processes and methods, he stated: “Virtually everything we do at General Motors has been reduced in some fashion or another to software.” Many of GM’s products have become reliant on software to the point that they could not be sold, used, or serviced without it.

By way of illustration, Dr. Scott noted that today’s typical high-end automobile may have 65 microprocessors in it controlling everything from the way fuel is used to controlling airbags and other safety systems. Reflecting how much the automobile already depends on software, internal GM estimates put the cost of the electronics, including software, well above that of the material components—such as steel, aluminum, and glass—that go into a car. This trend is expected to continue. As a second example he cited what he called “one of [GM’s] fastest-growing areas,” “OnStar,” a product that, at the push of a button, provides drivers a number of services, among them a safety and security service. If a car crashes and its airbags deploy, an OnStar center is notified automatically and dispatches emergency personnel to the car’s location. “That is entirely enabled by software,” he said. “We couldn’t deliver that service without it.”

To further underscore the importance of software to the automobile business, Dr. Scott turned to the economics of leasing. When a car’s lease is up, that car is generally returned to the dealer, who then must make some disposition of it. In the past, the car would have been shipped to an auction yard, where dealers and others interested in off-lease vehicles could bid on it; from there, it might be shipped two or three more times before landing with a new owner. But under “Smart Auction,” which has replaced this inefficient procedure, upon return to the dealer a leased car is photographed; the photo is posted, along with the car’s vital statistics, on an auction Web site resembling a specialized eBay; and the car, sold directly to a dealer who wants it, is shipped only once, saving an average of around $500 per car in transportation costs. “The effects on the auto industry have been enormous,” Dr. Scott said. “It’s not just the $500 savings; it’s also the ability of a particular dealer to fine-tune on a continuous basis the exact inventory he or she wants on the lot without having to wait for a physical auction to take place.” This is just one of many examples, he stressed, of software’s enabling business-process changes and increased productivity across every aspect of his industry.

Downside of Software’s Impact

But Dr. Scott acknowledged that there is also a “bad-news side” to software’s impact and, to explain it, turned to the history of Silicon Valley’s famed Winchester Mystery House, which he called his “favorite analogy to the software business.” Sarah Winchester, who at a fairly young age inherited the Winchester rifle fortune, came to believe that she must keep adding to her home constantly, for as long as it was under construction, she would not die. Over a period of 40 or 50 years she continually built onto the house, which has hundreds of rooms, stairways that go nowhere, fireplaces without chimneys, doors that open into blank walls. It is very



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