Part 1: What drives users to spend on test gear?

Article By : Larry Desjardin

What compels customers to spend billions on test equipment? And what are the key differentiators that determine when they might buy from a vendor?

This column seeks to provide architectural and business insight on topics related to electronic testing, with a particular focus on modular instrumentation. I’ve been pretty bullish on the future of modular instruments such as PXI and AXIe. I’ve predicted that they will continue to take share in the test industry due to numerous dynamics. But predicting where, how and why requires insight into why users buy test equipment at all.

This is actually a common question I’m asked in my day job as an industry consultant. And if I’m not asked, I often bring it up. What are the business drivers of the end user that compels them to spend billions of dollars of their hard-earned money each year on test equipment? And from that, what are the key differentiators that determine when they might buy from vendor A or vendor B, or instrument format X versus instrument format Y?

We’re all engineers, so we know the devil is in the details. But, with the right segmentation models, we can see some patterns emerge. A mentor once told me, “All segmentation models are flawed. Some are useful.” With that as a caveat, let me show you a model I use to segment the test and measurement industry.

 

Figure 1: On one axis are industries and on the other are segments that may be involved in the test and measurement industry. The shaded regions (R&D, Manufacturing and Maintenance) are considered T&M segments.
 

Test and measurement is a derivative industry to the entire electronics product industry. Test gear is purchased because a manufacturer or service provider needs it for their own success. I find a useful segmentation is to look at the lifecycle phases a product goes through on one axis, and a specific industry on another, as shown in the figure above. In fact, by adding embedded systems and monitoring, the entire test and measurement industry can be mapped onto this model. However, what we normally refer to as “test and measurement” is contained in the shaded portions of R&D, manufacturing, and maintenance in the figure above.

An electronic product flows through the lifecycle vertically from R&D to manufacturing to service, and the test requirements change as it does. There are some common needs at each cycle, but also some difference between industries. Even within a specific industry/lifecycle segment, as a single square in the diagram above, there are many applications.

Nonetheless, the business dynamics force some common patterns across industries for each lifecycle phase. These dynamics determine the profit centres of the industry, and opportunities to take market share. In the coming weeks, we will take a specific look at each phase and what that means. For today, I will describe the key business drivers from the end user perspective for each lifecycle phase.

Blogger Larry Desjardin continues his discussion in the second part of the report. Click on the link below to read on.

 
Next: Part 2: Get the theory right for selling test gear
»

Subscribe to Newsletter