Outsourcing "non-core" activities to gain competitive advantage has now become an essential tool of any business to survive. As the industry matures, "core activity" is undergoing a change already. The industry is maturing making virtual organizations, where HR, Finance, IT, operations, marketing and in some instances, even idea generation is being outsourced.
Independent Software Vendors (ISVs) are looking at outsourcing product development, while concentrating on core business such as product ideas, marketing, financing, and customer relationship. The basic drive to product development outsourcing is further moved by resource cost increase and reduced product life.
As concept develops it is becoming a way of utilizing company resources in a much efficient manner with new brains coming in, along with additional skills.
Why Outsource Product Development?
With customer demand at all time high and pressure to cut down cost of products . For ISVs to remain competitive in the market they have to act on following things such as:
- Product Life cycle reduction
- Prevent product from reaching technology obsoleteness
- Prevention of product to reach maturity stage by upgrading regularly.
Most of the time of management is wasted in product development creating value of 20% and wasting 80% of the time. This is where the profitability of the company takes a hit while going inhouse. The product development also involves analyzing competitors, defining product/technology road maps, planning early releases, testing through different approaches, targeting industry trends, spotting trends in technology usage and acceptance, pricing, marketing and promotion, finding add-on features etc.
The profitability of a product is directly proportional to crashed time-to-market and number of release and indirectly proportional to number of defects.
Product Profitability = K *(Shortened time)*(Number of releases)/ (Number of errors)
By outsourcing product development, companies can shorten time-to-market, increase number of releases, decrease defects. The value K is the value factor which outsourcing service provider further brings to the table.
The basic advantages of outsourcing product development are
- Diversified expertise
- Getting together different resources to work with.
- Reduce cost of development.
- Break product roadmaps, and above all
- Increase efficiency by focusing on new competencies
Steps to Follow
Though still viewed as core activity of an ISV and with issues remaining around Intellectual Property (IP), doubts over its feasibility and success of an outsourcing engagement, a piece meal approach to outsourcing product development and then incrementally increasing outsourcing product development is best the recommended approach.
Product life cycle typically involves:
Development - QA & Testing
- Enhancement
- Re-engineering and migration
- Support and testing (L2&L3)
To start with, ISVs can look at outsourcing one or more of above activities - better still, the ISVs can look at outsourcing one of above activities in sub-module of their product.
Startup companies, VC funded companies should be looking at outsourcing entire product development lifecycle and concentrate more on defining, marketing and packaging of product than product development.
OTS has been helping various software vendors in maintaining and develop products ranging from legacy desktop to latest web 2.0 SAAS web applications. With our experience we proudly can say that we have been very instrumental for many companies in using us for product development and maintenance while they have been focused on growing product ideas and planning new releases.
Please feel free to share your experiences and send us your feedback to us at sales@otssolutions.com
