Arpan Banerjee
Tuesday, September 30, 2008
Global product companies or Independent Service Vendors (ISVs) are always under performance pressure, as would any of us in our respective jobs. They strive for market expansion, increased product features, and new product ideas and face the regular constraints of decreasing profitability, increased competition, dearth of resource and skills, and rising costs with simultaneous pressure to upgrade and widen product offerings while using fewer resources.

Product-development planning remains crucial to organizations' survival. Some key challenges, and hence success factors are as follows:

Development Speed : 'Faster and faster' is the mantra of product development. One way to hasten development speed is through digital design, analysis, and collaboration tools to get products to market faster. Using collaboration software, file-sharing software and more, engineers can transform ideas into digitized virtual designs for testing and viewing a new product in three dimensions, within months rather than years.

Platform Flexibility : Every product guru will acknowledge that a key success factor of a product in the market is its platform flexibility. This results from using modular product architecture to provide more product variety to customers. Computer aided design and engineering tools permit easy reuse of already completed design files. All these files make product design much more efficient, cost effective, and accelerated than ever before.

Complexity Management : A product stands apart from an application in its complexity. It involves engineering complex systems through analysis of interaction networks. Research has resulted in network modeling methods to examine a network of interacting elements that form part of complex systems being developed. The challenge of engineering complex systems with many components, sometimes called systems engineering, remains a key success factor.

Customer Involvement : The advantages of involving customers to improve the product features and user experience are an open secret; but perhaps it also poses a myriad of challenges to a product developer. Some companies are using the order information about what features, components, or configurations the customers are ordering for and are interested in, and they use that in real time, or as quickly as possible, to reconfigure the next generations of the product. Paying attention to these trends can help managers and design engineers plan their product design processes and achieve their goals with higher efficiency, lower cost, and less time to market.

Outsourcing and Offshoring : Finally, the biggest challenge that remains is optimizing in-house skills, supplier skills and capacity, international operations, and new markets. Sometimes outsourcing saves considerable cost and sometimes a little cost, but more importantly, it actually helps in taking advantage of global product development networks, largely to access new markets in different locations and leverage global talent pools. Let us have a closer look at the outsourcing opportunities.

Modern communication tools and the Internet have reduced the need for product development partners to be geographically close. Indeed product development is increasingly being divided between locations, with different parts getting created in multiple centers around the globe and brought back together for integration and testing. The ability to succeed at global project management is the key challenge in this model. As the challenges grow in the face of global inflation, strengthening currencies, slowing economies, dried up venture funds so will be the opportunities, to springboard ahead of competition by globalizing. Two immediate channels that help bring in the advantages of globalization are building captive centers across the globe and outsourcing. Both have their pros and cons, but given the scale of expansion and flexibility, outsourcing is well acknowledged as the greatest opportunity for the entire product-engineering ecosystem. The opportunities obtained through outsourcing, leveraging local presence of partners, 24x7 development and support centers, multi-dimensional skills, and matured processes and best practices are fairly known as follows:
At this stage the founder(s) start pondering about their next step. Must they exit? If yes, how? Should they take the company public? Or should they sell the company to a larger player? Should they step back from the company and let professional management take it over completely? The answers to these questions decide the path that sometimes leads them to the beginning of their journey once again, i.e. to start another product company.

* Leveraging skills
* Speeding up time to market
* Global market expansion
* Superior Customer support
* Enhancing product development processes * Localization benefits

The emerging best practice for software development is to decouple product design and development (along with testing and support) elements in the value chain. The life cycle of product development is increasingly being divided into phases that require internal expertise (and value-adding), which is essentially in product definition and design phase; whereas steps that are highly commoditized include development, testing, and support. The division of responsibilities between IT personnel and outsourcing staff is specifically a critical factor in the success of the project and generally in the outsourcing relationship. Moreover, outsourcing vendors have made tremendous advancements in the metrics for quality and investment that drive greater efficiency into the overall process.

Offshore is usually regarded as a tool for labor arbitrage. However, it has its hidden benefits like higher quality and development discipline of the 'right partners', which lead to greater efficiency and productivity levels that are sometimes superior to the in-house engineering organizations of ISVs. Moreover, in the coming years, outsourcing vendors will expand further into the value chain of product development. Additional expertises emerge to dominate emerging technologies (for example, Web2.0) and develop deep vertical expertise.

To conclude, today's nextgen software products are evolving with a distinct global flavor. The products are developed with the globalization model already deployed by large companies like Microsoft's and IBM's but are extending down to regional and specialty players - enabled by offshore outsourcing. Offshore vendors are increasingly being involved in architecture, development, and deployment of a wide range of products from embedded products to software and hardware design. Products that are not born out of the global sourcing model will lose their competitiveness in the coming years.

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