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).