How Do You Go About Engaging a Design Services Firm?

Once you have decided to explore the possibility of developing a custom integrated circuit for your new product, how do you move forward from there?  If you do not have in house IC design/development experience or expertise the most straightforward choice is to seek out a consultant or design services firm specializing in custom integrated circuit design and development.  In particular when the product is heavy on analog content (i.e. big ‘A’ little ‘d’) this can be the best approach given the specialized knowledge and expertise required in the still-arcane field of analog IC design.

A quick search on Google for ‘custom analog IC design services’ will yield a number of firms both in the search results as well as the associated Adwords advertisements on the page.  You will need to investigate these once you have determined and ranked the criteria you intend to base your decision on.  These criteria could include:

• Location/geography
• Demonstrated experience in the given application space
• Capabilities of the firm
• Flexibility of engagement model
• Resources

Once you have identified a number of potential candidate firms and reviewed the material on their websites, the next step is to contact them for a preliminary discussion in which you can get a good sense of their capabilities and focus.  If you have a preliminary spec or datasheet for your product that can be disclosed without an NDA it would be good to give the firm a chance to review it at this time to provide you with some initial feedback.   This first interaction (be it by phone or email) will also give you a gut check on things such as responsiveness, communication style and general interest level in your project.   When you have identified one or more firms that you feel comfortable with and have indicated that your project is something they feel comfortable with and have a strong interest in working on, it is time to move on to the next steps.

At this point it is standard operating procedure to initiate a mutual NDA with the firm.  This will provide a comfort level on both sides to disclose proprietary details necessary to move the discussion forward.  There are many standard NDA forms available online, or your attorney can draft one.  In general it makes the most sense for you to provide the NDA since at this point you are the primary discloser.  In any event is typical that the larger firm in the transaction will generally provide the boilerplate NDA form to the other.  Once executed, a deeper dive into the technical and business related details can ensue.  Proprietary documentation can now be exchanged and discussed freely. 

Once the services firm has had a chance for their technical staff to review your documentation and requirements, a telecon or face to face meeting between the technical staff of each party is the next step in the process.  In this meeting questions and clarifications can be exchanged in order to insure the best possible understanding of the task at hand between the parties.  In parallel the program and business managers on both sides can discuss the framework of the working relationship including details such as business model, costs, schedule, program management, formal review process, etc. The end goal is to give the design services firm all the information required in order to provide you with a detailed technical, schedule and cost proposal, and at the same time help crystallize your requirements and priorities.

Now the design services firm will go to work.  Developing a detailed technical proposal is typically quite time consuming and represents a significant investment by the firm.  There may be ongoing discussions back and forth in order to iron out any remaining questions and details.  It is critical given the work involved that the proposal properly address all of your requirements and concerns adequately and to that end good communication in this phase is the key.  In general a good proposal will include most or all of the following sections:

• Introduction
• Project Overview
• Development Approach
• Technical Discussion/Tradeoffs
• Detailed Statement of Work
• Schedule Estimate
• Costs
• IP Considerations
• Other Considerations

A strong and detailed proposal will go a long way to help you make the final decision on whether or not it makes sense to move forward with your project.  Additionally, if you entertain proposals from more than one design services firm you can take this opportunity to compare and contrast the proposals and proposed technical approach as well as costs and schedule.  If even after everyone’s best efforts the proposal does not meet the project requirements often a second round clarification is called for as it may be that there has been a miscommunication or misunderstanding of relative project priorities in the first round.

In the end the proposal and especially the statement of work will form the guideline and reference for the project once the go-ahead is given, enabling you and the design services firm to be on the same page.  

In summary, properly engaging with a design services firm is critical to setting up your project to be successfully executed.  These initial phases represent a significant amount of work and communication by both parties but a strong effort in this phase will be a good indicator of how the project itself will proceed.

When Should a Professional Service Provider Consider Exclusive Service Contracts

This morning a friend of mine who runs a small electromechanical design and development service company asked me for my advice on customers who demand exclusivity in their contracts.  In his case he was asked by a prospective customer whether he would grant the customer exclusivity, i.e. to not work for other customers in this particular product area.  My friend asked me whether I had run into this type of request before, either at my current firm, MIE Labs, or previously at ICD, and if I had ever considered accepting this type of restriction.  

I told him yes, and yes.  While in general you should do your best to avoid this type of restriction, there are cases where this is a truly a valid concern of the customer and should be addressed with understanding.  In most cases the concern is in relation to the possibility of a customer’s IP ‘leaking’ to a competitor.  Sometimes the customer believes that they are ‘investing’ in you and therefore want to insure that you will be working for them when they need you and not a direct competitor.  Others are simply concerned about losing your bandwidth.  These are all common concerns among those outsourcing product development tasks.  The first step is always to try to understand the customer’s concerns and see if they can be alleviated short of a contractual agreement (in my experience, the vast majority of my customers over the past 17 years did not in the end need this type of restriction).  If that is not possible, the next step is to limit the scope of the restriction to the greatest extent; if one particular competitor is a concern and they are not currently a customer or seen to be one in the near future, perhaps that specific restriction would be acceptable.  Or if the specific product area can be narrowed to the point that it is unlikely you will see a similar opportunity - that might work.  In either case there should be some valuable consideration in return.

In my case, there were two main instances I can recall where we ended up accepting this type of limitation.  On one occasion, a Master Services Agreement was negotiated with a large semiconductor manufacturer who wanted us to do power management products exclusively for them.  In that instance, the mutual intention was that there would be a steady stream of business that would consume the majority of our staff doing power management designs.  We limited this restriction in our agreement by a) noting a short list of specific competitors the customer was concerned with and b) stipulating that if a certain level of business was not maintained, the restriction would be relaxed.  As it turned out, due to the downturn in 2001 the customer was not able to maintain the prescribed level of business we ended up removing this restriction, although it was a bit of a hassle getting them to first admit that the level of business was below the threshold and not coming back and then get the lawyers to implement modifications to the contract.  The lesson here is to be VERY SPECIFIC and as in all contracts consider well l the situation that you don’t want or expect.

In another case, the customer became a significant investor in our firm in order to secure a certain significant level of our bandwidth for their product developments.  There was not a specific contractual restriction involved however the investor was a Japanese company and made it clear that they would want to vet and approve any potential Japanese competitor that we might want to do business with.  In this case it was not a big problem to accept the restriction as they owned a significant portion of our company and their interests were therefore well aligned with ours.   Also the restriction was in practice not very limiting (they were our only Japanese customer) and they did provide us with a significant stream of work.  As our key investor of course I preferred not to antagonize them.

So in conclusion, do your best to try to understand your customer’s concerns and hopefully avoid this type of restriction in the first place, but if that is not practical, consider exclusivity restrictions, along with all other contract provisions that favor the customer, as a benefit you are providing and should be well compensated for in return.

The Value of Outsourcing in the Case of Analog IC Design and Development

Look around; in the midst of a hard-fought Presidential campaign the perceived horrors of outsourcing seem to be getting the bulk of political advertising dollars, at least from one side of the aisle.  To take the political poison out of the situation, let’s look at domestic outsourcing, in particular the example I want to highlight is one in which I am personally familiar, which is outsourcing of analog integrated circuit (IC) design and development to independent design service providers. For some background, in 1995 I started and ran an analog IC design services firm called Integrated Circuit Designs until 2007, when we were acquired by Texas Instruments as an internal design team and could no longer work with outside customers.  After a few years ‘on the inside’ I have recently started a similar design and development services firm called MIE Labs (www.mielabs.com).  Our charter is to partner with customers in providing circuit design, product development and consultation services in order to enable them to more quickly grow their business.

How would a customer benefit from outsourcing this type of activity?  Well there are many individual situations where a customer would benefit, I will highlight a few of the most common as they relate to my business: 

     1)      Customer whose core competency is in design and development of analog ICs

This is the most straightforward situation, in which the customer outsources design tasks primarily due to the fact that they have more opportunities than their internal staff can handle.  The difficulty in finding and recruiting quality analog IC designers still exists even in this economy, so outsourcing in this situation can make a lot of sense, particularly if the need is a short term one.  The design service provider can take on projects at both ends of the spectrum; where the customer does not have expertise in a particular specialized technology, for example, or on the other end where the service provider can provide turnkey services in doing spins and modifications of existing products in which the customer’s own designers have little interest in taking on.  A good design services provider will work hard to achieve a level of familiarity with the customer’s internal processes so that after a brief learning curve the outside provider looks no different to the customer than their own internal teams. 

2)      Customer whose core competency is in design and development of digital or mixed-signal ICs

In this case the customer is typically designing large systems-on-chip (SoC) with heavy digital/firmware content.  They most likely have a large staff of digital and firmware designers but perhaps do not have sufficient analog talent to address whatever small but critical analog content is needed in their chip.  Prepackaged analog IP is sometimes the answer but it is still not a plug and play situation and in many cases the analog IP must be customized for process and application.  Good analog IC design requires a critical mass of experience and expertise and most companies who are not actively doing it on a consistent basis do not have a strong analog team in place, nor does it make sense to build that team internally.  In this situation, the use of an outsourced analog design services provider is the best approach.

3)      Customer who has no core competency in IC development but needs an IC for their end product

In this case the customer needs to better integrate their end product for size, weight, power or cost reasons but they have no experience or expertise in IC design/development of any flavor.  In this case, the design services provider can provide the knowledge to make rational decisions on whether or not a custom IC makes sense, and if so, how the system should best be partitioned.  The services provider can not only perform the chip design task itself but also provide the specialized program management of both the chip design and the backend development, including interfacing between the customer and wafer fabs, assembly and test providers.

In this article I have tried to show three major situations in which outsourcing is sometimes a very attractive and reasonable alternative to trying to do everything in house.  I have used the example with which I am most familiar, which is analog IC design and development.  For those sensitive to the politics of the situation, or simply concerned that offshoring leads to communications and management nightmares, outsourcing to domestic service providers is a great alternative and should be considered as a matter of course where internal resources are short or do not match your core competencies.