Recently, outsource product development has caught the attention of the business world. Mostly, enterprises opt for outsourced product development for managing costs, boosting the bottom line, and saving time for core activities. The reasons for choosing outsourcing are many, but the essential question is -When does it make sense?
Here are some reasons why outsourcing product development makes the most sense:
A need for expertise that a company lacks due to the need for full time involvement.
Requirement for resources, unavailable at the company, for completion of all the required work.
To keep up internal teams to do some or all of the development projects.
A desire to include standard practices or any fresh approach in the product development processes.
Ease of methods, protocols, and resources for communicating and managing the outsourcing firm.
Tools, resources, and plans for gaining, storing, and using knowledge transfer.
Reasons for outsourcing product development?
Outsourcing product development is mainly done to acquire expertise that is not currently available within the company. It is an excellent way to fill the void for expertise.
Yet, one of the critical factors that lead to the successful implementation of outsourced product development is assurance of protection of all proprietary information. This should be arranged at the earliest or just before the onset of the project along with some contract.
Building Additional Resources:Another reason for outsourcing product development is to supplement the available number of development teams for completion of projects. In most cases, firms prefer to staff below their total development capabilities to lower costs and risk. By outsourcing they escape the possible burden of repetitive layoffs and hiring.
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.
Expansion or augmentation of resources are common reasons for outsourcing. Sometimes, they can also act as a compelling reason for firms to miss out on outsourcing. . Ineffective cost benefit analysis and an inability to measure internal development costs often leads to conclude that the project can be done internally for less. Inevitably, the internal teams get pressurized and overburdened that lead to delayed and ineffectual product development.
Minimizing Development Costs:Outsourcing can be seen to be a better and cost-effective measure, taking into consideration all costs involved in maintaining the necessary capabilities within a company. This includes:
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.
Additionally, organizations with internal product development resources choosing to outsource product development have the following benefits :
Gaining new perspective & process
Acquiring quality system reviews, and
Gaining industry standard practices
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.