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Software Companies as Hardware Companies: Challenge 2: Testing and Quality Assurance


 As part of my ongoing series on the challenges software companies face when they choose to become hardware companies (you can read parts 1 and 2), this post will focus on hardware testing and quality assurance.

It remains true that today, depending on the industry, as many as 80% of software companies still build their own hardware. The reasons for this include everything from a desire to keep costs down to attempting to mitigate integration hassles.

In reality, building hardware in house is often expensive, frustrating and fraught with the potential for delays and lost revenue.

When software companies want to get their solutions to customers, they must often buy hardware.

They can choose to procure their hardware in one of three ways:

  1. Build their own– Procure all components individually and assemble, test and integrate software with their own resources.
  2. Whitebox – Purchase semi-standard hardware from a whiteboxmanufacturer and do integration in house or contract with an integrator.
  3. Tier-one manufacturer – Engage a tier-one manufacturer with standards-based (x86) hardwareand comprehensive services and support.

Build Your Own

Sourcing all your own components means you have complete control over every aspect of your hardware and can insure it will work seamlessly with your software.

Right? Perhaps. But, what’s more likely is that you’ll encounter procurement and parts-availability challenges as you order myriad components from multiple vendors with disparate quality standards.

Even if all your components arrive in a timely manner and assembly and integration go well, you’re left with a testing schedule that leaves little time to develop new software because so many cycles are required. And, with limited support resources, ensuring in-field uptime is difficult, if not impossible.


Whitebox companies develop inexpensive hardware with some customization options that still leverages a semi-standard platform. This allows for companies to order their “boxes” assembled and ready for software integration.

But software companies, while not having to assemble their own components, must still test extensively upon receipt of whitebox units, after software integration and as an end-user solution. Quality is also wildly disparate from one manufacturer to the next and in-field failures remain high.

For this option to work well, software companies must make considerable investments in inventory management and quality control measures. This is due to the added complexity for companies who build solutions for end users. They must place orders and manage stock and replacement parts over the life of the product to ensure that the same hardware is available to customers as they need it.

Without strong inventory management, orders can go unfulfilled.

Tier-One Manufacturers

According to research firm IDC, the purchase price of the hardware and software was found to be only 15% of the total cost of owning the asset. Management, direct support and hidden user support accounted for 85% of the total cost over the useful life of the asset.

And that brings us to our final choice for software companies. They can choose to work with a tier-one hardware manufacturer and even outsource every aspect of their design, manufacturing, supply chain and end-user support.

While this option accounts for a small segment of the conversation, it yields the highest quality and fewest testing cycles. The result is decreased total costs and risk of failure.

From a quality perspective, customers reap the benefits of standard platforms that are built the same way every time…even for custom solutions. Quality does not vary and all components come from a single vendor.

This means fewer testing cycles when units arrive, after integration and when the solution is fully baked.

Specifically, tier-one manufacturers provide the following testing and quality safeguards:

  • Stringent limitations on the number of failures.
  • First-article inspection
  • On-going reliability testing
  • On-going defective parts per million tests
  • New product readiness review audits

Finally, inventory management is not required because orders are filled as they are placed and lifecycles closely managed to ensure no order goes unfulfilled because hardware was not available.

For many software companies, becoming a hardware company seems like a logical leap. But, with so much time spent on hardware procurement, testing and integration, an imbalance is created where execution and management get prioritized more highly than software development. This leads to decreased competitive advantage because there’s less time for innovation.

While all Dell customers benefit from our testing and quality standards, OEM customer CyberArk saw an 80% decrease in failure rates when they moved away from building their own hardware. You can read their case study here.

Are you building your own hardware?

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