yet every major car maker is announcing huge investments to go electric - most expecting to have EV models across their range well before 2025, and some within the next year or two whilst, at the same time, worrying about their profitability, the amount that they need to invest "because governments keep saying bad things about diesel", their ability to compete given decades of experience with combustion engines goes up in smoke, the supply chain and the challenges of software and over the air upgrades.

Slow, But Increasing, Adoption of Electric Vehicles (EVs)

Increasing choice in the market, lower prices, wider scale deployment of charging infrastructure and an Anything But Diesel approach are driving more sales (though still favouring plug in hybrids for now).




Our Changing Relationship With Transport

In the USA, more than 75% of the population own cars; in the UK some 78% of households own a car.  These numbers may, for now, be increasing.  But in China, car ownership is less than 10% of the population.  Sure it will grow, but it seems unlikely it will reach the same level as the UK or the USA over the coming years.  If you're a teenager in a major UK city, it may no longer be your ambition to own a car - why make the payments when Uber and other services are available, when public transport may take you right to where you need to go, when ride sharing with friends is easy, or when you can rent a car for an hour through ZipCar or one of the many Car Clubs?



As taxes on driving cars into cities increase - parts of London are already experimenting with increased parking charges for diesels (and a further surcharge for cars that are more than 3 years old). The costs of car ownership will become increasingly expensive and people who can, because of where they live or how they spend their time, will opt out.  They will walk, cycle, take the train or bus, share a car, rent a ZipCar, or take a taxi.

If the future plays out as most think, and the model for autonomous vehicles is increasingly one where cars are shared, like taxis that you summon for a single journey and that then go back to charge or to find another customer, then car ownership is, long term, trending to a much lower percentage, certainly in major cities.

The Lure of Autonomous Vehicles (AV)

These appear, simultaneously, tantalisingly close or a couple of decades away depending on who you read and which day of the week it is.  I noted that the UK, so far, doesn't have a leader in AV development - we don't have mapping companies, taxi companies getting into self driving fleets, machine learning algorithms practicing their driving skills in GTA V etc.  But we do have investment going into various research projects which might help.



The Challenges

The list of things to worry about is long and distinguished, hence the need for a strategic plan.  None of these cause problems overnight, but there needs to be long term thinking about the solution way ahead of them becoming big problems. Some of the bigger ones are:

Charging

Charging EVs outside terraced houses in major cities are a difficult problem to solve, but 60% of houses have off street parking and charging at work or fast charging at service stations - there goes another phrase from the lexicon as Petrol Stations gradually become a thing of the past), and continued subsidies for purchase and, of course, fuel duty exemption.  The UK government is already consulting on whether new lampposts should be mandated to include charging points (fine if there's one car for every lamppost, or vice versa, but tricky to see how it works where that isn't the case - i.e. all the time).  And there is also funding being made available for, e.g. feasibility studies for wireless charging as well as for other approaches to charging.

Taxation

Part 2, particularly, looked at the money - and the £27bn of fuel duty and £5n of Vehicle Excise Duty that is at risk as cars increasingly go electric; those holes will need to be plugged - and owners and potential owners will want to know when the change is coming so that they can factor that into their budgets.

The obvious solution is a "per mile" charge that is taxed monthly based on a number reported by the car.  That, though, is too simple for lots of reasons: it doesn't reward those who choose to (or can) travel off peak when there is little traffic on the roads, or those who drive carefully and within the speed limit who would have used less fuel, or those who would have bought a more economical car to have a lower environmental footprint and so used less fuel and, indeed, it might penalise those who, because of their jobs, have to travel long distances.

A more complicated model will emerge as a result, but there seems no reason why it can't be handled either through software reporting in the vehicle (a road tax app?) or through tracking sensors along the road (integrated with existing cameras), though the latter is a bigger project and I'm not convinced we need another one of those.

The Supply Chain

EVs have a handful of moving parts, versus dozens for a combustion engine.  Overall, the number of parts drops from maybe 30,000 to perhaps 8,000.    Providers of those "missing parts" will be smaller businesses.  Independent servicing may become a thing of the past - no clutch and no gearbox to fix.

Maintenance revenues for garages will fall - and that's where most of their profit over the long term comes from (margins on new cars are slim, and the same will be true of EVs once competition really gets underway).

Petrol stations, soon to be service stations or possibly locations for apartment blocks or houses, will need to rethink their business models - there won't be space to charge a dozen cars for 20 mins at a time, or to hold a dozen cars waiting for a slot to charge.  Motorway service stations may, somehow, benefit as customers will stop for longer, giving the chance to sell more.

There are multiple issues wrapped within this
  • Some suppliers will migrate to making and supporting the new components and perhaps a few dominant companies will emerge.  They may absorb staff from other companies; but the supply chain is going to get smaller, with fewer jobs overall.
  • Local communities where jobs are not only in car making but in the components (and logistics that supply those components) may begin to struggle as jobs, initially slowly, fall away
  • There will be the opportunity for new companies to emerge, who create new technology or parts that improve EVs (where improve covers a range of meanings from better performance, longer range, lower cost etc)
  • Software is going to be the distinguishing factor when comparing EV to EV - battery size, range and fit out will be interchangeable for instance, but the software stack will be unique to that maker.  So will you prefer a Mercedes stack to a BMW stack? Or an Audi Stack to a Landrover stack?  How will these be tested, upgraded and proven ... all the more so as we get closer to AVs?
  • Car sales may, indeed, increase for a while as the replacement cycle speeds up - if it's clear that EV costs are going to be lower than combustion engines (because subsidies and tax benefits stay in place), and there is more choice, then car sales will tick up (though the second hand car market may suffer)

The Trends

As EVs become more common, we can picture quieter streets, lower atmospheric pollution in cities, increasing numbers of pavement cafes and even, hopefully, fewer accidents as driving assistance gets smarter on the way to AVs.

We will see companies like Zipcar go all electric, with London targeting car clubs to be at least 50% EV by 2025.

Buses will follow (and already are in many places, including in the UK, particularly in London).  China is already adding a fleet of buses the size of London's every 5 weeks.  Yes, every 5 weeks.  Buses consume much more fuel than cars - maybe 20-30 times as much - so replacing a diesel bus with a petrol bus is a big win.  Today somewhere around 900,000-1,000,000 buses are delivered each year, with diesel accounting for c60% of those.  That's nothing compared with the 90 million combustion engine cars bought every year, but at 20-30 times the fuel use, the difference a switch to electric makes will be large - and likely quicker than the equivalent transition to EVs.

From buses it's a small step to other commercial vehicles we see on the roads every day - local delivery vans, waste collection vehicles, Royal Mail vans and trucks.  UPS has long been leading the way and recently announced plans to build its own electric vehicles - that's a fleet of 35,000 vehicles they'll be working to swap out.  The Royal Mail is working to follow suit.  Waste collection vehicles are available, at the smaller end of the market for now.  The Amazon effect likely means that there are more vans on the road doing more miles now than ever - and nearly all of those will be diesel.  There's big opportunity here to take some of the higher mileage vehicles off the roads, before moving to HGVs and other larger vehicles.

Cars, though, continue to lag, waiting for that increased choice, and for some of the challenges above to have signposted solutions.  1,500 EVs were sold in June 2018, with 10,000 plug in hybrids and 5,000 other electric.  Pure EVs are up less than 4%, but other types are up 50%.  Set against a total car sales count of some 235,000, this is still small (around 2% of total cars sold when electric, hybrid and plug in hybrid are included).

That said, there are less than 40 cars that qualify for the existing plug in grant (and most of those are hybrids), whereas there are many hundreds of combustion engine cars.  As the number of models of cars available collapses (e.g. there won't be petrol or diesel choices, multiple engine sizes, fuel injection or turbo versions ... there will be battery size/range choices, and fit out).

The number of EVs driven will increase as manufacturers (existing and new entrants) bring new models to market (at multiple price points, with something for everyone, especially when subsidies are factored in), range anxiety fades as a concern (through a mixture of better understanding of true, on road, battery range; confidence in what it means to have a car that is "full" when it leaves your driveway; and increased charging points in offices, supermarkets and elsewhere).  Finally, clarity of policy from government, expected in the Road To Zero strategy, will allow consumers to make decisions with an eye on the medium term, thinking about what their car will be worth 5 years out and what taxes it will see levied on it.

So What Happens Next?

I fear that, without a strategic plan that joins all of this up in the UK, the answer is more of the same - incremental growth in sales of EVs whilst waiting for more competition, more clarity on tax, more charging stations, and for the early adopters to get increasingly public about how happy they are with their purchases, so influencing their neighbours and helping the rest of the market along.

That strategic plan will join up all of the investment and thinking that is already going on in government, industry and think tanks and:

- Clarify future subsidies and taxes - what will be available and when, what will be withdrawn and when will taxes to replace fuel tax and Vehicle Excise Duty be introduced

- Promote a wider programme of R&;D incentives such as (1) a series of X Prize-style competitions and (2) a comprehensive programme of proposals to encourage companies to take risks and develop new EV capabilities such as solid state batteries (already being worked on by Dyson, but there will be more players needed)

- Plans for the macro and micro charging network - what will the government cover as strategic and how will it do that, what will local governments do, what will companies/employers do for their staff and what shape does the competitive marketplace for such installations take
- Security standards working with major vendors, GCHQ and others to make cars secure, made available to all vendors as open source to encourage fast adoption (and patching) of their technology to reduce the risk of compromise

- A comprehensive plan for recycling EV components, particularly batteries (and, by recycle, I mean find other uses for once they are no longer able to support the charge required for cars)

- A smart plan and infrastructure for dealing with the vastly larger number of scrapped cars that we will see over the coming years

- Ethical Sourcing standards for components.  We have an opportunity to funnel money, with appropriate controls, through our aid and development funding, to change how this works - to upgrade and automate mining, protect the labour force and avoid exposing them to harmful conditions and enhance the environment.

- Plan for the next phase of vehicle pollution reduction, including particles from brake dust, tyre wear and so on.  As petrol and diesel emissions fall, these smaller/finer particles will become of increasing concern.

No strategic plan and our ambition, aspiration or requirement to have only EVs available for sale by 2040 will be just another promise on a page, long forgotten by those who wrote it down who themselves will be forgotten.

The next step is to see if the just published Road to Zero strategy lays out a plan that is comprehensive enough to deal with these, and other, challenges.

I've said, all along, that "It will take more than Tesla" ... but I have to say I can't help but be inspired by the pace Tesla has set, but that pace has come with plenty of pain (and, it seems, some serious injuries).

Monday, April 09, 2018

GDS Disaggregates Data

To judge from the Digerati's comments, the recent move of Data (capital D) from GDS to DCMS is akin to the beginning of the end of GDS, that is, far beyond the end of the beginning that we were only celebrating a few weeks ago thanks to a brilliant talk by Janet Hughes.

For most in Government IT, disaggregation has been a hot topic and is a live goal for nearly all of them, even those busily extending their contracts with incumbents so that they can buy time to disaggregate properly, as I wrote in June 2013 for instance.

Concentrating power in big, slow moving central organisations has, traditionally, been a bad thing.  As an organisation grows, so does its bureaucracy.  Government has, then, repeatedly broken itself down (Departments and Ministries ... agencies and NDPBs) in an effort to separate policy from delivery and get closer to the customer, with varying degrees of success.

Political fiefdoms have, at the same time, been created to satisfy egos (ODPM) or to pretend to the outside world that real change was happening (the story of dti on its journey to the current BEIS for instance).  Alongside that, functions have moved - Child Benefit between DWP and IR (now HMRC) - and Tax Credits, whilst benefits, were sited in HMRC rather than DWP, to the great consternation of HMRC staff on day one (and for many days thereafter).

GDS, perhaps accidentally, perhaps as a result of a flood of cash in the Spending Review, has become that big, slow moving central organisation.  I'm sure it wasn't intentional - they saw gaps all around them and took on more people to fill those gaps. Before they knew it, they needed a bigger office to fit in the 900+ people in the organisation.  Along the way, they forgot what they were there for, as the NAO said.

On data, all we know for now is:

"Data policy and governance functions of the Government Digital Service (GDS) will transfer from the Cabinet Office to the Department for Digital, Culture, Media and Sport (DCMS). The transfer includes responsibility for data sharing (including coordination of Part 5 of the Digital Economy Act 2017), data ethics, open data and data governance."

The real issue here is not that "Data", whatever that is in this context, has moved from GDS to DCMS, but that we lack (still) an executable strategy.  We have a trite "transformation strategy" that is long on words and short on actions (see "No Vision, No Ambition" on this blog), but we have no real framework to evaluate this decision, to move "Data", from one department to another.

An executable strategy would lay out not just the what, but the why, the how and the when.  We would be able to see how changes were planned to unfold, whether incremental, revolutionary or transformational ... and when a decision such as this was taken, understand the impact on the that strategy and whether it was good or bad (and sometimes, decisions with known bad impacts are taken for good reasons).

Mike Bracken, writing in the New Statesman, is emphatic that this is a bad idea - one that runs against what everyone else in the world is doing.  His closing take is that:
"the UK seems to have made government a little bit slower, more siloed, harder to reform and more complex."
GDS is hardly the rapidly responding, iterative, agile organisation that it set out to be (and that it certainly was in its early days as I've said before) ... so maybe this little bit of disaggregation will free up the remaining (and still large) part to get moving again.

Over the last two decades we've had several goes at this - OeE, eGU, OCIO and then GDS.  Each worked for a while and then got bogged down in themselves.  New leadership came in, threw out some of what was done, took on some different things and did the things that new leaders generally do when they come in (say how rubbish everything was until they came along and then proceed to do much the same as had been done before only a little differently).

I suspect, though, that this isn't enough of a change.  We need a more fundamental reform of GDS, taking it back to its roots and to what its good at.  So maybe it is the beginning of the end and maybe that's no bad thing.



Sunday, April 01, 2018

Think.Digital Identity - Leaked Keynote Speech Announces "Verified By Facebook"

Next month sees Think.Digital Identity for Government, a conference focused on the issues around "The UK landscape for identity in public services is itself at an 'inflection point' compounded by government and private sector deliberations around a trust framework for the reuse of government-developed identity services, a subject which arouses plenty of opinion."

Kevin Cunnington, Director General of the Government Digital Service (GDS), will be at the event, with a speech entitled "Identity Parade."  I've been passed, by an anonymous source, the text of his speech which I have pasted, unedited, below. I'm confident you'll find the speech a revelation:

It’s 6 years, almost to the day, since DWP went to market for identity providers to support the Universal Credit programme.  Of course, we, that is, GDS, cancelled that programme, seeing it as symptomatic of the old way of doing business in government - closed, expensive, no demonstrable value for money, highly likely to fail and so on.
We replaced that programme with Verify, the start, as Mike Bracken said at the time, of a new market of identity services for access to digital public services.   Mike was clear that delivery wouldn’t happen overnight.  And he was right, of course. 
We have, though, made massive progress.  In just the last year, the number of accounts on Verify has doubled.  We now have 2 million users.  An astonishing number.  And we are running an open system, with proven value for money and one that is highly successful.  But, onwards, as is our rallying cry. 
Eighteen months ago we declared that by 2020 we would have 25 million users registered on Verify.  Today, I’m very pleased to announce that we have signed a partnership deal with Facebook to cross-link UK users of the world’s biggest social network with Verify.  That is, any UK citizen with a Facebook account will, from today, be able to log in to government’s online services to claim benefits, pay their tax, renew their passport or sign their mortgage deed.  That’s right, you’ll be able to use your Facebook account to access any one of the eleven amazing services available via Verify.   
We’re calling it “Verified by Facebook(TM)
How is this possible I hear you ask?  Well, we have been working on a brand new part of GaaP, or Government as a Platform, for the last year called GOV.UK ML.  Yes, machine learning.  Many people think that ML is just for analysing pictures of cats or for playing centuries old board games.  We’ve done far more than that.  We’ve used our ML platform to read in all of the UK Facebook data, kindly made available to us by one of Facebook’s partners, a small firm in Cambridge, and we’ve scanned all of the posts, likes, photos and videos to build up a profile of every user and them matched that with their government profile.   
Now we can be sure you are who you say you are, and when you next log in to one of those eleven services, you’ll be invited, first to “like” it and then to share with your network what a great service you’ve got from Verify, a step that will address a shortage of user feedback that is evident from our performance dashboard, and then you can carry out the transaction.   
Advertisements may, naturally, show up during your user journey. We have taken care to make sure that those ads are relevant to you, based on your search history on GOV.UK as well as other data that we, and Facebook, have gathered on your online activities, using our new product, GOV.UK Ad Curator, that entered beta recently. We will split the ad revenue with Facebook and their partners, and our share will go into improving the Verify service and its functionality - this is GDS proactively handling austerity and seeking new ways to fund itself. 
We are so confident in our GOV.UK ML platform and the matching that it’s already carried out that we have pre-registered every UK Facebook user on Verify and so, today, I can announce that we have met our target of having 25 million users on Verify more than 18 months early.  Indeed, we have over 35 million users now.  Contrary to what Mike said back then, we made it happen overnight.  
This announcement doesn’t, of course, mark the end of the Verify programme. It is, though, the end of the beginning.  With 35 million users, we can now move ahead even faster with our efforts to transform government, in line with our much lauded Government Transformation Strategy.  Departments will  beat down our doors to get their transactions integrated with Verify.  Soon Verify will have as many services available, if not more than, as our stand out GaaP performer, GOV.UK Notify.  Even those who thought it was the wrong hammer for the wrong nail will find that we've now got a very big hammer that can deal with any nail.
Critics, including the NAO, have said that GDS has found it difficult to define its role as it has grown.  Well, we can safely put that criticism to bed now.  Our role is clear - we are leading on the path to transformation.  Let me be clear that it’s not the cow path and we are not merely paving it, it’s a brand new, shiny path, defined by user needs.  How wrong do those critics look now? Let's see Govdigerati make a cartoon out of that. 
We have several more user-led initiatives that I am pleased to announce will be entering beta in the coming days, including: 
  • Close binding of GOV.UK with Verify.  If you login, using Verified by Facebook, and post, say, a picture of a baby, we will refer you to child benefit services, making it easier for you to claim what is due to you.  If you post a sad face letting your network know that someone has died, we will link you to burial at sea, a service that we are keen to see more use of.  Life events will be played out through your posts on Facebook, allowing us to build a detailed user profile and start to anticipate your true user needs so that we can develop and offer services to match. 
  • A series of partnerships with banks where our GOV.UK ML technology and Facebook data will allow banks to let customers sign up for new accounts and services right from GOV.UK Verify in just three clicks.    Verify will quickly become the centre of your digital experience in the UK - naturally we will look after your data and ensure that none of it is made available to third parties, except, obviously, for Facebook and companies with whom they engage.   The next step from there is obviously for us to suck in all of your data and prepare your tax return directly from the source data.  We are starting some discovery work now on what we call GOV.UK Orwell.  More on that another time.
  • Extending our GaaP work to include a brand new capability, GOV.UK blockchain. We see blockchain as a fundamental leveller of all things digital, allowing us to manage transactions across government and track who did what and when, reducing errors, fraud and improving the user experience.  For GDS, it’s all about being user led.  Too many previous efforts have been technology led and our blockchain initiative demonstrates that is the last thing on our minds.  We are 100% user led and our users need blockchain. 
  • Introducing digital certificates to government - never seen before technology that will make demonstrating your identity even easier, and portable across platforms and devices.   We know that blockchain is often closely associated with anonymity but we think our users need strong identity so we will tie Verified By Facebook, blockchain and our new digital certificates together to allow us to track all of your transactions across government services, banking and the wider web.  This will allow us to offer joined up government as described in all of the seventeen Digital Transformation Strategies published to date.  Those who publish "Lego Government” manifestos will realise that all they’ve been doing is talking and theorising whilst GDS has actually been doing it, brick by user-led brick. 
Oh, and one more thing ... 
We are so pleased with the progress that we have made on Verify that we are announcing a new project called “Global Digital Identity,Verified by Facebook”. As the name suggests, it’s an expansion of the existing Verify and our partnership with Facebook that will be open to international government.  It will help other governments make their services more transparent, prevent corruption and boost their digital, data and technology sectors.  We already have strong interest from both Russia and China about how they can take on our services to help them with their own digital transformations.  Very soon we will announce an event where you can hear more about this new initiative. Let the parade commence - cue bunting.
Onwards.

First published on blog.diverdiver.com on April 1st 2018.  The contents of Kevin's speech may well change before the conference takes place on May 18th 2018.

Friday, November 17, 2017

It Will Take More Than Tesla - Crossing The Chasm - Part 4

In Part 3 (News Roundup) I said that I would next look at some of the big questions provoked by the transition to Electric Vehicles (EVs).  My natural focus will be the UK but I believe that much of what I say is relevant to the rest of the world, and I will draw on examples of what’s being done (or is planned) in other countries for comparison.



There are plenty of questions, issues and risks to think about in this major transportation transition, but the first that I want to deal with is, from a consumer point of view, what it will take to “cross the chasm."

Crossing The Chasm

In the early 1990s Geoffrey Moore pubulished a booked called “Crossing the Chasm”, subtitled “Marketing and Selling High-Tech Products to Mainstream Customers” - in essence a manual for getting your leading edge technology product beyond the early adopters, technical enthusiasts and “buy it because it’s new and shiny” types and into the hands of the mass market.  There’s a great summary by Jonathan Linowes.

Moore’s thinking was that rather than there being a smooth curve of adoption from innovators (the real enthusiasts) through early adopters and on to early majority and late majority (the peak of the curve of adoption) with laggards coming in at the end, there were gaps between each of these groups of customers.  Getting across those gaps - with the largest being between early adopters and the early majority, so large that it was not so much a gap as a chasm - required different thinking.  That is, what made your first few customers buy your product would not be enough to get the early majority to buy it.

The Innovators

So who are these innovators, the very early adopters of EVs, and just how many of them are there?  Well, not very many, perhaps by definition.  But even less than you might think given all the press coverage around EVs, some of which I referred to in Part 3.  One way to count how many there are is to look at applications for grants from the government’s Plug-in Car Grant Scheme.  As of Q3 2017, a total of 122,000 cars had applied for grants since the scheme started in 2011.  That’s a cumulative figure, which, when placed against roughly 2.8m annual car sales in the UK, suggests that these innovators, at roughly 25,000 or so cars in 2017, are pretty much the 1% of fable and lore.  But, that 122,000 total includes both Plug-in hybrid and EV - the former count for roughly 60% of the total, leaving about 45,000 EVs so far in 2017.  The 1% is really the 0.5%



The most popular car that qualifies for the grant is the Mitsubishi Outlander PHEV - around 29,000 cars in Q2 2017.  The Nissan Leaf follows up at around 17,000 cars.  Tesla, including both X and S, counts for about 6,500 - as I’ve said, it will take more than Tesla.  In total, there around 50 cars eligible for the grant, though not all have seen sales so far.  What’s clear from the numbers is that there are far more hybrid options available than purely electric, for now. Mitubishi are roughly the 25th most popular brand in the UK, selling about 8% of the number of cars that Ford, the number 1, sells.  Nissan are 9th, seeling about 45% of Ford’s total.

According to various profiles, these innovators are likely to be relatively younger and richers than buyers of combustion engine cars and, some say, smarter/better educated than them too.  It’s hard to disagree with the “richer” label - EVs (and hybrids) are more expensive than cars with combusion engines, even with a generous government subsidy provided for (not to mention lower ongoing costs in terms of fuel, tax and congestion charges).  It strikes me that the innovators, whilst thinking green, are unlikely to be choosing such a vehicle only to be green - there are too many other factors to consider, particularly range and charging locations.

Our innovators, then, are relatively well off and have evaluated the pros and cons of EVs and decided that they can handle range limitations (perhaps because most of their journeys are short and because they can easily charge their car at home, with off-street parking available), they’re thinking green but they’re also thinking about long term cost saves (in the absence of any guidance on future “fuel” tax levies).  They’re also, probably, chasing technology - these same innovators are likely first buyers of new models of phones, televisions and other electronic gadgets; they may also have their eye on future revenue opportunities by feeding energy from the car back into the grid.

They’re also, I think, risk takers - they don’t know how things will play out in the future in terms of residual value of the car in a few years, future software upgrades, possible software errors that result in problems and so on.   They’re “moon shot” customers, people who are happy to take the risks because they want to be first and, if they’re happy, they will make great ambassadors for the brand that they’ve chosen (possibly to the point of terminal boredom for some of their friends who may be less inclined to be innovators).  

The Early Majority

The second wave of EV purchasers will be quite different from the innovators.  They will be thinking through far more options and considering a far greater number of angles than their early adopter counterparts.  The issues and questions confronting the early majority, who will still be asking why should they buy and EV, rather than why shouldn’t they, include:

Do I even need a car?  There’s a reasonably large section of the population - probably skewed relatively young and living almost entirely in cities - who likely see no need for a car.  They have easy access to public transport and use Uber when they’re out, they may not have easy access to parking and they’ll see the congestion charge (if in London) as a needlessly expensive tax.    Many will be green-thinking and conscious of the pollution in cities and will want to do their bit, but it will mostly be a calculation purely based on cost - why incur the regular expenses of a car when they can have near immediate access to one by the minute or by the hour through Uber, Lyft (soon) and black cabs with Zipcar and equivalents handling the very occasional long journeys they’ll make?

What choices do I have?  The number of pure EV models on the market today is limited.  As I noted in part 3, that’s changing and, over the next 3-5 years, there will be considerable choice.    Choice is important - if it wasn’t, VW wouldn’t have 300 models (across 12 brands) on the market.  Every major manufacturer has made the commitment that certainly over the next 10 years, and in many cases even fewer, they will have electric and/or hybrid versions of every car in their range available. My sense is that VW won’t have 300 EV models though - engine sizes, fuel injection, turbo, diesel, petrol etc are all redundant and will be replaced by external shape and functions, interior design and features and perhaps battery size.  Just as now, a near infinite variety of colours and functions/accessories, but only a few core models - small, big, off-road even.  Not that simple perhaps, and not right away, but you get the picture - number of seats, amount of storage space, safety features, entertainment upgrades and software capability (today and in the future) will become the big decision points (once range becomes a non-question).

Where do I go and see the choices? Dealers are going to have make some interesting decisions soon.  They only have so much space available to them … so do they roll the diesel cars out of the showroom (diesel car sales are already falling and are at their lowest even percentage of the total, notwithstanding industry efforts to convince us that modern diesel is as clean as petrol - imagine why we might be just a little sceptical about such claims)?  Do they reduce the number of petrol and diesel cars on show and make more room for EVs and hybrid?  Do they open an EV / hybrid only showroom on the basis that if the customer wants to buy an EV, there’s no point in showing them a diesel car?  Wrapped inside this are some very interesting disincentives for dealers - I’ve heard various estimates but something like 2/3rd of a dealer’s revenues are tied up in the aftermarket support of a car; with EVs having 1/4 or 1/5 (and falling) of the number of parts of a combustion engine car, will much of that revenue disappear because there’s less to go wrong (and some of what goes wrong could be fixed remotely by software?).  Comparing models across dealers is also going to get interesting - given how much of an EV is software based, how long should a buyer wait before she knows that the software is reliable and so can confidently make a purchase?  How can you compare software capability between manufacturers?  How should a buyer evaluate a manufacturer’s ability to patch and upgrade the software regularly?

How much will my EV cost to buy?  If you’re making the choice to buy an EV today, you can see exactly what the purchase price is.  It will be the sticker price less the government’s incentive plus the cost for installing a charger at home less the subsidy for the same charger.  But what if you’re thinking about making the switch a year from now?  Will those subsidies still be in place?  Two years from now?  I suspect the government sees no need to announce changes to those subsidies now given that take up is low, but as it starts to move higher (and the graph of purchases is very clearly upward now), that susbidy will look like an increasing cash drain, and one that, today, is seemingly rewarding people who are already rich enough to buy an EV.

What are my long term servicing costs?   Routine service costs are relatively easy to forecast - there’s some data available for existing cars, but there are also some unknowns (e.g. if a future software update adds functionality, will that cost money too?) - and, again in theory, the cost for an EV should be lower than for a combustion engine car (though it seems likely that independent/small dealers will struggle, at least for now, to compete with the main brands which means that there will be a little less competition); it’s unclear, today, what “major expenses” might be expected were there to be a significant failure but it seems reasonable to think that (a) costs will be lower than combustion cars because there are fewer parts and (b) there should be fewer major failures.



What about running costs? The cost of fuel is an area of significant uncertainty, not today, but soon.  With £27bn of fuel tax and some £5bn of road tax at stake, it seems unlikely that once EV ownership becomes more widespread, possibly as soon as it reaches mid-single digit percentages, that tax loss will have to be replaced and, given that most charging will likely be at home, a per mile charge seems most likely - with the cars themselves reporting the distance travelled, for government (or a 3rd party agency) tallying it perhaps every month or every quarter.  Charging away from home can be estimated too - and various third parties offer membership fees that let you charge at their own stations.  There is, of course, an ugly scenario - one that we have seen before with bank ATMs (you can only take money out from your own bank branches) and mobile phones (you can only text people on the same network) - where a long range driver will have to join multiple schemes to be sure that they can charge wherever they are; that should, like the examples I gave, work itself out in time though I can see an initial burst of effort to get first mover advantage where multiple suppliers provide charging capability to the same places (there is a role for regulation here perhaps, where government drives common standards and cross-charging) but, if not, the market will take over and smaller companies will be acquired and rolled together to create ever larger companies competing on price, speed of charge and network reach.

How much will my car be worth when I come to sell it?  There is very little data on this so far - the two data points I’ve come across are that a Tesla S is probably worth as much as 60% of purchase price at the 3 year point and a Nissan Leaf is worth only 20%.    This likely reflects Telsa’s constant software upgrade programme and its expectation (supported by testing) that its batteries will last 20+ years (and that they can then go on to be used e.g. for running lifts in appartment blocks for decades more) versus Nissan’s 10 year warranty on batteries (implying a large replacement cost).  As more cars come to market, these figures will get more difficult to assess.  A more important question for a potential EV purchaser might be, how much will my current car be worth in 3 years?  With the press on diesel engines resolutely negative, large numbers of cars (as much as 90% of the retail market) being purchase on PCPs and the shift to EVs, an awful lot of combustion engine cars will enter the second hand market over the coming years.  Someone is propping up that market now, but it seems unlikely it can be continued for much longer.



Where will I charge the car? Some 60% of UK households have access to offstreet parking and so, for most of those (subject to local infrastructure), installing a charging point capable of fully charging your car in a few hours overnight will not be very difficult.  There’s definitely a shift in mentality required though - if your car is “full” every morning when you get into it, just how often will you actually need to charge it somewhere other than home?  Sure, if you are going from Edinburgh to London, you’re going to need to charge it at least once along the route, just as if you want to go from Bath to London and back in a day, you’re probably going to need to charge at the far end (depending on how leaden your foot is).  Nonetheless, there will be a continued need for “en route” charging stations - but just where they will need to be and how big they will be is going to take some work.  Filling a car with petrol, buying some sweets and paying is a few minutes; the equivalent with an EV, even with a super charger, is going to be several times as long.  That means more space devoted to charging than fuelling because cars will be there longer, with the possibiilty of queues if there aren’t enough charging spots.  It also means more thinking about the economics - what’s an acceptable margin on a full charge (it’s possible, I’m sure, that some people will want “half a charge” or less, but it seems more likely that if you’re going to stop for longer anyway, it might be more practical to get a full charge, unless you’re on your way home and just need enough to get there).    The 40% of homes without offstreet parking present a different problem - cables hanging out of windows and running across pavements are clearly not the solution.  Experiments are underway with converting lampposts to provide charging - but there are more cars in the typical town centre street than there are lampposts.   Induction charging is another option, but would involve serious surgery to roads.  Paris is taking a different route and massively increasing the EV equivalent of Zip Cars (building on the success of Ve’libre).  There’s going to be a tricky balance here about predicting need and putting in capacity, perhaps ideally doing the work at the same time as other infrastructure is being deployed - think fibre to the home for instance.

How future proof is my car really?   Perhaps the greatest unknown with EVs is whether there will be major changes in capability a few years from now that dramatically affect residual value.  Major changes to hardware - more cameras, better radar, huge improvements in battery capacity or run time, more autonomous capability that needs new technology - could all happen, or be thought to be about to happen, and so depress residual value.  New combustion engine car models are telegraphed early and come, generally, with only marginal improvements - some design changes, some clever new features at the high end, a trickle down of previously high end features (parking sensors for instance) to lower models.  By the time we get past the early majority and into the late majority, this issue will probably have gone away but it will be on the mind of many purchasers.

Is it really green?  The power to charge the batteries has to come from somewhere - coal? The elements inside the batteries have to come from somewhere - exploitative mines in the Democratic Republic of Congo?  The car has to go somewhere when it reaches end of life - landfill?  These questions are relative of course - combustion engine cars produce toxic emissions that are hyper-local, rare elements are in catalytic convertors, combustion engine cars sit in scrap heaps with seemingly little recycling.  Here’s a view from Wired magazine.  The Guardian recently quoted a study that said whole life emissions of EVs will be around 50% of diesel cars.  What we do know is that there is an increasing push for power to come from renewable sources and that the bulk of charging can be done overnight when power costs are lowest (because demand is lowest) and so can be provided by the base load capability (initially, though that will change).  Dealing with the rare elements in batteries, recycling/re-using batteries and handling scrap (the bulk of which will be diesel and petrol cars are we get closer to the 2040 point, in the UK, when petrol and diesel cars will no longer be sold new) will all need some work.
  
What if I break down? “Running out of fuel” still happens and is easily fixed with a combustion engine car by taking a walk to the nearest fuel station and heading back to your car with a can of fuel.  What happens if you run out of charge on the motorway?  Will the AA have something in the back of the van that can deal with that?  What about a typical breakdown?  Will the RAC have the expertise to diagnose and address the problem?

Is it secure?  Whatever the answer to this is, let's not get the Smart Meter programme people involved.   This is going to be answered on a case by case basis, but I suspect that there will be plenty of scare stories along the way as teenage hackers as well as university researchers, tech companies and nation states discover that there are lots of ways to exploit the software in many cars.  How this turns out is up for grabs perhaps.

A Framework For The Future

Providing clarity and certainty around these questions requires a mix of actions from both public and private sector, with some co-ordination to avoid the otherwise inevitable chicken and egg scenario where buyers fear to buy and suppliers fear to supply.



Customers are already thinking  “I can’t buy an EV because (delete as appropriate) ... I don’t know where to charge it ... I’m worried that I’ll be taxed based on how far I drive ... my car will be worthless when I want to sell it ... it won’t be possible to upgrade it ... it’s not green enough.”

And

Suppliers, whilst making commitments to ship huge numbers of new EVs across their range are worried that “we can’t ship all of these EV models because the subsidies might be about to go away ... there isn’t enough charging infrastructure ... government will replace fuel tax with a road charge ... we haven’t got a recycling plan in place for the batteries”

The Role Of Government

Government has a key role in helping address some of these questions and also in being clear where it doesn’t plan to step in:

- Clarity is needed on future subsidies (for purchase incentive, home charger costs, fuel tax and road tax).  How and when will current subsidies be phased out?  What will replace them and will it be revenue neutral to government (meaning that the tax burden on an EV driver will be the same as now, just calculated on a different basis). Careful thought will be needed, as, for instance,  a per mile charge may actually increase the burden on careful drivers - those who consciously buy efficient engines and drive carefully likely use less fuel than those who do not, but will end up paying the same if it’s purely on a per mile basis.    Norway's recent proposals can show us what happens if this isn't well thought through - they look to be reversing course and increasing the cost of larger EVs (adding $5k to the price of a Tesla S for instance) because the original thinking was that the subsidies would encourage less well off people to buy EVs but it turned out that it encouraged far more rich people to buy bigger and more expensive EVs)

- A wider programme of incentives, encouragement and funding to position the UK at the top of the tree in the development of EVs and autonomous vehicles.  I've frame this in two parts - (1) a series of X Prize-style competitions but also (2) a comprehensive programme of proposals to encourage companies to take risks and develop new EV capabilities.

(1) The creation of X prize competitions, in partnership with VCs and research bodies, to promote the development of alternative battery technologies, development of autonomous capability and street infrastructure upgrades.  There is already some of this going on - for instance, see this £51m award across four projects in the "Connected and Autonomous Vehicle" (ugh) domain.    This funding is provided by the government's new MERIDIAN brand (why it's capitalised I don't know).  Meridian (I can't shout it every time) believes that the CAV market will be worth £907bn by 2035 ... so £51m is hardly putting a dent in it.  I fear another graphene here - the hard innovation thinking is done in the UK and other countries exploit it because we don't invest enough.  In this case, though, companies are investing billions (cf £1bn from Dyson into battery technology) and yet government appears to be fiddling with table stakes.

(2) Companies can already claim R&D tax credits but I have the sense that these are mostly chased by companies who know how the system works and who would likely do the R&D work anyway.  What about companies who don't know how the system works or who really can't afford to take the risk on the R&D, but who might if there was access to a buffer of cash to help them.  Government is terrible at picking winners so both (1) and (2) need some careful work to make sure that the risks are understood, and there should be the option for government to take an equity stake in return for its support of the work.

- Charging capability for the 40% of homes that do not have off street parking needs some thinking about and some regulation.  Streets may need to be dug up - and that should only happen once, packing in as much related work as possible (filling potholes, providing fibre to the home, installing smart meters, preparing for 5G rollout, deploying capability to support future autonomous vehicles and leaving easy access and capacity for future, yet to be thought of, infrastructure etc).  Local authorities may choose to award contracts, or give licences, through a competitive process to ensure that there is capability in their area but not a proliferation (note, I don't, for a minute, believe that local authorities should fund widespread charging infrastructure, but that they should think about regulating it to ensure coverage and minimal overlap). Central government may need to step in to ensure that there is cross-charging between networks, though the market is likely to resolve that first I suspect. 

- A security laboratory, working with major vendors, GCHQ and others to establish standards and technologies to make cars secure, made available to all vendors as open source to encourage fast adoption (and patching) of their technology to reduce the risk of compromise

- A comprehensive plan for recycling EV components, particularly batteries.    This could be left to manufacturers but, actually, having a national plan for dealing with potentially dangerous components, particularly if there is life left in them that, whilst insufficient to power a car, could power other things, could be a real game changer for the UK, creating new businesses and business models. 

- A plan and infrastructure for dealing with the vastly larger number of scrapped cars that we will see over the coming years, not just through a "scrappage scheme" where owners are encouraged to retire their ageing diesel car in return for some money towards a new EV (see the points above about subsidies).  In this case, I mean how are we going to deal with the petrol and diesel cars that are end of life and that are not replaced by new petrol and diesel cars.  It seems to me that we are going to have millions more cars scrapped over the coming 20 years than over the last 20 years - where will they all go, how will we recycle components etc?

- A clear regulatory framework and plan to encourage investment in sufficient local power distribution to support increased EV charging.  TfL, for instance, say that when they increase the number of buses in a bus station, they often have to work with power companies to provide new substations.  What else could that capacity provide?  How can future demand be thought through and made available ahead of when it's needed?  How will it be paid for (when it's deployed ahead of time) and what does that mean for a power company's regulatory asset base (and so its return)?

- Sourcing standards for components.  EVs today, just as many internal combustion engine cars (not to mention phones and many other electrical products, particularly anything with a Lithium-based battery) rely on a few critical components that often come from questionable sources - cobalt from the Democratic Republic of Congo (Half of global supplies come from the DRC and Amnesty International claim that as much as 20% is mined by hand, often by child labour).  We have an opportunity to funnel money, with appropriate controls, through our aid and development funding, to change how this works - to upgrade and automate mining, protect the labour force and avoid exposing them to harmful conditions and enhance the environment.  It would be a great shame if we went "full steam ahead" without addressing these issues before it's too late and the damage is irreparable.  Government's can step in here to drive sourcing standards and monitor adherence.

Bringing together these strands, as well as others that I will run through in future pieces, is some of what I think it will take to move EVs from the world of "why should I buy one?" to "why shouldn't I buy one?".    I don't, though, see it happening without a well thought through, integrated approach that involves public and private sector - all the more as supply chains and custom processes are adjusted in the run up to, and aftermath of, Britain leaving the EU.

Anyone buying a car today should perhaps already be looking at EVs available and asking both of those questions and seeing how the options land - and possibly even consider deferring their purchase decision to see how the EV landscape changes over the next year or so.