Economic considerations of embedded developments have been largely absent by corporate senior managers, CEOs and CFOs. They are certainly not alone. The design process is not particularly transparent to those who monitor costs and to those who make upfront decisions committing the development to one or another tool sets and design processes.
In the majority of cases, the investment of the tool sets used is the dominant factor. The down-side risk considerations are seldom integrated into the decision process. So in order to gain a more accurate financial perspective, senior managers must take into consideration the following direct costs, associative costs and extrinsic cost considerations:
On time shipment of product -- saves on engineering costs
Maintaining the expected performance, systems functionality and features and schedule of the development
Controlling development expenses
Achieving market windows of opportunity
Cost of in-field support
In addition, the financial officer must also take into consideration additional "risk factors", including:
Cost of maintenance (depends on the complexity of the design and the management of the design process)
Cost of upgrading software to meet changes in underlying hardware (requires upgrading legacy software)
Cost of recalls (cost includes actual cost of retrieving products, lost revenue, cost
of reimbursement and the loss of reputation)
Cost of providing code reuse (can save enormously on cost of development for system/product upgrades)
Cost of removing product features (failure to adequately meet pre-design expectations)
Cost of being late to market (depending on application, can result in the loss of
30%-90% of potential market - example would be consumer electronic products)
These risk-related costs can reach orders-of-magnitude greater than the upfront cost of development tools and the direct cost of development.
Bringing these considerations back into the broader embedded world, this paper is aimed at helping senior management address its product return on investment in a manner that can be effectively applied to their everyday management practices. In this report, EMF presents a methodology for calculating the ROI for a development based on the direct cost of development, associative costs, extrinsic costs and a process for estimating risk. This report includes a telecom infrastructure development example comparing the ROI for developments using Model Driven Development (MDD) and those not using MDD.
Download this analyst report to learn more.
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