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Outsource Product Development

Outsource product development has caught the imagination of the entire business world. Outsourcing non-core activities to gain economic advantage has now become an essential constituent of any winning business stratagem. Sometimes, an enterprise opts for outsourced product development to manage costs, boost bottom line and save time for core activities. Some strategic purposes such as dispense with some centers located at critical geographical regions have bearing on the option for outsource product development.

Moreover, product development also involves analyzing competitors, defining product or technology road maps, planning early releases, testing through different approaches, targeting industry trends, spotting trends in technology usage and acceptance, pricing, marketing and promotion, finding add-on features etc.

Following are the reasons to outsource product development

Cost minimization for development
One very pertinent reason to outsourcing is to minimize costs involved in the development of products. Outsourcing seems to be a better and cost-effective measure, if you take into consideration all costs involved in maintaining the necessary capabilities within your company, which include:

  • Employee costs such as salary, taxes, benefits, etc.
  • Overhead expenditure on office space, desks, computer, training, software and hardware tools, etc.
  • Supporting costs on information systems, management, human resources, payroll, etc.
  • Risk costs such as downsizing costs including severance pay, legal support, etc.

In addition, organizations having internal product development resources that choose to outsource product development projects can have the following benefits of outsourcing:

  • Gaining new perspective & process
  • Acquiring quality system reviews, and
  • Gaining industry standard practices

Most would agree that firms that don't usually outsource product development should periodically do so to know how they could improve the results of their internal development teams. To gain the maximum benefit, the firm outsourcing the development should have systems in place to imbibe within the lessons-learned and to integrate them into its systems where appropriate.

Acquiring expertise
One of the most plausible and successful reasons to outsource product development is to acquire expertise not currently available within the company. This lack of expertise could be because of a specific, non-core activity within the company, or it could be due to sudden rise in demand that exceeds the company's existing capability.

Outsourcing product development is an excellent way to plug the need for expertise. However, a critical factor for successful implementation of outsourced product development is to ensure protection of all proprietary information, which should be arranged at the earliest or just before the onset of the project with some sort of contract.

Building additional resources
One very obvious reason to outsource is to supplement the number of development teams available to complete projects. Actually, in most of the cases firms prefer to staff below their total development capabilities in order to lower costs and risk, and with outsourcing they escape the possible burden of repetitive layoffs and hiring sprees. This approach to outsourcing, or resource expansion, works well when the company outsourcing the project understands the capabilities required to effectively outsource a development project.
These capabilities include:

  • Identifying the best projects to outsource
  • Managing the outsourcing relationship
  • Identifying the project deliverables

Bottom line
Thus, it certainly makes business sense to outsource either complete or a part of product development process, which helps organizations build near-term capability, meet increased resource needs, reduce costs, and bring a new development project perspective.

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  1. avatar
    Alin Gradinaru says
    03 Jan 14, 7:11am

    We outsourced 2 projects with 2 different companies and the experience is very bad. It is so bad that we want to take over the projects and bring them inside. The response time for every little problem is very long, they tend to charge you even when is their bug. They use developers from other countries like China or India in order to pay less, but this causes a big problem with the hours difference. Also, they change the developers pretty often, so you have to explain over and over the same problem. Regarding the expertise I disagree again, they are not that brilliant to give you good advices, I personally help them to solve issues, they never came with any expertise. In the end the costs for outsourcing are, in our case, bigger than the salaries, taxes or benefits for an inside developer and the expertise was zero with outsourcing.

    (reply)

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