Deciding which parts of product development to outsource depends on various factors, including your company’s resources, expertise, and specific project requirements.
Why outsource?
There are 3 biggest reasons companies outsource:
- It’s cheaper: access skilled labour and resources at a lower cost compared to hiring and maintaining in-house teams.
- It’s a non-core business function: outsourcing services like marketing and IT enables companies to concentrate their resources and energy on their core business activities.
- Access to specialized expertise: Outsourcing providers often specialize in specific areas, such as software development or accounting. By outsourcing, you can tap into their specialized knowledge and experience.
Which parts of product development can be outsourced?
Deciding which parts of product development to outsource depends on the nature of your company, its resources, expertise, and specific project requirements.
Outsource those functions that are not core competencies of your business & that are cheaper to do elsewhere than to bring in-house.
If explosive growth is your goal, consider whether outsourcing allows you to scale your product development efforts up quickly. If the answer is no, you may want to take it in-house.
Here are some common areas of product development that are often outsourced:
Market research and validation
Outsourcing market research and validation can help you gather valuable insights into customer needs and preferences, market trends, and competitor analysis.
Prototyping and design
If you lack in-house design capabilities, outsourcing the creation of prototypes, user interface (UI) design, and user experience (UX) design can be beneficial.
NB! If you are a tech company and technology is your business core competency, you might want to consider taking this function in-house.
Software & hardware development
Outsourcing software development is a common practice. You can hire development teams or individual developers to build your product, whether it’s a mobile app, website, or software application.
For hardware-based products, outsourcing tasks like PCB design, electronic component sourcing, and manufacturing can save time and resources.
NB! If you are a tech company and technology is your business core competency, you might want to consider taking this function in-house.
Testing and quality assurance
Quality assurance and testing can be time-consuming. Outsourcing this aspect can help ensure your product is thoroughly tested for bugs and performance issues.
While you can outsource testing, defining the overall testing strategy and managing quality control processes is often more effective when overseen in-house.
Manufacturing and production
If your product requires physical manufacturing, outsourcing the production process to specialized manufacturers can be cost-effective and efficient.
For example, outsourcing chemical blending needs to be done by specialized companies who ensure accuracy, safety, and consistency. Professional chemical mixture experts possess all of the equipment, skills, and knowledge required to mix your chemicals in proportion, creating products that won’t explode accidentally and allow you to focus on other aspects of your business without fearing an explosion in your workspace.
Logistics and supply chain management
Managing the supply chain, including sourcing materials, warehousing, and distribution, can be complex. Outsourcing these logistics aspects can optimize efficiency.
Customer support
Outsourcing customer support, especially for non-core functions like basic inquiries and technical support, can reduce operational overhead.
Marketing and promotion
Outsourcing marketing activities such as content creation, social media management, and digital advertising can help you reach a wider audience effectively.
Which parts of product development are not usually outsourced?
While outsourcing can be a valuable strategy in product development, there are certain parts of the process that are typically considered less suitable for outsourcing due to their critical nature or the need for in-house expertise.
Here are some aspects of product development that are often better handled internally:
Strategic decision-making
High-level strategic decisions, such as product vision, roadmaps, and major pivots, should be made internally. These decisions are closely tied to your company’s mission and long-term goals.
Deciding on the product’s future direction, including feature prioritization, release schedules, and ongoing improvements, is best done by an internal team with a deep understanding of the product’s objectives and market dynamics.
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Core technology and intellectual property (IP)
The core technology or proprietary IP that sets your product apart from competitors should generally be developed and maintained in-house to protect your competitive advantage and control over your product’s features and functionality.
Security and data protection
Security is a paramount concern in today’s digital landscape. Protecting customer data, sensitive information, and your product’s integrity often requires an in-house team dedicated to security measures.
Innovation and R&D
The process of generating new ideas, experimenting with new technologies, and pushing the boundaries of what your product can achieve is typically best handled internally. Outsourcing innovation can lead to a lack of ownership and a potential loss of competitive edge.
Customer relationship management
Building strong relationships with your customers, understanding their needs, and obtaining direct feedback are tasks that should not be outsourced. These interactions are vital for product improvement and customer retention.
Strategic partnerships and alliances
Forming strategic partnerships and alliances with other companies or organizations to enhance your product’s offerings or market reach is typically an internal function, as it requires a deep understanding of your business objectives.
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