Outsourcing R+D Services Joaquín Luque, Robert Denda 1, Francisco Pérez Departamento de Tecnología Electrónica Escuela Técnica Superior de Ingeniería Informática Avda. Reina Mercedes, s/n. 41012-Sevilla-SPAIN Phone: +34.95.4552786 Fax: +34.95.455.27.64 Email: jluque@us.es 1 Endesa Ingeniería de Telecomunicaciones I, S.L. (Enditel Endesa) Edificio World Trade Center, Isla de la Cartuja s/n 41092-Sevilla-SPAIN Phone: +34 954 48 82 54 Fax: +34 954 48 82 55 Email: rdenda@enditel.es Subject 3 (Outsourcing of Information and Telecommunication Systems). 1. Introduction New technologies in the IT and Telecommunications sectors evolve at such a high pace that any company in these sectors continuously needs to follow the latest technological advances. This becomes especially true for companies which have to maintain their state among technological leaders in order to survive in a more and more competitive and globalized market. The development of products, systems and services that take full benefit of the latest and most modern technologies is a very complex and intense task that requires the strategic decision of the company to follow up all relevant technological advances and to periodically renew its development and production processes, i.e. to invest in an activity traditionally called Research and Development (R&D). Nevertheless, the high competitiveness and the recent market difficulties force the company management to reduce costs wherever possible and to dedicate the highest amount of human and economic resources possible to the company s productive activities. Even though the general belief is that research and development is necessary to assure medium- and long-term benefits, maintaining an R&D Department under the current market circumstances is considered a high risk, especially since short term benefits often cannot be guaranteed. Maintaining a group of highly specialized engineers which dedicate their labour time at non-productive tasks is, in many cases, considered luxury. However, abandoning all R&D activities can be beneficial on a short term, but a fatal error on a long term. Companies must find formulas via which they can reach the
correct equilibrium between following technological advances with sufficient competence and minimizing investment risks due to these activities. One manner to achieve this ambitious goal is to develop an externalisation strategy for R&D activities towards research groups belonging to universities and research centres. In this article, we describe the main characteristics of this type of externalisation, we present an analysis of the strengths and weaknesses of that form of collaboration and conclude with aspects gained within the collaboration in R&D between Enditel Endesa and the University of Seville. 2. The Spectrum of R&D Activities Even though the term R&D is widely used all over the world, we will start this article with a first introductory classification. By research we mean the systematic performance of intellectual and experimental activities with the main purpose being an increase of the knowledge concerning a certain matter. We can sub-classify the research process into 1) basic research and 2) applied research. Basic research mainly aims at gathering scientific knowledge without necessarily aiming at any practical application. On the other hand, applied research by definition, and from the beginning, has the goal of achieving research results that serve for economic or social purposes. The second term of R&D, development, refers to the activity that aims at progressing and growing economically, socially, culturally or politically in human societies. Thus, development goes one step further than applied research. While applied research ends with the practical use of the generated knowledge, development starts from this generated knowledge and targets at making this knowledge valuable by resolving problems of industrial construction and introducing it to the market. Engineering Research Development Basic Applied Prototype Marketing Demonstration Implementation All of these terms have slightly different notions and we can therefore regard them as a whole spectrum of related types of activities (see Figure 1) from basic research to
activities such as the construction of prototypes or the manufacturing of small demo series. However, companies are not interested in research of all available disciplines. Generating knowledge in fields such as social or legal sciences are, typically, not of our interest. We do not look for general scientific research, but and rather for specific applied technological research. Our goal is not to explain the world, such as it is done by scientific research, but rather transform the world in accordance with newly available technologies (see Figure 2). Science Explain Modify Technology Technological research has some characteristic features, among whose we would like to present the following: Technological research aims at solving problems here and now, i.e., the real problems of the society by which it is supported, i.e., problem of its institutions, its companies, and/or its individual people. It does not matter if the problem is solved simultaneously by others. It also is not sufficient that the problem is solved partially and the remaining parts depend on a new technology that will come at some point of the future. Technological research proposes innovative solutions that are applicable to a specific situation and problem, which at the current moment lacks some specific desirable properties. Technological research targets precise short- and medium-term goals; note however that this does not mean that it is incompatible with the search for basic knowledge and utilities that are useful on a long-term. Technological research has a strong dependence on the institutions that guide the lines of research. Being a type of research that tries to solve specific problems of the society, it is exactly that society that sets research priorities assigning economic resources to the lines of research that are considered of higher importance. This assignment of priorities is set both for companies and public institutions using the definition and execution of scientific and technological policies and the creation of national and international research programs. 3. Characteristics of the collaboration between the University and the Company Technological R&D needed by a company can be tackled in various ways. In particular, we will examine technological research and development performed via collaboration agreements of the company with universities and research centres.
According to our experience, this type of collaboration has a number of strengths and weaknesses, which we will explain in the following. Among the positive aspects of collaborating in R&D activities with a university, we can find: In general, at the University exists a high level of knowledge, with researchers and technicians often being at the front of the state-of-the-art in their corresponding fields of research. The university is a good source where to find future employees with a high level of training. Linking students to R&D projects that are performed in collaboration between the company and the university allows a better and natural selection of qualified personnel. The entire or partial externalisation of R&D activities allows to alleviate the company from the daily pressure for certain future projects that require an intellectual environment far away from commercial activities. Many R&D groups at universities already have an existing infrastructure, consisting of both material and personnel, independently of common projects with a company. For that reason, in many cases, it is possible to start R&D activities in collaboration with the university with only marginal costs. By the means of externalising R&D activities to a university group, economic risks in case of failure are better controlled and quantified, due to the fact that the costs spent on each particular R&D project are fixed in the externalisation contract. In many cases, a mixed group of University and company researchers has better access to regional, national or international research funding. Governments typically favour this type of collaboration in order to assure the transfer of technology between public research organizations and private companies. On the other hand, the collaboration in R&D matters between the university and a company has to overcome certain barriers: Academic and enterprise cultures exhibit certain gaps in some aspects due to their nature. However, this cultural difference can also be fruitful for the collaboration, since both cultures offer different and complementary points of view. Occasionally, we have found differences in the goals of the university and the company. It can happen that for the university priority lies in academic benefits (articles, presentations, PhD theses, etc.) whilst the company s priority lies in the timely achievement of the technical project goals. This difficulty can be saved without problems by negotiating the timely achievement of certain goals with respect to technical aspects, planning, economical issues, etc. Preferably, these aspects are established in a project contract between the university and the company. Another barrier, which sometimes occurs in the relationship with the university, is the administrative difficulty of certain activities (contracts, billing, buying and selling, payment, etc.) These issues can slow down the execution of some projects and require additional administrative resources of the company. However, there exist institutional mechanisms that allow research groups at the university to have the same administrative flexibility
as a company. A good part of the university research groups that already have experience in collaborating with companies have overcome this problem. The specific solution mainly depends on the legislation at each university. 4. Types of Collaboration between the University and the Company The collaboration between the university and the company can have different types, which we will comment in the following: Some types of collaboration cannot be considered R&D activities, even though they might form part of a more general R&D process. Among these types of collaboration, we want to outline the following: Traineeships and Internships. Incorporating university students gives a company, apart from the reduced economic costs, the possibility to perform personnel selection with more exact knowledge about the person. In addition, these employees have already a great knowledge about the company s culture and specific processes and therefore, start with a much higher efficiency from the beginning of their regular contracts. Contracted researchers. The incorporation of researchers through the university allows a company to limit its growth of personnel in business areas of higher risk. In addition, contracting a researcher clearly defines the associated cost to form part of the R&D activities of the company, which can be verified by any fiscal audit, and, as a consequence, important tax savings or funding can be obtained for these activities. Training. This activity is for obvious reasons one of the strengths of the university, since not only the necessary knowledge is available, but also the means and the daily teaching practice of the university professors. Consulting. Consulting activities concerning a technological matter, the knowledge of which is not available at the company, is typically a very good candidate for collaborating with the university. Also, it typically yields an analysis, strategy or technological proposal, which is not commercially biased. R&D projects. These projects involve a longer duration and greater size of the project group when compared with consulting. R&D projects range from small research groups during only a couple of months up to entire research networks for various years. The projects can be turn-key projects, or form part of bigger projects. They can be initiated by the university, the company, or both. Commercial support. On the rightmost border of the R&D spectrum, the university can give certain commercial support to the company, certifying certain products and confirming technical or technological viability. Many clients are interested in products or services that are technologically certified and supported by a university group.
5. Collaboration model University-Company Based on these considerations, the company Enditel, which is the telecommunications engineering filial Endesa (the biggest power company in Spain), has defined a model of collaboration with the University of Seville. This model has proved to be of great mutual benefit (see Figure 3). University Students R+D Kernel In-company Doctors Researchers Subcontractors Enditel, urged by the necessity to incorporate R&D activities, founded a department that aims at such activities. This department, consisting of only a very limited number of employees defines the R&D strategy of the company, specifies R&D projects and supervises their execution. This R&D kernel performs the research management and guarantees that the R&D activities aim at future support for the productive areas. In addition, it provides stability and continuity to the R&D group and gives coherency to the group of persons and institutions participating in that activity. Around that stable R&D kernel, a working group is formed, the size of which can vary depending on the necessities of the company and its financial situation. This working group is formed by university personnel of three types: Professors and doctors that temporarily work (potentially part-time) in the company. Contracted university researchers that are contracted for the execution of certain projects. University students with traineeships who are performing complementary R&D tasks. These two groups, i.e., the R&D kernel and the working group, form the R&D department of the company. However, the R&D activity goes further by outsourcing activities to other groups: Other departments of the own company. It is desirable that some of the R&D activities are performed in collaboration with productive departments that later will rely on the results and commercialise the products and/or services.
Other companies that perform parts of the products or services needed for the execution of a R&D project. The university, contracted to perform project-based training, consulting, project development and commercial support. This model has proved to be very efficient since it allows dynamically and flexibly adjusting the dimension of the R&D department of the company to the fluctuating situation of the market, thereby achieving the equilibrium between the necessary investment in R&D and a limitation of risks. 6. Conclusions According to our analysis, we can clearly deduce that R&D activities are beneficial for a company, especially since they allow to solve problems in a more effective and competitive manner. We believe that R&D activities are needed to successfully attack a more and more globalized market. In addition, a great part of these activities can potentially be funded by regional, national or international funds, which is very attractive from a business point of view. Performing R&D activities in a company has certain risks. These risks can be leveraged by partial or total subcontracting. In this paper, a model with three layers is presented, which has been successfully put into practice with the collaboration between the University of Seville and the company Enditel. This model, based on maintaining a reduced and stable R&D kernel inside the company and externalise the remaining R&D activities has proved to be very useful and capable of coping with the different phases and economical cycles of the company.