The cost of product development
Why does it vary so much for electronic products?
When you are ready to start developing your next tech product you want an indication of the cost of product development.
This allows you to make early return on investment calculations and establish a business case for whether the product is commercially feasible.
Even if you have accumulated valuable knowledge of product development over years or decades of development new considerations can crop up.
You may be venturing into new territory in terms of technology, geographical markets or using new technologies which can change the costs dramatically.
This article should help you estimate your budgets so that you have an outline idea before engaging with a trusted electronics and software design partner to work through the detail of your specific needs.
Why does the cost of electronic product development vary so much?
There are multiple factors that can impact the cost of product development for electronic products.
The top 5 are:
1. Technology maturity
Projects which call for well established, well tested components with reference designs and manufacturers support require much less time and bring lower levels of risk than those using cutting edge technology.
Newly released components typically haven’t yet had every feature and edge case thoroughly tested. Documentation can be sparse and there can be unknown bugs within the devices themselves. This can also be true for the tools, drivers and libraries provided by the manufacturers. Sometimes data and device samples simply aren’t made available unless you are manufacturing in volumes of a million pieces per year.
2. Product complexity
Complexity can come from numerous areas, each adds additional engineering considerations, and combining multiple areas can multiply the impact.
Some examples are briefly discussed below.
Squeezing the product into a very small enclosure which forces components to be populated on both sides of the printed circuit board, increases the pcb layer count and can introduce buried, blind and micro-vias.
Combining multiple radio technologies into a product requires considerations around the interactions between the antennas to avoid skewing their radiation patterns too much and causing interference or deaf periods.
Battery powered performance
Battery powered products bring the need to be frugal with the available stored energy. Making the most of low power sleep modes without impacting the necessary performance and ensuring the hardware design and testing finds and removes unnecessary leakage and wasted power. Battery powered devices often use rechargeable or secondary cells. Selecting the best battery chemistry and ensuring this can be charged and used safely is important. Adding wireless charging to the mix brings another set of considerations around EMC (electromagnetic compatibility), alignment, tolerances and safety.
Electronics generate heat. High power or high processing requirements generate a lot of heat. Too much heat is bad for electronic components and can cause premature failures. Products which generate too much heat need to have thermal management and cooling strategies in place. This can impact the placement locations of key components, require heatsinking, forced air cooling, liquid cooling, fan trays or speed throttling to ensure the product doesn’t break itself or reset due to overheating.
3. Impact of a product fault or failure on the cost of product development
The intended use of a product has a significant effect on product development costs. Products for entertainment ensure the risk of injury to a user is minimised. Products used for life safety such as life support systems, vehicle safety, fire alarms and those used in explosive atmospheres have a much more stringent set of requirements.
Those that must function under all foreseeable circumstances and not fail need significantly more effort spent on Failure Mode Effects Analysis (FMEA), Requirements, Auditability, Design, Design Controls, and Verification.
4. Compliance and approval requirements
The requirements for compliance can vary significantly. The factors influencing this include the country of sale, whether there is a well-trodden path to compliance using harmonised standards or similar, the risks of injury or worse from a product failure, whether you can “self-certify” or if a third party is required.
Third party testing, or attestation, is required for products which have a life safety implication. This brings additional costs as the product needs to be well tested before submission and the third party test process needs to be closely managed and issues responded to quickly.
5. Size and experience of electronics design consultancy and software development expertise.
The largest and long-time established consultancies charge significantly more than small, one or two-man band “Fred in Shed” type businesses. Mid-sized 10-50 employee consultancies sit in the middle ground such as Ignys. Each have their pro’s and con’s including: risk management, IT security, quality assurance, team qualifications, project management, training, compliance and expertise. Project complexity, appetite for risk, ability to tolerate delays, communication needs, skillset coverage and budget are some of the variables that come into play here. The small and nimble companies could be perfect for a project or they could be overwhelmed with demand or not have a depth of expertise to deliver. Cheaper is not always better although if you’re getting the same thing for less then why pay more? Time to market and therefore to revenue can easily outweigh charge rates.
One man bands – The cost of product development
Charge rates for one or two-man band engineers can be as low as £45 per hour for a reasonable engineer with a laptop or as much as £100 per hour for a very specialised skill. These jobbing engineers often have an old version of a CAD tool and limited test equipment. They make a good living out of being a brain for hire and may work for 3-6 months at a time on a project. By their very nature, a sole engineer can only bring one approach to a project; and sickness, holidays and other absences can disrupt and delay projects significantly. Often that single engineer doesn’t have all of the necessary skills to complete the full project and so will need to learn on the job or deliver parts of the work inefficiently. This can be a route to getting the simpler ends of projects delivered relatively cost effectively. At the end of the job the engineers move onto the next job and so may not be available for future updates or ongoing work.
What do mid-sized consultancies usually charge?
For the more complex, involved or larger projects an established design consultancy with multiple engineers, overlapping skill sets, quality processes, maintained software licences and maintained equipment would be a better fit. These mid-sized consultancies have more overheads for insurance, calibration, equipment maintenance, software licences, premises, accreditations, audits, project management systems, and IT and charge between £65 and £140 per hour. This overlaps the 1–2-man band companies and brings increased delivery confidence, robustness for absences and will be around for follow on work or for the next project. When taking the step from 1–2-man band contract engineers to engaging a consultancy there is often a change in approach.
Considerations for single electronic engineers or contractors
1–2-man band engineers’ slot into your business and temporarily become part of it. This means that the engineers are yours 100% of the time and are under your direct control. Engineering project activity can ebb and flow, there can be dead-time while prototypes are being manufactured or when a finalised design is transitioning into production. Unless you can persuade your contractors to take some holiday at exactly the right time this can become inefficient. Of course you can get them to look at other projects, bugs or problems with a different product line if you can afford the distraction from the critical path project.
Another overlooked aspect of engaging contractors is that, for IT security reasons, they are allocated a company email account. Anyone with a company email account can be asked by senior managers to work on critical tasks. The contractor is often brought into other key projects to help solve them which can bring additional delays to your project. Using an external consultancy can help maintain healthy boundaries and keep delivery focused on the project at hand.
A third consideration here is that most contractors are placed in businesses through an intermediary recruitment company. These companies add a fee to the hourly rate so that a £55 per hour engineer may cost you closer to £65.
What prices do large consultancies charge per hour
The largest and most established consultancy businesses can offer a wider skill sets, greater depth and breadth of experience, multiple locations, exceptional laboratories and equipment, well tested and continually improved processes, accreditations and awards. These can cost £200+ per hour. For extremely complex projects that combine engineering, scientists, business analysists, marketers and more this could be worth the additional investment. For other projects there may be little additional benefits realised other than the prestige.
This article was written by Richard Fletcher MD of Ignys Ltd.
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