Manufacturers and their engineering software tool makers have yet to catch up with the embedded software revolution. Cambashi’s Bob Brown makes the case for investment in new application software and new methodologies to match.

By Bob Brown
Principal Consultant, Cambashi Ltd.

Embedded software is in almost every product that has a power lead or a battery. This isn’t a new story; we are all aware that an increasing proportion of the

functionality of most commonly used products now depends on embedded software. However, from an engineering perspective, the nature of the product, and therefore the development process required to produce it, are fundamentally changed by the shift to embedded software.

Based on the stories we hear regularly about a product recall, failure or quality control problem with embedded software, it is clear the design process has not been updated or in cases where it has, is not sufficiently robust to cope with the increased complexity of the products incorporating embedded software. Our conclusion: too few companies designing products with embedded software have yet changed their design process to optimize the advantages, and the challenges, embedded software brings.

You do not have to look very hard to find products that exemplify the shift away from a focus on making products that are fixed and immutable, towards those that are potentially more flexible and adaptable, because some part of their functionality is delivered by embedded software. The extent to which this potential to add value throughout a product’s life is exploited, and the motivation for doing so, does vary considerably. At one end of the scale are devices that do not offer any real possibility of a field upgrade, at least without the need for a technician, like a washing machine. In this situation the benefits of moving to embedded software all hinge on a manufacturer’s ability to reduce costs. At the other end of the spectrum are all the devices that are accessible from a public or a private network or have some kind of input device.

Here the motivation is cost reduction plus the opportunity to generate incremental revenue. The computer industry and independent software vendors may have led the way but the same model has now been applied to a wide range of industrial and also consumer devices – for example, machine tools, factory automation solutions, cell phones, PDAs and satellite broadcast decoders.

Quick Payback
Embedded software pays back on the basis of cost savings alone. For a start there may be fewer parts, fewer hardware-specific variants, or the task of configuration or customization can be greatly simplified. Moving functionality to embedded software can improve the time to market versus competitive functionality versus price argument. By bringing a product to market early, even with basic functionality a company can achieve higher prices.

A product where much of the functionality comes from software can be steadily upgraded and a range of versions created at marginal cost. The higher specification products with more functionality can maintain a higher price for innovation. As volumes build it becomes possible to further reduce costs by moving functions to lower cost computing and silicon platforms, further improving profits.

Incremental revenue is possible because existing products can be upgraded, at a price, in situ. This creates a new aftermarket opportunity in a way that previously was very difficult, if not impossible. Customers have a powerful incentive to identify themselves to the manufacturer and therefore to the manufacturer’s marketing messages. From this continuing contact, the manufacturer can develop a better understanding of their customers’ needs and generate additional revenue from their installed base. In particular, for makers of consumer products, visibility of the ultimate customer previously
relied on customers registering their product for warranty purposes or the cooperation of the sales channel – neither of which is especially effective or reliable.

Coping with rapid change
These are very important considerations for manufacturers in the Internet age, where brand loyalty has less meaning and customer behavior is subject to more rapid change. Further savings can be garnered from reductions to marketing costs because manufacturers can communicate directly with users.

Potentially, more profound implications exist for the whole business – such as moving the business away from a transactional sale toward recurring revenues and service provision, or completely altering the dynamics of a manufacturer’s relationship with their sales channel.

So, one might think that the opportunity to increase profits ought to ensure that development teams are provided with the right tools to do the job. Several
things are required: a design organization that can handle multidisciplinary design, the knowledge of what to ask for and access to the investment capital that will make it a reality.

The move to embedded software has occurred sufficiently quickly that the requirements of users have, to some extent, outstripped the interchange between software tool buyers and the software development community that generates appropriate solutions. There are point solutions to some of the problems but there is no “one-size fits all” solution, so whatever incremental applications are purchased need to be made to work in an already complex applications landscape.

There are more basic challenges to deal with as well. Even in the case where the software development team is co-located with other parts of the new product development team, differences between software development and other disciplines is considerable and the opportunities for missed communication and misunderstanding are very real. Of course, company policy or skill shortages, may lead to work being outsourced – to suppliers unfamiliar with the products on which they are working.

Regarding obtaining the money, it is clear that nothing will materialize until it has been requested, cost justified, reviewed, defended and fought for. Purchases of technical software have never been terribly high on the shopping list for most CEOs, although it is unclear why this is the case. I suspect there are a number of different factors at work. The investment case may be too complicated or rely too heavily on esoteric arguments. Or, perhaps it is simply that the connection between the investment and the promised payback is insufficiently articulated and is therefore not understood and not acted upon.

Implications
The move to embedded software is one of several factors with implications for the whole business – so the financial case needs to quantify savings in all areas and not just present the issues from the perspective of the design community. Winning funding in a competitive environment requires that the CTO put together a clear, incontrovertible financial case. Now, more than ever before, this means building a power base of key players – in areas like marketing, sales and service – who will fully endorse the case for investment. Being entirely pragmatic about this, CTOs who are not getting their fair share of the investment cake only have themselves to blame.

While there is much to be gained, there is also more at stake and this argument may be getting traction. With consumers, regulators, stakeholders and investors taking a much tougher stance on issues like good governance and risk analysis, it has become much more important to ensure that products are fit
for a purpose and provide a completely satisfactory customer experience.

Brand reputations can be tarnished or damaged irretrievably by product deficiencies in the field or the need to recall products for safety reasons. This is happening in an environment in which there is enormous commercial pressure to reduce the time to develop new products and a relentless drive to reduce costs in every part of the business. So, making an investment case for new application software isn’t going to be easy – but there isn’t an alternative for companies that intend to win in the marketplace on the strength of their innovative new products. §

Bob Brown is Principal Consultant with Cambashi, the global strategic IT advisory firm specializing in management, marketing, industry analysis, and market research for engineering, manufacturing, construction, and related industries.

You may contact Cambashi at 52 Mawson Road, Cambridge CB1 2HY, UK; Tel: +44 (0) 1223 460 439. www.cambashi.com. Copyright 2010 Cambashi Limited.