Outsourcing product development


With the current economic conditions and the resulting squeeze in profit margins outsourcing non-essential business processes is becoming more popular. This article concentrates on the reasons, advantages and pitfalls of outsourcing product development with an emphasis on technology products.


Some companies prefer to concentrate solely on their core expertise and use external resources to develop the non-core parts of their product. A typical example is one of our customers who needed a piece of diagnostic hardware for the chemical process that they had developed but had no in-house expertise in developing the necessary electronic hardware. The fact that little expertise is gained in-house for developing further the non-core parts of the product is a potential disadvantage of this approach.


Bringing in an external development company is advantageous for large scale designs that a company simply cannot handle because of the design's complexity and the manpower required to realise the design. Rather than take on extra employees for the design the company can utilise an external design house to develop either the entire product or parts of it. A disadvantage of developing parts of a design externally is the time required to integrate the externally developed parts.


Product design in a developing country will cost less than one in a developed country such as within Europe or the USA. However the extra management required for outsourced development can reduce these savings, sometimes substantially. Time zone differences also make communication difficult due to the small window during which teams scattered across the globe are all available. Product developers in developed countries may be more expensive but they do have the advantage of locality and being more able to have face-to-face meetings resulting in less issues managing the development process and resulting in a faster development cycle.


Outsourcing product development correctly can reduce the overall product development cost, reduce it's time to market and allow features that otherwise could not be developed by a companies development team.