Depending on the size of your organization and the volume of work it does, you may have at some point considered outsourcing either electronic manufacturing services or electronic design services to help soften the load. After all, work that’s being picked up by a third party is work you don’t have to focus on, which in turn means your team is free to deal with revenue generating projects.
But what, exactly, is the best way to outsource? When you sit down with an outsourcing contractor, what should you be expecting? We’ve broken down the three most basic business models so that you’ll have a better idea of how they differ from one another:
- Fixed Bid
A Fixed Bid contract is fairly simple: You establish the job requirements and outsource the work to a electronic design services company for an agreed upon fixed price.,. In general, any cost overruns are the responsibility of the design services company. This model works well for simpler projects where the scope of work is easily defined and estimated. This type of arrangement is not recommended for projects that require significant research and development or where the requirements are not fully understood or defined at the start of the project. For more complex projects, Axelsys recommends the following two business models.
- Time and Materials (T&M)
A Time and Materials contract is a bit different. Instead of completing all the work on your project for one set price, the electronic design services company bills you for the hours it spends working at a previously agreed upon rate. Additionally, you will be expected to reimburse the contractor for specific expenses (also agreed upon in advance) like hardware, materials and software required to complete your job. Time and Materials contracts work well for large, long-term projects that contain many variables that are not definable at the start of the project.
A hybrid contract is typically structured in phases where each major phase is either billed as a Fixed Bid or Time and Materials. This type of business model is generally used for projects where budgets are tight but the work is not completely definable at the start of the project. There may be parts of the project that may be defined quite well while other parts may be more research and development in nature.
The business model you select for your next custom electronic design will be a key decision success factor when outsourcing custom electronic designs. If you’re questions or need help, feel free to contact us at www.axelsys.com or at 408.600.0871