Why the Best Automation Companies Often Outsource Development

Why Are So Many Projects Miserable Failures?

Supporting Development Needs Is Harder Than Ever

If outsourcing of your electronic controls is not part of your strategic plan, It Should Be. All product manufacturers are under intense pressure to rapidly design, develop, test, certify and produce the next-generation product. Increasingly, the single point of leverage where additional capabilities, functionality, and higher-value is the electronic components and software. Product development teams must design and develop electronics which matches marketing requirements; perceived and real customer needs in an era of quickly evolving technology, all while meeting cost targets. Internal product development teams not only must be highly cognizant of customer needs but of all the various technologies which can be brought to bear against these problems.

Increasingly these challenges are filled by outside engineering teams. These teams exist to match customer requirements to technology and must maintain a reservoir of expertise and broad capabilities to achieve success for their customers’ projects. These teams who work with varied amounts of supervision bring project management skills, critical outside perspective and expertise in technologies that your team may only have limited expertise.

The Truth about Engineering Development

In our work over the years building electronic controls for small, 12-person companies to Fortune 10 companies we’ve never found Product Managers that didn’t see opportunities in the market and niches to fill with Engineering Organizations that had enough of the right resources to exploit those opportunities. The company size isn’t of particular importance. The industry doesn’t matter-we’ve found this to be true in industries like Automotive Component Suppliers, Food Processing, HVAC, Drive Systems and many, many others. We hear the following messages over and over:

“We Constantly miss opportunities around here – we just can’t respond fast enough.”“We need to build the _______ from the ground up so we can control the revisions and quality!” (Interpretation: protecting my job is top priority).
“Our Engineering team is always behind. Off the record, I’m pretty frustrated.” “We can’t let a 3rd party in here and learn about our product.”
“I’ve got my field salespeople screaming at me about different competitive threats, and I can’t make our people understand what we’re facing.”“We’ve got a lot on our plate, but we can make the __________ happen, we just need a few more months.”

Why the Best Outsource

Frankly, our customers are some of the most influential, savviest, largest development companies in the world and they outsource development projects to us. These are companies with scores of engineers in the US and around the globe. Companies with almost unlimited financial resources and buildings filled with engineers with masters degrees and PhDs. Here’s what these companies have learned:

  • You succeed by sticking pretty close to your core competencies. If you make hydraulic valves, your core competency is hydraulics not designing circuit boards.
  • An outside engineering firm that specializes in a technology or a development process is going to be faster, better and more experienced then they can ever be in that technology.
  • Even with access to the proprietary technologies, an unethical 3rd party development company has massive problems trying to compete with them in the marketplace including:
    • No name in the market, no customer base
    • No distribution channels
    • No marketing and sales story
    • Little understanding of the applications, who the customers are, how the market is segmented, what problems customers have, what language to use to talk with customers and how to sell products in that market
    • That competitive issues can be solved by restricting the 3rd party company from working with direct competitors.
    • That outsourcing is a significant capital expenditure, but the intellectual property the vendor provides (beyond any deliverable software and hardware) is well worth the financial outlay. An experienced 3rd party company has a wealth of knowledge in their specialty area that they can tap including:
      • Years of experience in the market for products with that technology
      • The design and implementation alternatives and the long term implications of each alternative
      • Typical problems other vendors and end users have with this technology
      • How to speak to customers about this technology including the type of information to include in datasheets, user manuals, and electronic files

None of the companies we work with blindly hand out engineering contracts to anyone with a compiler and an oscilloscope. Companies with a history of successful projects, a wealth of endorsements from other customers, the required resources, and the specific technology background required for the project get Contracts.

The Top Nine Ways to Absolutely Ruin Your Next Electronic Controls Project

  1. Use a New Vendor on Every Project
    Manufacturers who regularly outsource to brand new vendors can achieve higher costs, lower productivity and slower time to market. You always increase your costs and risk by the constant use of new vendors:

    • These vendors won’t be familiar with your company; it’s products and terminology. They won’t respond quickly to your RFQs (Requests For Proposals). You will spend much of your time interpreting and explaining the development process and what is expected from the vendor.
    • These vendors won’t know the culture, people, procedures, processes and expectations of your company ensuring lower productivity, longer startups, and inadequate communication.
    • You won’t get the best prices since the vendor senses he may never see you again.
  2. Don’t Clearly Define a Policy on Intellectual Property
    Before we got smart, we buried our ownership of the Intellectual Property in our quote. From time to time a customer would get upset with us at the end of projects when they found out they didn’t own the technology. Carefully consider who will own what at the end of the project. There are good reasons for you, the supplier, or both, to jointly own the IP so think it through carefully.
  3. Don’t Specify all the Critical Outcomes Prior to Requesting a Quote
    You can tank a project quickly by changing the target after the project is started. Do your homework up front to ensure you know exactly what you want before requesting the RFQ. If you make changes afterward, the vendor should have the option of revising his quote.
  4. Don’t Prepare Example Work Products
    Don’t let your vendor know you have a proprietary format for your documents, specifications, schematics, code or other design documents. Let them get into the project and then find out that your test specifications will require hundreds of development hours.
  5. Forget About Testing
    Focus all the time on the project requirements, technology, and implementation issues and nothing on how you expect the product to be tested. Don’t design a process that matches the functional test requirements to the critical outcomes you expect from the project.
  6. Select the Cheapest Vendor
    Search the world until you find an Eskimo in the Aleutian Islands that has heard of this technology and is “pretty sure” that it can be done for 1 month of sled dog feed. Don’t ask the single, most important question of a prospective vendor:

    “Can you provide the names of three customers with similar projects who would use your services again?”

  7. Treat Your Vendor as an Outsider Meddler
    Before starting your project don’t think through how often you need to communicate and all the media, documents and strategies you will use to maintain good communications among all team members. Use poor communications to create cost overruns, schedule slips, and inferior quality. Share as little as possible with your vendor. The vendor’s job is to design the screen door not worry about how it will work on the submarine.
  8. Don’t Consider Available Project Management Technology

    Don’t think seriously about the types of technology that can be an asset to achieving your goals. Revision control systems, teleconferencing, automated resource/problem tracking systems, and project management systems can be handled manually or not at all.

    Keep track of defects (hardware or software), resources, enhancements for future versions, and many other types of issues manually. Post-it notes are an especially effective tool for missing your schedules and delivering a product with missing or incomplete functionality.

  9. Don’t Develop Special Strategies for Overseas Development
      Ignore all the issues about using overseas resources:

    • The Telecommunication Infrastructure
      In some places, one critical building or component supports the entire telecommunications infrastructure. This component will probably hold up for the duration of your project. The team can work around limited, slow or spotty telephone and internet service.
    • Ethical Considerations
      In some places, bribery is common and an acceptable way of promoting business. Don’t worry your management may never find out?
    • Cultural Differences
      Don’t learn about the culture and the people you will be working with to identify what kinds of reward systems and what encouragement works best.
    • Scheduling Problems
      Ignore the extra cost of shipping and duties on transferring parts and equipment of a foreign country. Ignore the local holidays, vacations (usually much more extensive than US vacations), and different attitudes toward work hours and deadlines.
    • Prepare to Confront or Adjust
      Don’t worry if some cultures object to people on your US team based on Race, Sex, Religion or Sexual Preference. Handle these issues after they get out of hand.

John Rinaldi
Chief Strategist and Director of WOW!


John S. Rinaldi is Chief Strategist and Director of WOW! for Real Time Automation (RTA) in Pewaukee, WI. With a focus on simplicity, support, expert consulting and tailoring for specific customer applications, RTA is meeting customer needs in applications worldwide. John is not only a recognized expert in industrial networks and an automation strategist but a speaker, blogger, the author of over 100 articles on industrial networking and the author of six books including: