Outsourcing product development

The future of a product-focused company largely depends on the ability of its marketing division to strategically plan and more importantly implement a product release.

The volatile nature of high-tech marketing perhaps best exemplifies the challenges. The enormous task of building products better and faster to keep up with rapid changes in technology and market demand for innovative features will certainly see companies failing to traverse the chasm between growth phase and maturity phase. This particular challenge has forced many product-focused companies to opt for an outsourced product development team (OPD) with expertise in building products. The implausible combination of technology, expertise, flexibility and costing the OPD offers becomes an alluring proposition for most software product companies. This phenomenon is certainly not new. The pharmaceuticals, automobiles, and consumer electronics industries are replete with outsourcing trends that are so complete. BMW outsources the entire product development and manufacturing to Steyr - Daimler Puch Fahrzeugtechnik (SFT). SFT also undertakes manufacturing for Daimler Chrysler in Europe. There is no reason why this manufacturing trend cannot be repeated in software product development.

Objective

With intense competition for mind and market share, product companies are under enormous pressure from all quarters - sustaining growth, operating margins and retaining customers. More importantly, the global market of today is witnessing a paradigm shift in competition itself. Companies are investing more on initiatives to aid "disruptive innovation." This kind of an innovation is radical and extends new value proposition besides bringing about a significant difference in existing consumer habits and behaviour that will enable them to create new markets and business models. Gone are the days where companies will only invest in innovations to sustain their current business. The rapid change in technology is forcing companies to work strenuously on "disruption" and prolong the maturity stage of its product in the lifecycle. And, this is precisely why companies should seek the help of an OPD team.

OPD's role in early stage

Any start-up with a robust product idea should ideally engage an OPD early on. This is the stage when top management would channel their energy towards attracting funding, tweaking up business plan and also gather market understanding. The early stage is when creating awareness about the product and its benefits is high. With the objective of establishing a market and creating demand for the product, spending on advertising, market research and distribution is very high, which entails significant cost for the company. These higher costs coupled with low sales makes this stage quite tough for the company. It is hence ideal to leave drawing product roadmap, defining product features, technology selection, development of beta version of the product, creating the first version and benchmarking against competitors with experts in OPD.

Growth stage

A very critical stage in a product's lifecycle as this is the stage when the company sees a spurt in the number of customers. Sales increases and newer segments are targeted for marketing. There is also a step up in spending on advertising and distribution to tackle competition that is gradually asserting its presence and eating up the market share. The task for the company is to stress on competitive differentiators. In such a situation, while the company can focus on building customer relationships, creating customer bandwagon, product management and product release planning, the OPD team can aid in highlighting competitive differentiators through product enhancement, product migration, product re-engineering, product implementation and product testing thereby significantly bringing down costs through carrying out the tasks from an offshore site.

Maturity stage

Brand awareness is at its peak and hence advertising expenditure can be reduced drastically. However, with intense competition, market share diminishes with price. This is also a stage when there isn't any particular differentiator between competing products. Efforts are on to encourage competitors' customers to switch, increase usage per customer and also converting non-users into customers. There is also a significant amount of investment to increase shelf space than competitors by influencing retailers.

Decline stage

The market is saturated and the product is gradually showing signs of becoming technologically obsolete. This is the time when the company has to focus on diversifying the product line or find new uses for the product. With most of the maintenance work and customer support outsourced to the OPD team, the company is strongly positioned to invest more time in initiating a disruption.

There are several strategies that can extend the lifecycle and increase the return on the original investment in the product. However, this requires careful planning and investment of time and capital by the management.

Conclusion

The intense competition in the global market place today indicates that companies should explore growth based on disruption as that offers enormous benefits. This infact is increasingly becoming an imperative so as to prolong the declining stage in a product's life cycle. However, an organisation in pursuit of disruption needs to adopt a strategy that is conducive for such innovations. This is where an outsourced product development team will play a vital role. With most of the technology initiatives outsourced to experts, the company can have a strategic team that focus on disruption in products, technology, marketing and distribution.