Companies and manufacturers across all industries partake in new product development once at the least through their lifecycle of operations. If conceptualized, planned, developed, and launched strategically, the new product development process can lead to significant growth and success for the company. However, the product development process is neither easy nor short-term. Due to the cost, effort, time, manpower, and skill required through the process, companies may outsource the process.
These outsourcing services can either handle the entire new product development process or take control of a certain part of the manufacturing process. Certain more specific activities, such as software development, or engineering skills, may not be readily procured internally, in which case, outsourcing becomes the most favorable option. For instance, in the automotive industry, some key players outsource up to 75% of the product development of a new vehicle. Outsourcing helps companies reduce costs, and effort, and improve time-to-market substantially. In this article, new product development strategy experts at Infiniti discuss the types, benefits, and challenges of outsourcing.
What is Outsourcing Product Development?
Outsourcing product development is the strategic practice of engaging external vendors to handle the entire lifecycle of product creation, from ideation to deployment. This approach not only allows companies to access specialized skills and expertise that may be lacking in-house but also significantly reduces costs and accelerates time-to-market, essential for staying competitive in today’s fast-paced business environment. Major brands like WhatsApp and Google have successfully leveraged outsourced development to innovate rapidly while maintaining focus on core business functions, showcasing the effectiveness of this model in driving growth and efficiency.
When To Outsource Product Development?
The new product development process is long-drawn and requires highly efficient strategizing to be successful. Through this process, the company must ask a set of crucial questions before deciding, so they may be aware of their choices and decisions. In the case of outsourcing, the question to be asked is, “Who will lead the new product development strategy?” While companies may be equipped in terms of finance, manpower, and skill, handling multiple projects simultaneously can be detrimental to current and developing projects. At this point, choosing to outsource is the best option.
Categories of Outsourcing Product Development
Companies may choose to outsource the entire product development process or a certain set of functions. The outsourcing process can be divided into the following four categories, as per the functions that are provided:
Outsourcing functions such as legal, accounting, purchasing, and administrative jobs fall under this category.
Functions relating to software or technological development are considered under IT outsourcing.
This involves any part of the manufacturing process, be it the entire product, or a certain section of it.
This includes the outsourcing of the entire project, such as outsourcing the whole product development process, to the point that it needs to be launched.
The Benefits of Outsourcing Product Development
Outsourcing is used widely due to the various benefits it offers. When it comes to new product development, these benefits can be crucial to the success of the newly developed product. Five of these benefits are discussed below:
Lower Costs
Outsourcing most often results in quicker, more efficient results due to the dedicated resources and heightened focus, as compared to in-house product development. Additionally, outsourcing services save the cost of hiring temporary or permanent employees for the process of new product development. Many companies outsource to countries with substantially lower labor costs. These various factors combine to reduce costs by a large margin.
Workload Distribution
While in-house permanent employees would be ideal for producing a new product in many cases, the workload may be too high. However, in the case of outsourcing, current employees can focus on the maintenance of existing products, while other professionals focus on new product development. This allows for efficiency and perfection across the board without losing quality due to quantity.
Innovation
As professionals, engineers, and other skilled employees work in the same space over time; their ability to ideate something radically different may be compromised. Outsourcing allows for the addition of other experts in the same field, to view the product, strategy, and development process in a different and unique light. Combined suggestions may lead to a product that is better than the original idea.
Expertise
In certain cases, the expertise required for a process may not be within the skill set of current employees. Guidance on engineering something different or manufacturing a new product type can help successfully deliver a product with the right expertise. With outsourcing, it is possible to acquire expert guidance through the process without investing in a new team of employees solely to develop a new product.
Time Management
Outsourcing service providers have dedicated resources for the product that is being developed. Additionally, one team of employees attempting to maintain current products and developing new ones will increase the time to market. However, outsourcing reduces time-to-market and, in turn, leads to higher profits, faster returns, and proper maintenance of the systems already in place.
Challenges of Outsourcing Product Development
Outsourcing is highly beneficial for the process of new product development. However, there are certain challenges of outsourcing. More particularly, certain details that companies must keep a note of when they choose to outsource. The following are three major challenges of outsourcing:
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Control:
When outsourcing major functions such as manufacturing, it is crucial to ensure that quality is maintained. Clarifying the amount of control the company has over the entire process and being adequately involved in the process to ensure quality control is a major step towards avoiding losses and poor-quality products.
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Communication:
As is the case with all business partnerships, clear communication is exceptionally crucial. Having clear project guidelines and continuous communication throughout the process can help reduce challenges, losses, and time-to-market.
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Resources:
All companies must ensure that they are outsourcing to a provider who has the ideal equipment, skillset, culture, and manpower to provide the best results. As the new product development process is carried out, issues with machinery or expertise can take a toll on the entire process and the company, causing significant losses.
Step-by-Step Process of Outsourcing Product Development
Outsourced product development is a dynamic strategy that empowers businesses to leverage external expertise for designing, developing, and launching software products efficiently. The process typically involves several key steps:
Establish Objectives:
Clearly define your product goals, features, and requirements to guide the selection of an outsourcing partner.
Select the Right Partner:
Research and identify potential outsourcing companies with a proven track record in your industry, ensuring they align with your project needs and cultural values.
Choose a Collaboration Model:
Decide on the most suitable engagement model—whether fixed-price, time and materials or dedicated teams—to match your project's scale and complexity.
Set Communication Guidelines:
Establish clear communication channels and protocols to facilitate seamless interaction between your team and the outsourced partner.
Formalize the Partnership:
Create comprehensive contracts detailing project milestones, deliverables, and ownership rights to protect both parties' interests.
Initiate Development with Oversight:
Begin the development phase while maintaining oversight through regular updates and feedback loops to ensure alignment with project goals.
Quality Assurance and Testing:
Implement rigorous testing protocols at various stages of development to ensure the final product meets quality standards.
Launch and Continuous Support:
Deploy the initial version of your product, gather user feedback for improvements, and ensure ongoing support for maintenance and updates.
This approach not only accelerates time-to-market but also allows companies to tap into global talent pools, reduce costs, and focus on core business functions while experts handle technical complexities.
| Transforming Product Development: A Case Study of Infiniti Research’s Impact |
| Background: In an increasingly competitive landscape, a mid-sized technology firm specializing in software solutions faced challenges in developing innovative products that met market demands. With limited in-house capabilities and a pressing need to accelerate their product development cycle, the company sought external expertise to navigate the complexities of outsourced product development. Recognizing the importance of leveraging market intelligence, they turned to Infiniti Research, a global leader in customized market intelligence and advisory services, founded in 2003. |
| Solution: Infiniti Research employed a comprehensive approach to assist the client in enhancing their product development process: Market Analysis: Conducted extensive research to identify emerging trends and customer preferences within the software industry. This involved analyzing competitor offerings and understanding market gaps. Stakeholder Engagement: Engaged with various stakeholders, including end-users, suppliers, and industry experts, to gather insights that would inform product features and functionalities. Customized Advisory Services: Provided tailored recommendations on product specifications and development strategies that aligned with market needs. This included insights into pricing strategies, potential partnerships, and distribution channels. Risk Mitigation Strategies: Developed frameworks to assess risks associated with new product launches, ensuring that the client could make informed decisions based on reliable data. Ongoing Support: Offered continuous support throughout the product development lifecycle, from initial concept validation to post-launch performance analysis. |
| Results: The collaboration between Infiniti Research and the technology firm yielded significant results: Accelerated Time-to-Market: The client successfully reduced their product development cycle by 30%, enabling them to launch new software solutions ahead of competitors. Enhanced Product Features: By utilizing insights from market research, the client was able to incorporate features that directly addressed customer pain points, leading to increased user satisfaction. Increased Revenue Growth: Post-launch analysis indicated a 25% increase in sales within the first six months of the new product’s release, attributed to better alignment with market demands. Strengthened Market Position: The firm established itself as an innovative player in the software industry, gaining recognition for its responsiveness to customer needs and market trends. Through this strategic partnership, Infiniti Research not only facilitated a smoother outsourced product development process but also empowered the client to thrive in a dynamic marketplace. The case exemplifies how leveraging expert market intelligence can transform challenges into opportunities for growth and success. |
Real-World Examples
| Company | Industry | Outsourced Development Focus | Description |
|---|---|---|---|
| Messaging/Communication | App Development | WhatsApp outsourced its app development to a team in Eastern Europe during its early stages to save costs and access expertise. | |
| Technology | Various Software Solutions | Google frequently utilizes outsourced development to enhance its product offerings and tap into global talent. | |
| Microsoft | Technology | Software Development | Microsoft has engaged in outsourcing for various software projects, allowing them to leverage specialized skills. |
| Slack | Collaboration Tools | App Development | The popular messaging app Slack was developed with the help of outsourced developers, enabling rapid growth and innovation. |
| GitHub | Software Development | Mobile App Development | GitHub used outsourcing to develop its mobile application, enhancing its platform’s accessibility and user experience. |
| Opera | Internet Software | Web Browser Development | Opera has successfully outsourced parts of its browser development, allowing for faster updates and feature enhancements. |
| Skype | Communication | VoIP Technology | Skype utilized outsourced product development to expand its service offerings and improve technology integration. |
These examples illustrate how major international companies leverage outsourced product development to enhance their capabilities, reduce costs, and accelerate time-to-market for their products.
Conclusion
Outsourcing new product development has emerged as a strategic trend for companies aiming to enhance efficiency and competitiveness in today’s fast-paced market. By leveraging external expertise, organizations can access specialized skills, reduce costs, and accelerate time-to-market. This approach allows companies to focus on core competencies while tapping into a global talent pool, fostering innovation, and improving product quality. As businesses face increasing pressure to adapt quickly to changing consumer demands, outsourcing offers a flexible solution that not only meets immediate project needs but also positions companies for sustainable growth and success in the long run.
