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January - 2015 - issue > In My Opinion
Outsourced Product Development (OPD) - Driving Innovation
Anil Bhaskar
Managing Partner & President-Asentech LLC
Monday, January 12, 2015
Today, businesses are mindful of the need to stay flexible in order to survive and grow in the dynamic and internet-driven world. This requires them to be constantly vigilant and respond to market needs. Outsourced Services, especially offshore services, have become very common place and almost a given in a multitude of industry verticals.
With ever-increasing competition, companies focused and driving innovation in the US are now opening up new avenues for Outsourced Product Development; inviting offshore services to participate from the concept level for development of new innovative (and non-standard) product development.
Some of the primary challenges faced by any company (big or small) driving and thriving through constant innovation are Conceptualization, Time, Effort and Budget for Development, which in turns forces the company to choose among multiple concepts, time to Beta, risk of failure and depletion of budget in non-successful efforts.
While some of these issues can very easily be addressed with offshore development, the primary barriers to off-shoring are:
a) Off-shore companies have typically delivered to established and standardized business processes.
b) Such companies typically work on standard SDLCs and success relies majorly on well developed and documented requirements.
c) Environmental and cultural variations within the country level environments, e.g. Healthcare system in the US is vastly different with multitude of variations in the stakeholder roles, as compared to India or China.

To address the above issues a new breed of Offshore Product Development organizations are mushrooming redefining the rules of engagement as it pertains to Offshore Product Development.
While the approach to address the new type of requirement; participating in the innovation cycle ground up, is not entirely different what was done in the early days of offshore, the companies have tweaked the model and have rather adapted to a boutique version of engagement instead of the cookie-cutter model.

A good case study to understand the finer points of such a boutique engagement can be found when a large Pharmaceutical Marketing company in the US, which was traditionally involved in the highly transaction model of making co-pay cards available to patients, found itself forced to innovate over and above its regular transactional model.
Owing to its market share, the customer had access to more than 90percent of the largest US pharmaceutical manufacturers and had an organization completely devoted to transaction product development. However they found opportunity to provide disruptive innovation in the area of big data. While they had access to massive amounts of unique data generated internally and also a team of highly capable data solutioners, their current technology teams did not have the ability or the experience to develop non-standard products.
Instead of experimenting with their current technology teams and also selecting one of the many opportunities they had identified, the company chose to proceed on multiple product development paths and engaged a boutique firm with significant experience in Innovative Digital Transformation.
The offshore firm aligned itself with the US customer and:
a) Business strategists mapped and conceptualized the business opportunity
b) Market researchers analyzed the publicly available products (or equivalent solutions) and further verbalized the opportunity.
c) Technical Architects with UI experts developed a mock product in a tangible way to better demonstrate the "proposed" solution to key industry stake holders.
d) Once the feasibility was established the product was developed using the Agile framework and delivered before schedule and on budget.
The Company used this engagement to simultaneously develop multiple projects and was very successful in:
a) Meeting market needs - Multiple contracts with their clients which came for renewal were renewed successfully based on the innovation the Company demonstrated in an otherwise static market.
b) Developing new streams of revenue - The company was also able to successfully recoup a multiple of their outsourced effort, in the very first quarter, in new lines or previously non-existent revenues.
Such examples highlight the value of boutique engagements in product development and product innovation which can result in significant value (and success) both for the Company and the Offshore / Outsourced partner.

According to a Gartner report, the global IT outsourcing market was expected to increase 2.8% to reach $288 billion in 2013. For the R&D/product engineering services market, an IDC (International Data Corporation) report forecasted that customers would increase their outsourcing spend in 2014 for these services and the market would reach approximately $66.2 billion in 2017.
IDC projections show a robust growth in OPD. Businesses are increasingly discovering that in order to stay ahead of the competition while ensuring timely product deployment, outsourcing product development, to the right partner and engagement, can allow them to meet the business' innovation goals.

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