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Commentary - Richard Longdon

Globalising R&D whilst protecting IPR

Innovation in software solutions

AVEVA has been leading the development of innovative software solutions for the design of complex, large-scale process and marine facilities since its foundation in the late 1960s. Originally commissioned out of Cambridge University by the government in 1967 to bring the best of emerging computer technology to British industry, it had little choice other than to develop everything it needed as the software industry was so embryonic at the time. Today the business is still seen as an innovator whilst being one of the most financially successful in the sector. To remain at the forefront of innovation, AVEVA is investing nearly 20% of sales in R&D and then has an operating profit of just over 10% of sales.

Keeping our products at the forefront of a developing market has been a challenge as the product set has grown and the complexities of trying to maintain a degree of commonality in core components has multiplied. Tools such as Rational have been introduced and decisions to ‘make or buy’ technology have seen the number of internal components reduced. In order to keep innovating, the core teams are developing strategic features whilst non-core coding, testing and localisation are outsourced. At the same time, a lot more functionality is developed as applications are split between specialist engineering teams and outsourced partners. The latest large-scale outsource contract, for example, has been started in India with a dedicated team hired for a specific project, with the option to take the team on after three years – potentially a ‘try before you buy’ scenario.

Selective outsourcing is only part of the answer

However, outsourcing is only part of the answer as we have learnt at AVEVA during the years that software product development has spread from the original foundation team in Cambridge to encompass several different locations in Europe and beyond. Some of the spread has been planned in order to maximise access to precious skills – other centres have been created through acquisition as part of a planned broadening of the product portfolio. In order to maximise productivity with a diverse set of applications and development centres, new tools and methods have been introduced, including selective outsourcing. Much is written on the benefits of outsourcing to high value centres and such is the competition amongst outsource providers that at least ten unsolicited offers ‘to lower costs’ come in every week. Part of AVEVA’s strategy includes integrating centres in India and Romania into the development programme to deliver on time and protect IPR. For security, no core code or techniques are developed outside the European centres, where protection of IPR is supported by a legal structure.

Increasing production is not always just a case of committing more cash to R&D, but also maximising the return on budgetary spend, both in real terms and by way of putting more back in through tax credits and grants, although often the cost of obtaining the grant outweighs the benefit. Only the most tenacious stand a chance of enhancing their R&D efforts through the support of EU funding. The AVEVA experience has meant working more closely with demanding but rewarding Asian customers, pushing the boundaries based on commercial cost/ benefit reward schemes.

Finding new skills in an old market

In the engineering software business, finding engineers to produce specifications is the most difficult task facing employers in Western Europe. The region once led the world in industries such as shipbuilding that are now dominated by Asian manufacturers who are, ironically, using tools developed in the West. In order to innovate and maintain ownership of the applications market, we will need to keep adding experienced talent to our workforce. An effective way to do this is to establish development centres in locations where the skills are, such as Asia or Eastern Europe.

This introduces new management challenges with respect to export controls and protection of IPR. AVEVA’s experience of partnerships to develop the skill base or tap into local resources has revealed complications and dangers in terms of ownership of IPR. However, with twenty-seven regional sales and support offices, AVEVA is well placed to upgrade its regional offices to carry out in-house R&D.

Managing the balance between cost-effective production, security and multicultural development teams will be a key to AVEVA’s future success – communication is the essential ingredient in effective teams. We are starting to make more use of the latest communication technologies, such as video conferencing and web meetings, but these are only a substitute for continual face-to-face interaction. After all, no one has produced a virtual replacement for the coffee machine around which developers have planned much of the innovation that the UK has become famous for.