A Framework for Embedded Software Sourcing: Another Strategic Sourcing in the Electronics Industry

With the digitization of electronics products and the enhancement in hardware performance, software is starting to play a key role in product development. First, the means for realizing functions has been changing from that of using dedicated hardware to installing embedded software on it. Second, the ratio of software development cost in product development is on the rise. Furthermore, as Horizontal Specialization structure has progressed to enhance the efficiency of product development and production, the outsourcing of its software that make up the product is becoming increasingly more important. These trends indicate that today, the securing of embedded software development capability is the key factor which determines the company's ability to develop products. However, most of the discussions in literature up till now have been on hardware sourcing; there have been fewer discussions on embedded software sourcing. In consideration of the product development trend toward emphasis on embedded software, discussions for embedded software sourcing must become more widespread. This paper considers to what extent the knowledge in hardware sourcing thus far accumulated can be applied to this important topic, embedded software sourcing, and suggests a practical framework.