Outsourcing Product Development a reality

In today’s world which is becoming flatter and flatter, one has to look for the best resources at the right price and right place –Optimizing Manufacturing.

Captive vs Partnership

Initially select companies decided to capitalize on the benefits of offshoring and opted for setting up their captives. Initially there was thought of an annual savings of 6 – 10% YOY; however reality was very different, most captives have seen a continuous cost increase; unable to find cost advantages in India a number of companies started to move to other countries in Easter Europe and China for both IT work and Design services, these companies also had a similar experience and were not happy with the outcome.

This has paved way to a vendor relationship model for the captives too; which has seen more negative results with the supplier more or less taking over the entire resource base

In the last few years more that 60% of the captives are moving for a partnership model. 

In the New era more and more companies are moving to a partnership model where they work with a single trusted partner who manages the entire extended enterprise chain for the goods to be delivered.

A single vendor does not have all the capabilities starting from design to prototyping and manufacturing. Also, at each stage there are multiple bodies which may be involved during the entire lifecycle of a product which may span from regulatory to trial, etc and they need to be managed in a totally different fashion.
What should one look for in a partner

Even the Tier I are just entering the Product Development space and their focus has traditionally been IT and BPO services.
One should look at a Strategic partnership with a company which can handle all aspect of Product Development and manufacturing.
The most important thing to consider are transparency, the credibility of the partner in terms of delivering similar services, their quality related processes, internal processes, mature program management and change management processes. One should also look at the cultural fit, long term vision and consultative skills.
While the above should be considered one should also look at how cost effective they are, can they help to ramp up production and are they open to help in innovating.

Associations with best practices:

Close working relationship with organizations like IAOP and Duke ORN helps us keep abreast of the latest developments, issues and best practices in the world of outsourcing and
offshoring:
http://www.outsourcingprofessional.org/
https://offshoring.fuqua.duke.edu/community/index.jsp