Why product development as a service works

With the ever-changing landscape of technology, many security equipment manufacturers are finding they don't have the right technology or they lack internal critical resources and skills sets to fully realize their future business needs. Furthermore, time-to-market, high development costs, geography, and other factors compound this issue. For example, the security industry finds itself at a cross-road where there is an emerging need for network technologies combined with the integration of access control, IP network video, and intrusion solutions. Nonetheless, traditional access control, intrusion and video OEMs (Original Equipment Manufacturers), while processing solid core competencies in their respective business areas, understandably, lack the core resources and technologies to fully implement their product development needs. Often times, the missing core resources and technologies relate to IP networking, streaming IP video, web-based and client-server based software applications, DSPs (Digital Signal Processors), FPGAs (Field Programmable Gate Arrays), and embedded applications.

Sub-optimal choices to augment OEM core resources and technology needs

Traditionally, barring the time consuming and costly process of hiring internal resources, security equipment manufacturers have had little choice related to augmenting their organizations with badly needed technology and resources. Prior to starting Security Industry Services, Inc. in 2006, I led formidable engineering and R&D teams within major OEMs within the consumer electronics and security industry markets; the options to augment my organizations were primarily restricted to two very sub-optimal choices:

1) Hire contractor resources either locally, or hire "off-shore" or domestic staffing/teams.

2) Obtain technology and solutions such as video server components, network technologies, etc via small companies that sell and/or license reference designs.

Surprisingly, these two sub-optimal choices are still the prevalent solutions to augment OEM product development organizations till this day. While sitting in the shoes of the OEMs, I found these solutions were wrought with problems.

The pitfalls of contractors and staffing solutions include the following:

• Numerous laws confront OEMs to restrict the on-going usage of contractors for more than one to two years. Further, by definition, hiring staffing and contractor firms (or individuals) is temporary. Subsequently, in the midst of product development, often times your most critical contract resources end up leaving at the most inopportune times. To make matters worse, at the end of the project, the contractors leave with critical know-how.

• For contracting solutions, total ownership of the outcome of the overall product is unfavorably distributed to temporary resources that are not committed for the OEMs long-term success.

• Contractors are typically a full-time, 40 hours commitment which can be costly.

Although hiring contractors and staffing firms was unfavorable for me in the past, licensing reference designs from design suppliers presents another set of less favorable issues:

• Walking in the security OEMs shoes, it was apparent that the design suppliers often provided pieces of the technology but lacked the overall experience in launching complete and successful differentiated security products. What was needed: experience to fully appreciate the OEM's "big picture" needs including ownership/accountability, understanding of the full end-to-end customer requirements on how the product would be used, plus an understanding of the OEM's processes, project management responsibility, and other critical wing-to-wing necessities to ensure a successful launch.

• Large up-front NRE (non-recurring engineering) fees were charged.

• In the end, the same core reference designs were available to competitors, thus making product differentiation difficult.

• The OEMs did not own the full IP (intellectual property) in the end, thus essentially restricting or eliminating the option to freely use the invested development, NRE, etc. for future generation products.

• After paying high NRE and development cost, additional licensing/royalty fees still existed.

• Because the OEM is dependent on the intellectual property of the design supplier, the OEM's internal teams were not independently enabled for the long-term.

Product Development as a Service

In today's competitive environment and challenging economy, OEMs have the opportunity to insist on better product development solutions to enable them for the long-term. Product development, offered as a service by a reliable product development service provider, offers the OEM the opportunity to control their product development on the OEM's terms, while at the same time augmenting the OEM's organization for the long-term. Thus product development as a service has many benefits:

1. Pay only for what you fully receive: As with other services, the OEMs should only pay for the service only after they receive the service - thus eliminating up-front NRE, fees, royalties, licenses, etc. Additionally, in today's economic times, OEMs can't afford to have all the resources on-staff, and therefore must seek more cost-effective resources solutions. Once you pay for it, it should be yours.

2. Ensure ownership: The OEM should fully own what has been developed and the associated critical technology, to use in the future as the OEM wishes. This includes the delivery of intellectual property such as source code, BOMs (bills of material), schematics, and other developed solutions and technology. Subsequently, the OEM should have full ownership with no strings attached and with no licensing fees or royalties at no additional cost.

3. Focus on long-term enablement: The product development service provider should be a viable long-term partner, interested in developing solutions that are unique and differentiated for the OEM. Further, the service provider should openly turn over "know-how" to enable the OEM to acquire the skill sets internally, and then support the OEM as needed (including training) with a focus on long-term enablement of the OEM.

4. Look for in-industry experience and service across both the technology and the business needs: The OEM should seek service providers who fully understand and support their end-to-end product development needs. This should include experience and services to ensure the OEM realizes the end-point: a finished product or solution that delights customers. Thus the OEM should look for a service provider that understands not only the leading-edge technology aspects, but also a service provider that fully understand and supports the OEM's needs. This expertise should range from concept, to customer needs definition, requirements definition, project management, R&D, test &D, to a fully produced and delivered solution.

5. Improve efficiency by leveraging the existing internal OEM resources across multiple projects: By implementing product development as a service, the OEM has great leverage to use valuable internal resources across multiple projects, thus increasing the OEMs ability to provide differentiated solutions across an entire road-map of solutions.

6. Lower total cost of ownership: By selecting a service provider that is proficient at specific skills and technologies, plus leveraging a service provider that has experience at "off-shoring" the right elements, the OEMs can significantly lower their cost of development while not compromising delivery.

7. True service should always come first: Everyone is delighted when they receive good service, no matter what. Good service requires an organization that has a mind set to delight customers based on a relentless passion for good service and humility. Good service never goes out of style.

In the end, whether product development is done in-house using full-time resources, or OEMs look to the outside for help, OEMs must maintain differentiation for their products and software solutions, while learning how to best leverage their critical internal core competencies. Subsequently, the OEM should look for product development solutions that best enable them to succeed for the long-term. Having sat in the OEM chair myself, I believe there is a better way to obtain cost-effective product development than what has been available in the past. Product development as a service provides both the short-term benefit of tapping into badly needed skilled resources to address immediate needs, while at the same time, provide the OEM complete control of their own future.

About the author: Richard Kramer is president of Security Industry Services, Inc. and SIS Development, Inc. SIS (www.sisdevelopment.com) provides end-to-end product development solutions for OEMsterm. Prior to leading SIS, Richard led formidable organizations within major OEMs.

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