Adaptive Engineering, LLC Harvard Case Solution & Analysis

Introduction 

Adaptive Engineering is a professional service firm that builds interactive, highly visual user interfaces customized for each client. The company has occupied a niche market by assisting large firms to increase productivity and become costs efficient. It employs artists as well as software engineers to develop interfaces that are effective and enjoyable when used.

                The customers of this business include any company that uses technology to communicate with a service delivery provider or salesperson or its customers through a website. The customers’ portfolio includes T-Mobile, Dish Network, Accenture, Merrill Lynch and Bank of America. The company sells fixed prices projects normally ranging from $175000-$250000. In 2010, the company’s professional service had revenues of about $4.3 million and EBITDA of 25%. The company has 150 employees.

Problem Statement

Allan has come with new software, Concourse, which has shown exceptional growth since its launch. However, Allan thinks that if sufficient resources are devoted to this software, the business will be able to exploit the software benefits to the maximum. Therefore, he is considering abandoning the already profitable business of current professional services. However, he is worried whether he should take this action for relatively new software.

Case Analysis

Evaluate Adaptive Engineering's "distributed" work model. Is it efficient? How does it impact the everyday execution of the professional service business? What is your estimate of how much money does it saves each year? Hint: There is no cost information in the case to guide you. Use your judgment about the size and cost of a reasonable office in the Greater Boston area.

In the distributed work model, employees work from their homes and communicate with themselves when required. The office does not exist. This system allows employees to work from abroad such as the software engineers who work from India and Siberia. This saves the costs of holding an office and transport of employees. However, there are some drawbacks. The weak Internet connection makes it difficult to communicate with each other. Moreover, disturbance at homes also distract employees. There is no social gathering of employees who do not know each other. This can affect the employees’ productivity adversely. The average rent is assumed to be $48.60/SF and total square feet required for 150 employees are 7500 square feet. The rental costs saved are $364,500/ year (Lincoln Property Company, 2014).

The average Electricity consumption in Boston is assumed to be 630kwh/ monthly. Therefore, the yearly consumption is 7560 kWh. Therefore, the total cost saved is $1701 (7560 multiplied by $0.225)(Electricity Local, n.d.).

The total costs saved could be approximately $372,201 per year. Besides that, rental and electricity costs of $ 6000 have been added for the costs of gasoline and utility piped gas consumption.

2015 Gasoline all types, per gallon Electricity per kilowatt hour Utility(piped) gas per therm
January $2.297 $0.225 $1.384
February $2.308 $0.225 $1.303
March $2.544 $0.226 $1.216
April $2.411 $0.225 $1.217

(Average Energy Prices In Boston-Brockton-Nashua – April 2015, n.d.)

Evaluate the two businesses that Adaptive Engineering has pursued. What are the strengths and weaknesses of each business? Are they related? Is there a benefit from doing both of them together in the same firm? Does the self-funded development of the software make sense? If you were Allan Stern and had decided that you had to pick one of them, which would you pursue?

The professional service business allowed the business to grow rapidly. The revenue of the business grew by 7225% from 2004 to 2010. This business is able to earn EBITDA of 20% of total revenue since it has begun. The business is stAdaptive Engineering, LLC Case Solution
ill profitable and growing. The jobs of approximately 150 employees are dependent on this business. It has been able to capture a reasonable share of the market. It is the business in which the company has a competitive advantage. There was no office for this business to be carried out saving considerable overhead costs.

Despite the above advantage of this business, there are many drawbacks of this business. It has lengthy and complex sales cycle. The uniqueness of this business was such that it requires more than one executive authority to take decision under on client. As coordination is required between different departments at client’s place, the decision making is delayed and the project may take more time than expected. Furthermore, the entire revenue takes considerable time to be received from the customers because a project can take six to nine months to complete. Therefore, considerable receivables can be built up. The time and cost of design phase of each project is high. It is because clients and employees take considerable time to understand the technicalities of the project. Moreover, as every project is unique, therefore a flexible workforce is required to manage it...................

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