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Investing in Product Engineering - Increase Revenue and Decrease Cost

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LSH 25.03.05

This IDC Perspective explores the correlation between the cost of R&D, cost of goods sold, and revenue growth for almost 1,000 discrete product manufacturers across five industries. A strong correlation has been identified where higher engineering costs results in lower production costs (higher gross profits) and higher revenue growth. While the precise nature of this cause-effect relationship is beyond the scope of this document, there is enough evidence to provide specific recommendations for technology customers, vendors, and consultants."Investing in engineering and R&D isn't just a cost, it's a strategic lever for financial success and market competitiveness. As manufacturers face increased competition and production costs escalate, it is important for them to invest in engineering and R&D, with an eye toward driving both revenue and profits," said John Snow, research director, Product Innovation Strategies at IDC.

Executive Snapshot

Situation Overview

  • Product Success in a Volatile Economy
    • How Should the R&D Budget Be Invested?
    • Looking at the Data: Higher Engineering Budgets = Lower Production Cost
    • Looking at the Data: Higher Engineering Budgets = Higher Revenue Growth
    • The Power of Engineering to Reduce COGS - Tesla Example

Advice for the Technology Buyer

  • Technology Imperatives for the Engineering/R&D Budget
  • For Technology Vendors, Consultants, and Integrators

Learn More

  • Related Research
  • Methodology
    • Income Statement Data
  • Appendix: Comparing Five Industries' Revenue, %CR&D, %COGS, and Growth Rates Across a Six-Year Span
  • Synopsis
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