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A system to assess component investment options in design services projects

IP.com Disclosure Number: IPCOM000012730D
Original Publication Date: 2003-May-22
Included in the Prior Art Database: 2003-May-22
Document File: 5 page(s) / 194K

Publishing Venue



Engineering design services businesses help customers raise the performance of their engineering processes to a given level, and take a portion of the achieved value beyond that level. Deep technology expertise can economic value to customers in 3 ways: (a) creating new revenue streams for customers, (b) reducing their costs and expenses, or (c) accelerating their revenue streams. Being able to use internally developed technology is critical for competitive advantage in this business. Unfortunately, opportunities to reuse an internal component for a service engagement (e.g., the design of a system on a chip), are often unused, because, although they provide clear value to the engagement, they may directly harm the business performance of one or more internal organizations involved. It is therefore crucial to provide assessment tools to help partners decide to participate in a reuse transaction when the transaction provides value to the corporation as a whole. This invention addresses this challenge by (a) ensuring that all parties can quickly assess the impact of a reuse opportunity on their business performance, and (b) encouraging high-value reuse opportunities by recommending an appropriate compensation or inducement to the parties involved. The invention provides a systematic and automatable method to evaluate component investment options in design services engagements.

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A system to assess component investment options in design services projects

In this method, a (logically, but not necessarilly physically) central tool helps coordinate component-related transactions by generating and routing critical information. Figure 1 illustrates how the tool, that embodies the method in this invention, helps the various partners involved in a component transaction make a decision to engage in the transaction.

For a given component that may be utilized in an engagement, the tool can automatically compute the following items:

Component price: personnel or funds compensation from the design team that may use the component for using a component that it has not developed. This compensation can be used to (partially) support the extra effort that will be required from the component designers ("consult" cost), plus the overhead incurred by the team that maintains the tool and coordinates component transactions. A buyer inducementmay be included, since a zero return on investment may not be enough to provide an incentive. In that case, price may become a smaller number.


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Seller inducement: compensation that the organization that owns the design team in charge of the component receives. It may be a portion of the component price. It may cover the extra effort in designing the component for reuse, plus the effort involved in consulting with the user of the component. For the inducement to be effective, it must be larger than the net present value of these extra expenses. If multiple uses for the component are known, then the series of inducements will be added. (The inducement could also be proportional to the customer value for the component, in terms of its global impact on final design performance and functionality. The tool can be connected to business interface systems to ensure that estimated value is proportional to real external customer value when applicable.) The following 3 items are also returned. They have the (price - cost) form but can take the traditional investment return form by dividing them by the cost portion and calculating the net present value of their terms:

   Buyer Investment Return: scratch cost(estimated cost of development from scratch)minus wrap cost (cost of adapting the component to incorporate in design) minus component price.

   Seller Investment Return: seller inducement minus estimated cost of design for reuse and component user consulting cost. Multiple transactions can be added if the information can be estimated or if a multiple-partner transaction is possible.

   Corporation Investment Return: addition of all cost savings (and extra revenue, if any) minus all extra expenses, versus the situation where no transaction happens.

The results returned satisfy the following constraints:

The return for the buyer is non-negative (assumes positive inducement). The return for the seller is non-negative (assumes inducement). The...