Should I Outsource Product Development?

To outsource or not to outsource? It’s a question that arises again and again in small companies. Why? Because technology is evolving rapidly, and many small companies are struggling to fund the fixed cost of a full-time team with the necessary diversity of skills needed to stay competitive.
For years, small companies have been developing products with one or two engineers. In today’s world, this team would be too small to have the necessary expertise to develop anything but the simplest of products. The world is becoming highly specialized, especially in technology.
But all that is beginning to change. Small companies now have myriad choices when it comes to product development services. The choice is no longer IF you outsource, but what to outsource, to whom and how.
To outsource or not to outsource? It’s a question that arises again and again in small companies. Why? Because technology is evolving rapidly, and many small companies are struggling to fund the fixed cost of a full-time team with the necessary diversity of skills needed to stay competitive.
For years, small companies have been developing products with one or two engineers. In today’s world, this team would be too small to have the necessary expertise to develop anything but the simplest of products. The world is becoming highly specialized, especially in technology.
But all that is beginning to change. Small companies now have myriad choices when it comes to product development services. The choice is no longer IF you outsource, but what to outsource, to whom and how.
The RIse of the Expert: Today’s products are becoming more complex. New technologies are being introduced at a faster and faster pace. CAD and simulation software systems are growing in complexity and specialization. Choosing the appropriate technology and systems now requires a team of specialists.
Not only is technology changing at an ever-increasing rate, the environment most companies operate in is changing as well Changes in technology include the current demand is to have all technology connected and through the internet, as well as expectations of user interfaces that are intuitive to use, the move to highly automated manufacturing, and responding to new regulations that are added every year which increase product compliance complexity.
No one person can be an expert, or even proficient, at the processes that must be mastered to be able to develop a technology product in today’s world; thus, the reason for the proliferation of consultants and Professional Services Firms.
This increase in complexity has driven many small companies to outsource product development. Today, the skills required to develop a product are vast and varied. And because many of them are driven by rapidly changing technology, they require a great deal of expertise to keep up with the pace of change. Many small companies don’t want the distraction of keeping knowledgeable of the pace of change so they turn to outsourcing to fill in the gaps, or even take the reins.
Before we dig into this phenomenon and its implications for you, let’s begin with a definition.
Outsourced Product Development Defined: Outsourced product development is the practice of contracting some, or all, of a company’s product development task to other than a W-2 employee. This person, or persons, may or may not work in the customer’s office, and may, or may not work within the same country as the contracting company.
Some common methods of outsourcing are:
Hiring temporary workers to work onsite and within the existing product development management system—usually through an agency.Hiring consultants—typically working out of their home or small office. The consultants are using the contracting company’s procedures and management.Hiring a professional services firm. This is a complete team, with their own management and processes.
The product development team: A typical product development team, whether outsourced or not consists of the following:
Product Manager: Responsible for understanding what the market wants in a product. In small companies, this could be the owner of the company or the management team.Project Manager: Responsible for managing the specialists doing the actual work. They are typically held accountable for budget, timelines and exceeding the product requirements.Technical Specialist: Numerous engineers with various skills sets and abilities necessary to develop the product. These specialists are usually chosen and supervised by the project manager.Support Staff: Numerous technical and administrative staff that support the project manager. Responsibilities include drafting and document control, purchasing, prototyping and testing, etc.
Who Uses Outsourced Product Development, and Why? Outsourced product development is common in companies of all sizes and across all industries, but is especially prevalent in small niche businesses and startups (see: https://finishlinepds.com/outsourcing-strategy-and-company-type)
There are many reasons firms outsource some or all of their product engineering. Here are a few of the most common situations:
They want to increase innovation and bring in solutions from other industries (see: https://finishlinepds.com/innovation)They need expertise, but can’t justify the fixed cost of a full-time engineer or project managerThey want to focus management’s attention on their core[NBS1] (see: https://finishlinepds.com/what-is-core-to-your-business)They want to reduce product development cost through the use of reference designs (see: https://finishlinepds.com/reducing-cost)To improve time to market, reduce ramp up time, keep the runway long, and improve the ability to pivot (see: https://finishlinepds.com/why-product-development-is-different-in-)
Regards,
Steve Owens – CTO Finish Line PDS A Better Way for Small Companies to Develop Products
Steve.Owens@FinishLinePDS.com
Ph: 603 880 8484
94 River Rd | Hudson, NH | 03051 Click for Product Development White Papers
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