Product Design And Development Is Outsourcing's Next Big Thing - InformationWeek

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IT Leadership // IT Strategy
Commentary
1/3/2006
03:05 PM
Paul McDougall
Paul McDougall
Commentary
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Product Design And Development Is Outsourcing's Next Big Thing

Software development, customer service, back office work--the offshoring of these business activities is now pretty much commonplace. So what's "the next big thing" headed overseas? It could well be new product design and development.

Software development, customer service, back office work--the offshoring of these business activities is now pretty much commonplace. So what's "the next big thing" headed overseas? It could well be new product design and development.According to a recent survey of 300 U.S. firms by AMR Research, 25% have outsourced at least some engineering services, while another 40% are considering it. Their reasons were, not surprisingly, primarily motivated by cost. 57% of the companies responding to AMR's survey said cutting labor costs was their main goal, while 47% hoped to cut manufacturing costs.

But, as with most forms of outsourcing, cost cutting is only the most obvious benefit. Almost half of the respondents--45%, to be exact--said they felt that outsourcing product design and development would also help them improve time-to-market. For those companies, getting new offerings on the shelves faster is a priority, and they believe that outsourcing can help them get there.

Who can blame them? In today's 'Net-based, one-to-one, customer intimate economy, market opportunities open and close faster than an open seam into an NFL end zone. Think of an electronics manufacturer that suddenly needs to meet demand for products that can support a hot new audio or video format (which seem to come and go every six months).

The problem is that few companies can afford the luxury of maintaining a full complement of engineers just in case a new product needs to be designed in a hurry. The preferable scenario is to have a team of product designers on call through a third party contract manufacturer. If that contractor is offshore, operating in a low cost country, then so much the better.

Comparative advantages are becoming non-existent in today's world of international eBusiness, so companies--wherever they are--better have a competitive advantage if they hope to thrive. Outsourcing product design and development is just one more arrow in the quiver.

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