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Previous Blogs

November 14, 2017
Liberal Arts and Tech

November 7, 2017
Amazing Devices Enabled by Flexible Hybrid Electronics

October 31, 2017
Will the Future of Computing Emerge from the Fog?

October 24, 2017
Solving Multi-Device Dilemmas

October 17, 2017
Tech Inevitability Isn't Guaranteed

October 10, 2017
Edge Computing Could Weaken the Cloud

October 3, 2017
The Business Challenges of Artificial Intelligence

September 26, 2017
Microsoft Takes Computing to the Extremes

September 19, 2017
What is the Future of Upgrades?

September 12, 2017
It’s Time for Modern Digital Identities

September 5, 2017
The Autonomous Car Charade

August 29, 2017
The Golden Era of Notebooks

August 22, 2017
The Evolution of Smart Speakers

August 15, 2017
The Myth of General Purpose Wearables

August 8, 2017
IoT Connections Made Easy

August 1, 2017
Smarter Computing

July 25, 2017
The Value of Limits

July 18, 2017
Tech in the Heartland

June 27, 2017
Business Realities vs. Tech Dreams

June 20, 2017
The Power of Hidden Tech

June 13, 2017
Computing Evolves from Outside In to Inside Out

June 6, 2017
The Overlooked Surprises of Apple’s WWDC Keynote

May 30, 2017
Are AR and VR Only for Special Occasions?

May 23, 2017
The Digital Car

May 16, 2017
Digital Assistants Drive New Meta-Platform Battle

May 9, 2017
Getting Smart on Smart Speakers

May 5, 2017
Intel Opens High-Tech Automotive “Garage”

May 2, 2017
The Hidden Value of Analog

April 28, 2017
Google’s Waymo Starts Driving Passengers

April 25, 2017
The Robotic Future

April 21, 2017
Sony Debuts New Pro Camera

April 18, 2017
Should Apple Build a Car?

April 14, 2017
PC Market Outlook Improving

April 11, 2017
Little Data Analytics

April 7, 2017
Facebook Debuts Free Version of Workplace Collaboration Tool

April 4, 2017
Samsung Building a Platform Without an OS

March 31, 2017
Microsoft Announces Windows 10 Creators Update Release Date

March 28, 2017
Augmented Reality Finally Delivers on 3D Promise

March 24, 2017
Intel Creates AI Organization

March 21, 2017
Chip Magic

March 17, 2017
Microsoft Unveils Teams Chat App

March 14, 2017
Computing on the Edge

March 7, 2017
Cars Need Digital Safety Standards Too

February 28, 2017
The Messy Path to 5G

February 24, 2017
AMD Launches Ryzen CPU

February 21, 2017
Rethinking Wearable Computing

February 17, 2017
Samsung Heir Arrest Unlikely to Impact Sales

February 14, 2017
Modern Workplaces Still More Vision Than Reality

February 10, 2017
Lenovo Develops Energy-Efficient Soldering Technology

February 7, 2017
The Missing Map from Silicon Valley to Main Street

January 31, 2017
The Network vs. The Computer

January 27, 2017
Facebook Adds Support For FIDO Security Keys

January 24, 2017
Voice Drives New Software Paradigm

January 20, 2017
Tesla Cleared of Fault in NHTSA Crash Probe

January 17, 2017
Inside the Mind of a Hacker

January 13, 2017
PC Shipments Stumble but Turnaround is Closer

January 10, 2017
Takeaways from CES 2017

January 3, 2017
Top 10 Tech Predictions for 2017

2016 Blogs

2015 Blogs

2014 Blogs

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TECHnalysis Research Blogs
TECHnalysis Research founder Bob O'Donnell publishes commentary on current tech industry trends every Tuesday (along with occasional extras) at Techpinions.com and reprints those blog entries here. Those columns are also reprinted on re/code, Techspot, SeekingAlpha and LinkedIn and occasionally in Investing.com, Smarter Analyst and Indian Engineers.

He also writes a regular column in the Tech section of USAToday.com and those columns are posted here. Some of the USAToday columns are also published on partner sites, such as MSN. In addition, he also occasionally writes guest columns in various publications, including Fast Company and engadget. Those columns are reprinted here.

November 21, 2017
The Ridesharing Business Conundrum

By Bob O'Donnell

One of the most widely praised concepts to emerge from the tech industry over the last several years is ridesharing, particularly through the services of companies such as Uber and Lyft. Not only is having the ability to request a ride and have it promptly show up nearly wherever you are a great service that millions now enjoy, it is also a textbook example of how the disruption of a traditional industry—in this case, the roughly century-old taxi business—can enable new types of business opportunities that couldn’t exist before.

As great a concept as ridesharing may be, however, there are increasing signs of strain on the business model that ridesharing companies use, particularly regarding costs and technology timeframes.

Before digging into these concerns, it’s important to remember the extent of influence that ridesharing has had on the tech industry overall. In fact, ridesharing’s enablement of the big picture concept of “transportation as a service”—where people can forego the purchase and ongoing maintenance of an automobile, and request rides whenever and wherever they need them—arguably has led to an enormous range of “as a service” offerings, most of which seem to suggest they’re the “Uber of something.” Of course, with regard to ridesharing specifically, arguably, some urban dwellers have lived this way for decades, and simply used taxis to get from place to place. With ridesharing apps and services, however, the process is significantly easier for a much wider group of people and—for now at least—much less expensive.

Part of the reason for the lower prices is the significantly different business models and expense structures between taxi companies and ridesharing companies. Because drivers for ridesharing companies aren’t employees, and therefore aren’t entitled to regular salaries, benefits and other costs associated with personnel, the overhead costs for them are significantly lower than they would be in other businesses. Throw in the fact that these drivers are using their own cars, and the physical asset-related expenses of most ride-sharing companies are almost zero. Traditional taxi companies, on the other hand, typically have to cover all of these types of expenses.

Recent legal challenges to Uber in London (and potentially much more of Europe), however, clearly highlight a potential flaw in the “gig economy” independent contractor business model upon which ridesharing companies are so dependent (and which they created). If European laws are changed to force companies to officially hire these contractors, the costs to ridesharing companies could skyrocket. Plus, it’s not inconceivable that changes in one region could quickly migrate to other regions, causing a much larger impact than a single legal requirement might first suggest.

Ironically, part of the problem is that these ridesharing services are a victim of their own success. So many people have become so dependent on driving for these services—either full-time or significant part-time efforts—that the ridesharing companies are seen as providing significant amounts of income to a large and growing group of individuals. The longer that process continues, the more dependent drivers will become on these ridesharing companies, and the more likely that employment with these entities starts to become a political issue with even more far-reaching ramifications.

In theory, of course, this latter problem was never supposed to happen. Built into the business model of the ridesharing companies was an “inevitable” evolution to a fleet of self-driving cars that wouldn’t require any drivers. The drivers were only ever meant to be a temporary solution until the “real model” of an on-demand pool of autonomous cars was available. The problem is, the timeframe to reach truly autonomous cars looks to be lengthening. Despite some of the frothier media commentary to the contrary, it’s becoming increasingly clear that the technical, logistical, regulatory, insurance, and even ethical hurdles that still face fully autonomous vehicles are extremely high. As a result, it could be well into the 2020s before the key technological and legal conditions are in place to make fully autonomous vehicles a mainstream reality. We’ll see plenty of experiments before then, but as soon as the seemingly inevitable first serious accident involving an autonomous car occurs—regardless of where the true fault lies—the process will once again slow.

The challenge with this timeframe is that it means the amount of people and the amount of income that will be impacted as ridesharing companies start to move away from human drivers and towards autonomous fleets is going to be enormous. The nightmare scenario for these companies is that the transition from an independent driver model to one based on an autonomous fleet lasts so long that legislators end up feeling the need to step in. Large numbers of their constituents could end up being impacted by such a transition, leading to demands for political action, all of which could slow down the transition even further.

This is why I expect we’ll see a number of announcements similar to the recent Uber-Volvo arrangement about autonomous car partnerships. Certainly, the fact that Uber is working with a major car manufacturer like Volvo on autonomous cars is important, but it’s arguably also an effort to get people thinking about the transition to autonomous vehicles much sooner than is realistically possible. By driving the discussion towards the next stage in the ridesharing industry’s business model evolution, the announcement deflects attention away from what could be more pressing business model challenges in the near term.

There’s no question that ridesharing is a tremendously useful and, for many, essential addition to the range of service offerings that tech companies provide. But as the industry matures, there could end up being a number of unintended consequences stemming from ridesharing’s once revolutionary business model. Any combination of these consequences could force people to re-evaluate what the industry’s long-term opportunity may really be.

Here's a link to the column: https://techpinions.com/the-ridesharing-business-conundrum/51699

Bob O’Donnell is the president and chief analyst of TECHnalysis Research, LLC a market research firm that provides strategic consulting and market research services to the technology industry and professional financial community. You can follow him on Twitter @bobodtech.

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