Dan Dodge

QNX: The little-known company that controls your car

April 5, 2013: 7:12 AM ET

Have a fancy navigation system? It's probably running software built by QNX, a little-known but powerful Canadian company.

By Kurt Wagner, reporter

130405071107-qnx-620xa

FORTUNE -- Under the bright lights of the Consumer Electronics Show in Las Vegas last January, a stunning black Bentley sat with the top down on the showroom floor. The Bentley -- a Continental GTC convertible starting at $191,000 -- became the center of attention throughout most of the week as thousands of geeks filed through the Las Vegas Convention Center's North Hall. But it was not for its curvaceous sheet metal that attracted them but its futuristic dashboard inside. Developed by Ottawa-based software company QNX, this dashboard boasted 3-D maps and reverse cameras, pre-touch technology that kicks the massive 17-inch screen to life as a hand approaches, and even, per Bentley's request: video conferencing (only functional when the car is in park, of course).

For more than a decade, QNX -- the same QNX that makes BlackBerry's (BBRY) new mobile operating system known as BlackBerry 10 -- has developed software specifically tailored toward the auto industry. Ask analysts what reputation QNX carries, and you'll get phrases like "rock solid" or "a solution for things that can't crash," fitting considering the potential consequences of a computer failure while traveling at freeway speeds. (In a 2003 interview, one QNX customer jokingly told Fortune, "The only way to make this software malfunction is to fire a bullet into the computer running it.") QNX has wielded this reputation to carve out an early hold on the so-called infotainment market share, shipping more than 9 million units in 2011, over 60% of all such units sold, according to Derek Kuhn, vice president of sales and marketing. Audi, Toyota (TM), BMW, Porsche, Honda (HMC), Land Rover -- QNX has been in them all, and Kuhn estimates QNX software currently operates in "tens of millions" of cars around the globe. An automotive industry report from IHS pegs infotainment revenues at $6.7 billion for 2013.

MORE: 4 lessons for Apple in the Facebook phone

Connected devices, from refrigerators to washing machines, have stemmed from better technology and a consumer-base eager to build on the "always connected" smartphone experience. Connected cars -- think built-in GPS, blue-tooth, and Wi-Fi -- may just be the most practical of the bunch, says Andy Gryc, QNX's automotive product marketing manager. Long commutes, coupled with a need for hands-free cell use and GPS, make the car prime real estate for hosting an infotainment unit. "The automobile," explains Gartner analyst Thilo Koslowski, "is the ultimate mobile device." Better technology and heightened user expectations are driving automakers to incorporate infotainment units -- essentially touchscreen dashboards -- into their standard models, too. By 2020 some 80% of new vehicles are expected to have built-in infotainment units, up from just 40% currently, predicts Koslowski.

The significant role QNX may soon play in the auto industry would have been hard to predict at the time of the company's founding in 1980. For starters, co-founders Dan Dodge and Gordon Bell barely survived financially, a task made all the more difficult considering they didn't take venture capital funding. The duo routinely worked 20-hour days, and CEO Dodge, 58, was supported by his working wife; Bell, the COO who retired in 2004, lived with his parents during the company's early days in order to save money. QNX was originally designed for use in PCs, but as its operating system evolved in the late '90s, the software's flexibility slowly transitioned the company's focus toward other opportunities. This unintentional shift and successful deployment in so many industrial and consumer products helped differentiate QNX from other PC companies of the time like Microsoft (MSFT) and IBM (IBM). Nuclear power plants, hospitals, and casinos are just a few of the areas QNX software can be found. In 2009, QNX software was part of a Switzerland-based effort known as Solar Impulse that created a solar-powered airplane.

MORE: How Facebook Home works

As the company evolved, so too did its value. In 2004, Harman International, a manufacturer of audio and infotainment equipment, purchased QNX, shopping it again less than six years later to mobile phone manufacturer Research in Motion (now BlackBerry). BlackBerry purchased the software company for $200 million in an attempt to recharge the brand's ailing smartphone lineup. QNX won't divulge revenues, but "software and other revenue" made up just 3% of the company's $18.5 billion in total revenues in fiscal 2012. Of course, QNX is not billed as a cash cow for the phone manufacturer -- its value lies in the BlackBerry 10 OS it provides for the company's latest phones and tablets. BlackBerry surprised analysts last month by posting profits of $94 million in the fourth quarter. The company also shipped one million new Z10 smartphones boasting the BlackBerry 10 OS.

Despite early success, it's too soon to tell what kind of long-term impact QNX will have on BlackBerry smartphone and tablet sales. The field is of course dominated by devices running Google (GOOG) Android and Apple (AAPL) iOS systems, leaving a once dominant BlackBerry device fighting for its life. BlackBerry 10 was only unveiled in January, and BlackBerry's newest phone, BlackBerry Z10, has yet to reach the U.S. market. On the auto front, QNX appears to have a much firmer grasp of the market, although other players, including Microsoft which is working with Ford (F) on its Sync system, are certain to offer a challenge. Other major operating systems like iOS and Android may not be far behind, predicts Koslowski.

For now, QNX is simply looking to innovate. Some of the more sophisticated mapping technology is already available to consumers, and QNX engineers are planning out our dashboards years into the future. With specific details under wraps, Kuhn will only offer up a tease: "Some of what we are working on right now for the 2017 model year," he says, "is even blowing our minds." Just enough to lure you in.

Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.