Finding a Better Way
Arshon Technology is finding a better way – both through the development of next generation solutions and a clever new business model.
Before launching Arshon Technology, Mazi Hosseini, M.A.Sci., P.Eng., had a good job with one of the world’s top engineering companies – but he wanted more than security and a retirement account. He had a vision to start his own company and made the leap from employee to entrepreneur. Now, fifteen years later, the Ontario-based company is not only a successful engineering firm; it is establishing a new business model for the industry.
Arshon Technology has grown to become one of the most active consulting and design firms in the United States and Canada. The team delivers complete end-to-end electronic design and manufacturing services across a wide range of industries around the world, from industrial applications and high-tech startups to consumer electronics. The company actually partners with customers to share the risk – and the profits – of development and manufacturing in a unique take on the traditional engineer-for-hire business.
When Hosseini launched his company, he assumed it would take the traditional path of a standard engineering consulting firm. “The first idea for Arshon Technology was to be a consulting firm to design products for others,” he recalls. “And the first two or three years went very well.” The company grew to 30 employees and took on a large number of projects. But, despite the success, complications arose and Hosseini sensed there could be a better way of doing things. Contracts came and went at unexpected intervals and cash flow was unpredictable. Then the Great Recession of 2008 hit, exposing the company’s vulnerabilities even further. “Some big projects [had] to be cancelled or put on hold,” Hosseini remembers. “Payment didn’t come through and things like that. So I basically learned a lesson to be careful about the future and sustainability of the business.”
Hosseini switched gears and added manufacturing to the company’s services. “That put us in a good financial position to be a company to invest into,” he says. Plenty of customers hired Arshon Technology to design and manufacture their product, but a new problem developed. As soon as the team had created a solution for the customer, that customer all too often pulled out of the relationship and went to a lower cost manufacturer. This meant Arshon Technology lost access to a product’s revenue stream as soon as it became lucrative. “They start to pressure you and they start to negotiate and sometimes they just go away,” Hosseini explains. “They go to China or South Korea or Vietnam or someplace else and they produce it over there. And that was really hurting us because we spent a lot of time to really get this product [to become] a reality. We produced it, we fixed the bugs and issues and everything. And now we run into an issue that the customer really doesn’t want us to produce because we are $2.00 more expensive than someone in South Korea.”
The team put their heads together and developed a creative and effective solution. Rather than be a brain-for-rent and manufacturer with a limited role, the team decided to take on projects that created a partnership with other companies and gave Arshon Technology legal rights to the design and manufacturing. “It is much more secure and much more sustainable business as we go forward,” Hosseini says. “I made the best decision in my life.”
Arshon Technology had to sacrifice some projects and customers, but recognized that the gains outweighed the losses. “You have to say no to a lot of opportunities because you have a long-term goal,” Hosseini says. “The number of projects dropped but the value of each project that we have significantly increased.”
Now, each project is carefully vetted to ensure it will yield long-term profitability for all involved. “If you come to me and say, ‘I have an idea,’ or ‘I have a product I’d like to manufacture,’ I tell you, ‘okay tell me your business plan, how many do you want to produce, what is your end product cost, who are your customers?’” The team looks for opportunities that are low risk – a solid company with a tried and true customer base. Ideally, “they have their own sales channels, they have their reputation, they are a very good company,” Hosseini says. “So that risk is very minimal.”
Arshon Technology actually shares the risk with the customer – now considered a partner – by taking on a lot of the financial burden. “We help them lower initial cost. That means I’m investing into their product; I’m taking more risk off their shoulder.” In return, the company also reaps some of the rewards, assuming the risk pays off. “You have to give me the right of production for the next seven years or for the lifetime of this product or I have to be sole manufacturer of this product,” Hosseini says. “Legally you are bound to us.”
The team walks customers through the process to ensure a fair transaction from beginning to end. “Typically they say, ‘how can you guarantee the price will not go up?’ Then we provide them with a very transparent model of business.” Customers appreciate the clarity, saving money upfront and spreading the risk. They also appreciate having a partner to guide them through all the design and manufacturing steps. “After a couple of times dealing like this I found that the discount is not really the most prominent thing,” says Hosseini. “The peace of mind I’m giving them is more attractive.” And, the Arshon team enjoys their own peace of mind knowing they have a solid roster of reliable, long-term projects.
The company takes on a range of projects involving leading edge technology. One area of specialization is the Internet of Things (IoT). To put it simply, IoT means an object “would be controlled and monitored through the Internet,” Hosseini explains. The technology has an endless variety of options to make our everyday lives easier. For example, a homeowner could check the temperature of her house through her smartphone and adjust the air conditioning while out of town. Or, a tired employee could use his smartphone to switch on his coffee maker as he leaves the office so he arrives home to a fresh cup of Joe.
IoT also has a breadth of industrial uses. “There are tons of applications,” Hosseini says. For instance, the company is developing sensors that pick up machine vibrations and notify technicians wirelessly if there is a change in the machinery. This nonstop monitoring picks up any problem, from a damaged ball bearing to an overheated engine, and sends out an alert right away. “It can notify the owner and tell them exactly what location, what problem exists,” Hosseini says. “It predicts problems before they get catastrophic and before they get too expensive to solve or before they stop a production line. It is very valuable.”
Remote monitoring also provides convenience and cost savings because personnel no longer have to check on machinery in person as a preventive measure. “The technician doesn’t go there because they see everything on their phone. They don’t need to travel to the site.”
One of the team’s newest IoT developments is a wireless gateway the size of a thumb drive that enables devices to communicate with the cloud. Arshon Technology plans to provide the solution at the production cost in order to attract customers who will then pay ongoing fees rather than just the one-time price of a product. “The model of business would be very low-cost hardware, but to use it you have to pay for the cloud,” Hosseini explains. And that’s even better [than high-cost hardware], because it’s a very sustainable income for us.”
The team is excited to keep their focus on IoT as they continue to move forward. “My first and most important goal is to become one of the top companies in IoT and provide hardware/software solutions for the next five years,” says Hosseini. That goal is well within reach.
“The need is there,” he points out. And Arshon Technology has the track record to prove the team is well-equipped to take on that need and deliver a reliable, reasonably priced solution.