The Agony of Choice: a Comparison of Development Strategies

External Project: What are the Pros and Cons?

Contracting out the complete development results in the smallest management effort and there is no lock-in. Maintenance and expandability are also ensured. The external parties must first acquire the industry knowledge and for the ultimate risk mitigation through a fixed price, the project must be sufficiently specified at the beginning.

Mixed Team: What are the Pros and Cons?

If you cannot prepare exact specifications in advance, then a mixed team of in-house developers and those from an engineering firm is the best choice. The benefits come at the cost of managing all the engineers and the risks, which are all yours.

In-House Development Team: What are the Pros and Cons?

With an in-house team, the apparent cost are low and maintenance is assured. The knowledge of the industry is also available. On the other hand, the management effort is quite high and legacy issues can delay new development. Also, fluctuations in demand cannot be balanced well and embedded specialist knowledge may be lacking.

EEMS (Electronic Engineering and Manufacturing Services): What are the Pros and Cons?

The obvious advantage of development by an EMS is the reduction of interfaces due to the fact that everything comes from one source. Make sure that you are not just a stopgap, that the developer knowledge really exists and that the contracts exclude lock-in with the contractor.

University of Applied Sciences (Fachhochschule): What are the Pros and Cons?

Assigning the project to a university of applied sciences can be one of the cheapest solutions in the short term. However, the risks should not be underestimated, since development, especially to production readiness, is not the core business of universities.

Freelancer: What are the Pros and Cons?

At first glance, freelancers are the easiest solution to fill resource and expertise shortages. However, the long-term maintenance and all risks, including the qualification of the freelancers, remain with you.

Near-Shoring/ Off-Shoring: What are the Pros and Cons?

Off-shoring usually looks like the most cost-effective solution in the short term. However, this advantage can be eroded away by the large cultural and geographical distance, the many fluctuations and the need to ensure expertise.

Which is Better: Fixed Price or Time and Material?

There are two general charging models for external, defined projects. What are their advantages and disadvantages?

Time and material billing, which also includes most so-called "agile contracts", allows simpler changes on demand. All risks remain with the customer. The danger with this approach is that of feature creep, which can jeopardize the cost and schedule goals of the project. Most often this happens because when the decision to change is made, it is not clear by how much which feature will drive the price.

A fixed price shifts the risks to the contractor, which naturally includes it in the price. The incentive to achieve the deadline and cost targets is massively greater. The customer may find it unpleasant that his targets, the specifications for fixed price must also be fixed. In practice, this can have the advantage that clear decisions about the product must be made in advance. Changes are then always possible, with the advantage that each change also gets a clear price and deadline effect, which can be included in the decision for its implementation.

The development strategy you choose has a major impact on the success and lifecycle costs of your product development.

Solcept develops electronics and software using several of these models. If you have questions about the different strategies, join us for a workshop.

Andreas Stucki

Do you have additional questions? Do you have a different opinion? If so, email me or comment your thoughts below!