By Michael Gurney
Concept Systems is a systems integration firm specializing in custom automation solutions for manufacturing customers. Our areas of expertise include PLC/DCS/HMI systems, motion control/CNC/robotics, vision inspection/laser scanning and PC/database applications.
We leverage our expertise across multiple industries including wood products, converting, pulp and paper, aerospace, food processing, metals and mining and other industries. We work directly with manufacturers and machine builders to improve their automation systems.
Our main service is delivering custom automation systems as fixed-price custom projects, but we also look for opportunities to “productize” these custom projects. Knowing the technology, industry, and process puts Concept in an excellent position to identify these product opportunities.
When a manufacturer or a machine builder has a problem that needs to be solved, they often contact us to develop a solution. This was the case with BoardHound, our latest product. BoardHound is a lumber tracking system that tracks individual boards through sawmill/planermill operations.
While we actively seek out product opportunities, our main business is providing custom solutions. Custom solutions expose us to different technologies, industries, processes and problems. This serves as a great exploratory mechanism for identifying product opportunities.
Concept sees several benefits in providing custom solutions. It allows us to be involved in multiple industries, avoiding the market cycle of any one industry. The variety of custom solutions is another benefit, not just from a technology standpoint, but from an industry and process standpoint. This variety keeps our engineers invigorated as it is a constant challenge to stay on top of the technologies and their applications.
One day an engineer might be working on a multi-axis motion application at an airplane manufacturer, and the next day that same engineer could be integrating a vision inspection system for an apple packer.
The disadvantages to custom solutions relative to products are in resource management and risk. Custom solutions are delivered to our clients as individual projects, and resource management across multiple projects is a challenge. Timing the delivery of each project and properly matching resources with projects can be particularly difficult.
But the biggest challenge of custom solutions is managing risk. We consider every aspect of the project before establishing a price and beginning actual execution, but there often are hidden factors that can absorb engineering time and funds. The art of the system integration in particular and the custom solution business in general is being able to account for all these factors while still offering the customer a competitive price.
Products offer different benefits than custom solutions do. Margins are higher because of the unique benefits that our products deliver to our customers. We also find product revenue streams to be more consistent and predictable.
Products require less recurring engineering and less design time and therefore cost less to develop. Risk also is less because the price of the product is known with a high degree of certainty before the sale is made.
With respect to service, custom solutions usually have one or two engineers who know the system intimately and are suited to support that system. With products, there is opportunity to get more internal resources involved and build a larger support base.
Concept Systems will continue to develop products in addition to delivering custom solutions because we feel strongly that having a good mix of custom solutions and products is key to a balanced company.
Michael Gurney is executive director at Concept Systems. Learn more about the company at conceptsystemsinc.com
Read Dan Hebert's May Column, Products vs Services, on how system integrators get most of their revenue from services, but many develop and sell products as discrete and somewhat standard items.