Part 2: Get the theory right for selling test gear

Article By : Larry Desjardin

In this takeaway, find out which business and financial drivers are directly related to an enterprise's need for purchasing test equipment.

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

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In the first part of the report, our correspondent detailed the business dynamics driving the demand for test gear. Larry Desjardin continues the discussion on the lifecycle across industries involved. Read on.

The key takeaway is this-the description of the lifecycle objectives is fairly generic across industries. “Get the theory right” is not specific to wireless communication research, it is essentially true of all research. So, let’s discuss the key business drivers per lifecycle:

Figure 1: Wireless communication industry: The shaded region shows which lifecycle phases and ecosystems benefit from test and measurement.

Research: Research is the R in R&D. Many users say R&D, when they really mean D, as in development. Not all enterprises even do research; some are pure product development plays. But when it’s done, research is all about “getting the theory right.” The major drivers are an overall need for very flexible equipment, any new critical measurements, and time to market. In the “R” phase, some industries may be driven by time to market (communications), while others are driven by the size of the breakthrough (quantum computing).

Development: Without a doubt, the major business driver in the development phase is time to market. This can be seen by calculating the lost gross profit of a product if its schedule moves out one quarter. Most modelling shows a quarter’s loss of peak gross profit in that case. Ouch! The consequence is that anything test equipment can do accelerate the schedule is a big win. Often, that means being the first to offer an effective measurement of a new protocol, or to accelerate design validation test times. The leverage test equipment can have to business profit, hence success, is substantial.

Production: Cost is the major driver across manufacturing. You can calculate the cost of test per unit for any given product by summing up all manufacturing related test costs (development, equipment cost, floor space, utilities), and dividing it by the number of units tested. This is a dollar value that adds directly to COGS (Cost of Goods Sold). However, this calculation is illuminating. Since the denominator is number of products tested, more products tested with the same gear lowers the cost of test. For this reason test speed can be the critical purchasing criteria.

Maintenance: The maintenance drivers are very industry specific. Some products, low-cost consumer electronics for example, don’t have a service segment at all. The products are thrown away, not repaired. Other industries have severe maintenance requirements-think of maintaining a jet fighter and the associated avionics at an airstrip in Afghanistan. In this latter case size is the key driver due to the mobility needed. In the communication industry, uptime may be the key driver, followed by low OPEX (operational expenses). “Time to troubleshoot” might be the key purchase criteria. An industry by industry look is essential.

Monitoring: I’ve included monitoring, though it only exists for specific industry segments. Think about monitoring a communication network continuously to observe the quality of service, outages and other issues. Or, consider a brewery that is monitoring their production processes. In general, monitoring is driven by the need to optimise a service or process and the equipment becomes part of the end user’s value delivery chain itself. Measurement equipment that does this at the least total cost, with well-calculated returns on investment, is typically chosen. As with maintenance, an industry to industry look is essential.

What I’ve attempted to do with the above summaries is to directly relate business and financial drivers of an enterprise to their need to purchase test equipment. We can see some common themes for lifecycle phases even across industries-time to market for R&D, cost of test for manufacturing, and so forth.

In future columns, I will focus on each lifecycle phase, look at key trends across industries, and make some observations of what that means for test equipment, test vendors and the role of modular instruments. I encourage readers to comment. Do these things ring true? Have I missed something? Are there other drivers? Let’s talk!

First published by EDN.

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

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