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August - 2008 - issue > Outsourced Product Development

How Firms Choose OPD Partners - Providers

Sudin Apte
Friday, August 1, 2008
Sudin Apte
Since the time Forrester unleashed the OPD space and its potential — followed by a detailed view of the vendor-landscape, one of the most frequently asked questions by product firms has been: How do we choose a suitable partner provider? What benchmarks be set and followed for choosing the right partner provider? While addressing this unique query from hundreds of product firms across industries and sub-verticals, a standard vendor short-listing framework – comprising multiple parameters, evolved at Forrester; and the same is being leveraged today by most product firms having OPD work step-up plans.

Forrester’s OPD Vendor Selection Model used by global firms
This is a model meant for an end-user, so for providers’ benefit, I have captured the essence of it to present as an ascent-path for them. It’s important to understand how firms segment their OPD providers according to capabilities and what type of relationship they enter into with each segment providers.

The OPD propositions of firms range from the age-old benefit of labor arbitrage to using the provider to connect with your firm’s customers to determine the most valuable future product features. And to effectively consider all options and make the most appropriate decision, most firms first index their suppliers into three value-segments and then choose a combination based on product life-cycle objectives. The three segments are additive, where each successive one builds on the other, and helps providers realize where on the value-curve they stand.
* The first segment of R&D money savers are viewed as ones focused on lower-end skills with solid ability and strong process discipline, and that can ramp up OPD teams quickly. Such providers are usually leveraged to cut product development time and costs and typically handed the volume work such as maintenance of mature or end-of-life products, re-purposing, re-engineering or porting established products, and running product certification labs.
* The second set is termed as Product launch-date sprinters. In addition to cutting costs as above, clients look for clear specialization in managing large-scale programs along with experience in managing dedicated offshore development centers (ODCs). Other capabilities expected from these providers are effective transition of work from the client to the offshore location, commitment to business metrics such as on-time, on-budget product launch. Also, pricing models related to output rather than full-time equivalents (FTEs) come to fore in these relationships, and they are best viewed for outsourcing a key or time-sensitive project as well as running a large, long-term program via a dedicated facility.
* And the most respected segment is treated as Strategic product partners. Cost-cutting and faster time-to-market are “hygiene”, and the key expectations include demonstrated domain knowledge and capability, thought leadership, OPD market ecosystem access and control, delivery center geography diversified beyond one offshore location, and high-value, reusable intellectual property in a given area. These firms are leveraged for end-to-end product development, helping to build competitive products and relationships where the client wants to share risk and reward.

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