The Electronics Cooperative Concept

As the electronics industry ages, the changing circumstances of the larger world cause new pressures to be applied to it and new accommodations arise. The quickly changing economic and social circumstances in our time are driving a new movement within engineering toward open-source thinking. The implications of it can be enormous.

What if some engineers were to do something bold and take all the risk in making their designs openly accessible and free to be used by anyone wanting to manufacture, sell, and support them? This is the key issue for open-source hardware or software. Product design and engineering research and development are all labor-intensive and difficult, requiring high skill levels. How do these skilled people become remunerated for their intensive efforts if they give away their designs? A perusal of the open-source discussion and activity on the Internet shows that open-source efforts are conducted largely on either a hobby basis or as an industry open standard such as the “open-systems software architecture” that Data Translation president Fred Molinari has promoted (Computer Design, AUG 1996, pp. 120-123).

No engineers trying to make a living are giving anything away - or are they? Once a product is introduced into the public domain, it can (most commonly) be reverse engineered. Patents disclose the more interesting design aspects that lead competitors to improve upon them (as intended by Thomas Jefferson) unless they are retained as trade secrets. And trade secrets are hard to keep. Even the century-old family secret of the Coca-cola formula has (so I hear) been disclosed in recent years. Circuits can be hidden in potting compound or by monolithic integration, but chemical solvents and microscopes can reveal their details. We now live in a world where you can run but you can’t hide, so to speak. What is an engineer to do in a world without secrets?

The Open-Source Way

A new strategy is emerging, labeled as open-source. It eschews patents, which are in multiple ways flawed as a social institution, and secrecy is abandoned for openness. The industry then decomposes into two kinds of enterprises: designers and suppliers. Designers supply designs - information - and suppliers supply products to users. Users have recourse not only to suppliers for product support, but also to the websites of the originating companies (the designers) who, in an open-source manner, reveal all that is needed by a user to maintain the designed product, and even to modify its design for user-specific applications. None of this requires licensing or permissions, apart from a general open-source agreement. (Several are available on the Web.) None of it gives government a nexus for interfering with and degrading market activity. The designers, consisting of engineers and technicians, can concentrate on what they do (and like) best, which is design. Suppliers, who are entrepreneurs and business people, do what they like best: manufacture and distribute the products of design. Both support the product in their own ways.

Such a strategy already exists in agriculture. Farmers are like designers in that they supply their output to one or more cooperatives (co-ops) who are the suppliers. They remove from the farmer the burden of distribution and sales so that the sole effort can be the sourcing of food. The co-ops then become the product sources to the rest of the food chain. Co-ops are run by business people who would probably not make good farmers. Farms and co-ops, like design and supply, are two different functions and in agriculture are two different businesses. Yet the analogy is not perfect in that co-ops merely pass along what the farmers produce. In the electronics industry, engineers produce information and suppliers produce tangible products that can be sold.

So how are the engineers paid? They collaborate with suppliers. They can have joint ownership in one or more suppliers, or have a revenue-sharing agreement, or be paid a “license fee” for new design information, which can include more than is otherwise disclosed. This includes board layout files and possibly firmware (μC, ROM, PLD, FPLA) source code. What is made available to users is all the information needed to maintain and even build their own unit(s), including circuit diagrams, custom parts instruction (such as magnetic parts), and firmware object code.

Engineers are also paid by providing ongoing engineering support to both suppliers and users on a fee or other basis. Designs themselves require maintenance and design refinements occur over time, as engineers perfect them through increased understanding of the design and of technical concepts affecting them. Product lifetimes tend to be increased through product evolution, like the VW Beetle was in its long product lifetime. Suppliers wanting to maintain a competitive edge over other suppliers will buy the updated design information before it is generally disclosed. Or more likely, suppliers can subscribe on a retainer basis to updates and ongoing information for the designs they manufacture. Users seeking design assistance in modifying a product also can go to its designers because in this strategy, it is known who the designers of products are. Suppliers and users have access to designers and, like lawyers, this access comes in varying degrees at a price.

In the traditional industry scheme, designers and suppliers are within the same company. As a sole supplier, the company builds and sells the output of its designers who themselves are largely undisclosed to the world outside the company. In the new scheme, the designers become visible to both the public and to suppliers. Instead of a one-to-one correspondence between designers and suppliers, designers can provide their designs and engineering support to multiple suppliers of the same product. Suppliers differentiate themselves in selling the same product on the basis of which geographic regions or technical areas they emphasize in their marketing, price, quality of manufacture, quality of after-sales and pre-sales support, and overall product offering (for one-stop shopping). One supplier might build cheap and sell at a lower price the same product which another company sells for somewhat more but manufactures to higher standards of components and build. Designers can customize their designs for either kind of supplier. Multiple suppliers not only give the market (users) a wider range of choices for purchasing a given design; designers also have a wider range of clients for their designs. A prospective supplier might want to build a product that an existing supplier is making but with some differences. The designer then has another client and more design work.

Similarly, suppliers are free to choose from product designs among multiple designers. This gives a manufacturing and sales company more options, and it also - and this is significant - lowers the barrier to market entry as a supplier. Young entrepreneurs with few resources or capitalization who want to start their own businesses yet who have not connected with a good engineer such as a Howard Vollum or Bill Hewlett (as in the cases of Tektronix and H-P) have such resources in the designers. Because the designs are open-source, they can be used as a basis for additional product development (board layout, for instance). More practically, a prospective entrepreneur can enter into a low-barrier-to-market agreement with designers by offering them returns on the effort in various forms (revenue-sharing, company part-ownership). This benefits designers in that by being visible to the public as an enterprise, entrepreneurs can find them and provide them a clientele of suppliers. Design and supply companies can develop without having to be both, and this lessens the market entry barrier for both kinds of enterprises.

This open-source configuration in industry has differing characteristics from traditional company structure. For one, it results in more and smaller companies. There is less opportunity to become extraordinarily rich for either designers or suppliers in that entry barriers are lower for competing enterprises and more can participate. It is a free-market solution to the problem that socialism or Communism was intended to solve in that predatory or monopolistic capitalism is hindered by it. It is more of an equal-opportunity strategy. The better designers and suppliers will likely be more successful from a financial standpoint. Their situation is analogous to a recording industry in which performers make most of their income from live performances and direct recording sales while record companies are free to copy and distribute any recordings. The actual recording industry is feeling great pressure from the low barrier to entry, and in the developing world, one need only have access to a DVD or CD recorder and player to be in the movie and music distribution business. In the open-source industry, anyone who can manufacture a product from an open-source design is free to sell it.

This openness at first seems precarious to our traditional way of thinking. Yet in actuality, it is inevitable. It is also not as different as it first seems. Anyone now can manufacture existing products without significant patent protection, but must provide the needed resources for engineering, manufacturing, sales, and support. The Chinese are manufacturing measurement instruments such as DSOs and waveform generators, and established companies with a more expensive labor base feel the pressure to collaborate with them. There is not as much product protection from the traditional closed-source strategy as it might seem.

Open-source designers can succeed well in business if they are also vested in successful suppliers, and can possibly become well-rewarded. Yet at the same time, those desiring to enter the electronics industry - both engineers wanting to be independent and entrepreneurs - have a way of finding each other to their mutual benefit. With a lower entry barrier, more market choices become available. Some of them are culled out by a discriminating market while the better designers and suppliers have more chance of success. Traditional reasoning tells a designer to look after his own supplier function to assure its success. (If you want it done right, do it yourself.) Yet the designer can only be a single supplier and this sole effort is less likely to succeed than multiple suppliers who are oriented to the supplier function. The open-source multiple-supplier scheme does not make it easier, overall, to succeed in the electronics business because the market still presents the same demands. What is different is that by separating designer and supplier functions as free-market activities, each has a greater opportunity to succeed in that neither is solely dependent on a single one of the other.

Where to Go From Here

To enter the emerging open-source electronics industry, how does an engineer proceed? An obvious prerequisite is the required engineering skills sufficient to design competitive products. Then it is a matter of finding (or being found through a website by) prospective suppliers. In this early stage of the open-source concept, existing traditional companies interested in new product designs are also prospective clients for designers. A designer website would also invite suppliers for designs. My enterprise, Innovatia (www.innovatia.com) does this by offering “designware” to prospective suppliers. You might think of more innovative ways of marketing your product designs and promoting open-source technology, and I hope you do. Just as a rising tide raises all ships, open-source efforts of multiple suppliers enhances market awareness of multiple-sourced products. Newer product designs and suppliers that have yet to make their mark in the industry benefit from the wider market exposure of both multiple suppliers and designers who lower the “advertising barrier” for all of them.

As the open-market scheme takes hold in industry, traditional companies might split into designer and supplier companies, where some of the traditional advantage is retained by preference agreements between the splitting companies. Yet each company acquires freedom to sell designs to other suppliers or acquire designs from other designers. The present state of the industry is showing some pressure for this to happen, as companies go outside for contract engineering support while also engaging contract manufacturing companies. The novelty is for contract engineers and manufacturers to expand their scope of industry involvement beyond that of traditional company support. Each would expand into enterprises that use their capabilities in whatever way they can and this would include the designer and supplier roles of the open-source scheme.

If product designs are generally appealing and open-sourced in a way that Linux is open-sourced, then the barrier to manufacture - the risk of investment - is lower because no licensing agreement with the designers is required (other than to adhere to the open-source agreement). Contract manufacturers, however, would not generally be interested in taking the risk to manufacture them because their business is one of providing an outsourced function for traditional companies. They can manufacture, but who would do sales and customer support?

Beyond contract manufacturers, there is always a dynamic supply of technical and business people who want to be small-scale entrepreneurs. Vollum and Murdock viewed Tektronix this way in the very early days. The successful entrepreneurs are, as in their case, technically innovative people who manage to adequately perform the other business functions of a traditional company. A less innovative prospective entrepreneur will not have the bright idea and have no direction to go, despite business skills. However, if free designs ready for manufacture exist, and the new entrepreneur thinks they might have market appeal, he can start making them. Anyone can. The barrier to entry - the risk of capitalization - is small.

Designers can realize their return on their efforts by introducing the new product to the market through a supplier with whom they have a profit-sharing kind of an agreement. Once the product is introduced into the marketplace, the documentation for it is released. Competing suppliers can now manufacture it, but the originating supplier has the market edge. The designers are also free to consult with additional suppliers for an agreed compensation. The only practical difference between this scheme and the existing state of affairs is that the competitors do not have to do as much reverse engineering, though more subtle points about the design remain undisclosed despite the availability of circuit diagrams. A substantial disclosure sufficient to allow a user total product ownership of repair and even design modification need not extend so far as to train the competition in the finer points of the design. How far depends on what the designer is willing to reveal. To build user-designer-supplier community support for a technology, at least the H-P-Tek-API level of disclosure is necessary. Microcomputer software - if it is written in something other than C (such as Forth, which remains advantageous for real-time system development), poses a barrier to use by another supplier, though the source code is divulged. Circuit-board layout files similarly pose a format barrier when public-domain board editors are used such as the Protel-derived CircuitMaker and TraxMaker 2000. And FPGA formats (VHDL or Verilog or something else) do too. As products become a more complex mixture of analog and digital, copying by another prospective supplier is still a nontrivial task.

The product supplier must also sell, and the new scheme has a new view of sales. It is no longer a distinct company function but is split between the supplier and the designer. Both participate in making known what is available in their own ways. So is user support, split between designers and suppliers. Both sales and support are augmented by the open-access community of users. The core-four traditional company functions are thus reduced to two and distributed within both of the remaining two. Companies that are either designers or suppliers can concentrate on their respective functions. They also have a lower start-up barrier, both in complexity of operations and in capital risk. Because the barrier for becoming a supplier is reduced, multiple suppliers might offer a product from a free design. If the suppliers are small, then their relationship is synergistic more than competitive. They would be like commercial Linux suppliers and add value in their packaging, accessories, and supplier services such as calibration and repair for those desiring it.

Although there still exist traditional companies that continue the H-P-Tek Way (Audio Precision, Inc., a Tek spinoff, is one), for many products, the separation between designers and users continues to grow. The market is given an alternative with the new scheme, with a user community based on trust between designers and users, and products differentiated in the marketplace by the replacement of predation with a cooperative and synergistic community orientation. The flagship precedent is the community which has grown around Linux. Prospective users of such technology are those attracted to a return to the H-P-Tek Way by designers and suppliers. They want open access to information about the products they buy, and they buy them with a different attitude, of technology-sharing, than in the predatory scheme. The designers initiate a cessation of hostilities by exercising trust in releasing open-source designs with the intent of participation by users in both design refinement and construction. Some will see that and respond in kind to become users. Consequently, the rigid functional boundaries dividing design, supply, and use are reduced through an open sharing activity.

Some characteristics of the open-access scheme are as follows.

·         Open access by suppliers and users is made to detailed product information, so that a user or supplier could refine, improve, correct, or in other ways, modify the design (just as Linux can be modified), and build, repair, or calibrate units of the design. Most will not, but all can.

·         Design optimizes product quality in multiple ways: long product life (decades), adequate reliability, safety, and specification margins, and high performance per cost. Design activity can return to the milieu of H-P-Tek in designing the best product for the user, not the most quickly replaceable.

·         Replaceable components that are multiple-sourced, legacy parts that persist in the marketplace are emphasized in design. Ultra-small IC packages are avoided whenever possible to ease repair and modification of circuits. If a small soldering iron (such as an 18 W Antex or Weller) cannot be used to remove a part, it is too small. Pin pitches below 0.5 mm are too small for most users to handle. Sockets are used when applicable for ease of diagnosis.

·         Minimum use is made of customized or proprietary components. Board layout files are open-access; magnetic parts construction is based on simplified methods requiring no specialized winding equipment, with detailed build instructions. Software is open-access for programming μCs and FPLDs.

·         Designs are modularized to the extent possible so that module mixing and matching increase functional versatility. Because the products are open-sourced, the modules comprising them are also made available from suppliers. The user then has the option of buying a whole working product or subsystems of it to use as “tinker toys”.

·         Mechanical packaging is minimized to maximize access to the circuit-boards for calibration, repair, or modification.

·         Users are a market niche of people who value a total ownership relationship to the technical products they have.

·         Users participate in a user community via a linked chain of Internet websites. As the user community grows, the word about community-driven products spreads, just as Linux spread. Prices can be kept low with adequate supplier margins by not having to pay as much because of distributed engineering and community-driven sales promotion.

·         Suppliers profit by the margins in their product sales.

·         Designers profit by support of the user and supplier community and by participation in the profits of suppliers.

If designs are given away, one might ask, how are the designers compensated for their efforts? In theory, they would be starving, but Linus Torvalds in not starving in Finland. (He is living in Beaverton, Oregon, the hometown of Tektronix.) Has Linus made as much off of Linux as Bill Gates has from Windows? Of course not. Neither is he short of a lifetime of consulting and training requests for designing a single (albeit large) product and giving it away. Designers can, of course, also be suppliers if they choose, or participate in collaboration with a supplier. This might be the preferred route to designer recompense.

In the community technology scheme, nobody becomes very rich but everybody benefits from the positive relationships between designers, suppliers, and users. This synergism has potential that should not be underestimated. Linux now threatens the monopoly operating system, though it did not originate as a competitive product in a traditional company. As a few astute users make design refinements that are posted to the community, designs evolve to highly refined state that can last for a long time. Such product stability increases overall efficiency in that those using stable products need not expend as much in overhead developing their tool-base of such products.

Community-based technology is already here and growing in seminal form. www.redpitaya.com is participating with its generic instrument board. Various microcomputer boards such as the Arduino or Stamp have caught on and have a growing user base. (See www.designspark.com for an example of a website promoting open-access technology, with downloads of open-source hardware and software licenses.) One direction of expansion of instruments is to develop add-on modules for existing popular μCs. The user community for them is a potential, accessible market. In the past, there were user communities for VAX and other minicomputers, for Volkswagen Beetles, and nowadays for Tek and H-P old equipment users and for various microcomputer modules, led by the open-access Arduino.

In effect, what the community scheme does is an extension of the H-P-Tek Way in that it extends participation in product design, construction, and use from designer to supplier and even the user. Linux has benefited immensely by having the world’s largest design support base in its user community. Why not do this for electronics?

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