Outsourcing electronics design: a review of approaches and trends in Russia and abroad

Based on the history of the IT outsourcing market and the experience of Russian companies, we will talk about the appearance of the first contract developers and electronics design centers in Russia and the CIS, explain how you can shorten and cheapen the development cycle of an electronic device, and try to answer the important question: how to make your product competitive in the electronics market.

Formation and development of the Russian outsourcing market for embedded equipment development

At the beginning of the 90s, companies emerged in the global market that provide services for customized development of electronics and embedded systems - from designing printed circuit boards and writing system software to creating turnkey electronic products. These companies were called differently: contract developers (OED, original equipment design); electronics design centers (EDS, electronics design services or IDH, independent design house).

In the early 2000s, the demand for embedded microprocessor modules around the world also emerged, when on-chip systems (SoCs) became affordable, the topic of processor modules developed. In Russia, there were timid attempts to build on this business, but, oddly enough, in the domestic market, SoC-based modules were unclaimed, deliveries went in small quantities.
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It is important to understand that in Russia and in other post-Soviet countries, business models in the development and production of electronics began to form 10 years later than in the West. After all, the information technology industry itself, with the possibility of integration into international business, appeared only after the collapse of the USSR in the early 1990s, with the emergence of private business. Today, in the outsourcing market for embedded software development, software development is one of the key services offered by Russian IT companies on the world stage. Electronics development companies also have serious development prospects, but this is a more conservative industry, the processes in it are slower.

The first bold steps in the field of contract development of electronics in the CIS countries were made only in 2000. In 2005, the first notable market players appeared, some of them by 2010 grew into large serious companies with a developed portfolio of customers.

Also in recent years, complex processor modules have become popular. Competition has arisen, but so far it cannot be said that the market has been formed. To date, we have limited information about the situation in the industry - the volume of development of private companies, the geography of their design centers, and other parameters of the market map are still poorly understood. Thus, in our assessment, for the time being, we can only be guided by the opinions of various experts, customers and performers in the electronics development services market.

Opportunities to reduce the time and cost of developing electronics

In the global market, several approaches are used to reduce the time / cost of developing electronic devices. Consider several options:

1. Platform design is development based on platforms and reference designs (PBD, platform based development).
2. Transferring the development of an entire product or part of it to an electronics design center or contract developer who specializes in a particular area.

Russia in the use of these opportunities again lags by about 10 years from the world market.

It is important to understand that not every company can calculate the economic effect of using one of these options. The fact is that in order to properly estimate the cost and development time it is necessary to have sufficient experience. Specialists of a company that plans to outsource its project should objectively evaluate their costs in the case of independent execution of project tasks, without using an external team:

• to consider the work of not only engineers and programmers, but also administrative staff;
• add the cost of purchasing electronic components;
• sum up the overheads that are relevant to the development;
• do not forget about indirect costs, which are often not allocated and therefore do not allow to properly assess the time and financial resources for the project (this category includes such activities as immersion in the topic, training and other tasks for preparing for the project).

If you are able to count all this, then you can evaluate the effect of referring to a third-party developer, otherwise it will be very difficult to compare.

How else can you assess whether to turn to outside help for a project in the field of electronics development? You can analyze the specifics of the market for outsourcing development and use it for their own purposes. For example, to perform individual tasks in a narrow technical area, you can turn to small companies of 15–20 engineers. Often, such independent teams work within a specific specialization, so their services will be cheaper compared to the work of internal staff of the client company. However, it should be borne in mind that the output will be only a prototype device without setting to mass production. The customer gets a good design, but he himself must deal with production issues.

Larger engineering companies (design centers and contract developers) can specialize in the whole industry. Accordingly, they should be addressed if the development of a device for a specific market plus the launch of mass production is required. These companies will take into account production issues at the design stage, implement integration testing and, if necessary, prepare the device for certification. Also, if the customer does not have enough experience for the author’s supervision over his project, he will be able to outsource this task to outsourcing. Thus, the developers of a complete cycle can be entrusted with designing the whole system, which consists of several electronic devices.

A very important issue is a reasonable distribution of responsibility for the result at each stage of the project. Some part of the guarantees will provide a design center or contract developer. The customer, as a rule, deals with the maintenance and development (modification) of the device independently. In any case, the zones of influence of external and internal (standard) teams must be allocated in advance. At the same time, it is important to retain the core competence (business logic) of the project; this is one of the ways to protect (for other ways, see our previous article “Outsourcing: How to protect your developments from copying” ).

Here are some examples:

1. Now the next cycle of changing electronic equipment in the field of industrial automation is taking place, systems with higher productivity are being introduced, systems on a chip are being actively used, which were not yet used in 2000. Product company developers do not keep up with new trends, because are busy supporting previously released products. As a result, in most cases, specialized electronics design centers have more experience than developers within the customer company. As a rule, small contract developers are not able to cope with business logic at all or are not ready to engage in the topic of automation. And developed design centers must overcome the sectoral threshold in order to be able to give them the whole project.

2. A company that operates in the measurement electronics market accumulates expertise in high-precision measurements. Of course, the design center will not be able to provide the same level of experience and knowledge in this area, but at the same time it can successfully design certain elements of the new measurement platform: it will work out the electronics, low-level software, graphical interface - it will perform the bulk of the work associated with the development of the device , modeling the strength of the product, the choice of materials. As we noted earlier, the customer must retain the know-how in the measurement algorithms (protection of his intellectual property).

Thus, in the applied fields, the design center specialists will be in a more advantageous position compared to the internal developers of the client company, but they are unlikely to know the specifics deeply unless they have already performed a similar project before.

How to make a product competitive in the market

The initial requirements for the electronic device being created may be exaggerated, but in any case they should be higher than that of a competitor. The key to a successful product is to distribute the tasks correctly between the contractors and subcontractors that are motivated to work for the result.

In Russia, joint-stock companies have a habit of doing everything themselves. They should take the time to search for their core competencies, eliminate inefficient departments, transfer the remaining tasks to other market players, redistribute responsibility between them, and work on either product development, production, or sales and marketing. The efficiency of labor will increase, and the competitiveness of Russian products will more rapidly approach the world level.

PS If you are interested in meeting other analytical articles of our team, welcome to Promwad Electronics Design Center Library .