Outsourcing R&D as a Strategy to Grow Your Business

Included below is an article regarding strategic outsourcing of R&D that I recently came across. I’d be very interested in hearing your thoughts and/or plans in this area.

Technology companies are increasingly partnering with Offshore R&D providers to surmount the challenges posed by rapidly changing market dynamics.

There is a considerable shift and restructuring in the way companies are approaching R&D. Rapidly changing technologies and market dynamics, increasing competition, and availability of similar types of products are some of the factors that are making product differentiation at faster time-to-market, an absolute imperative for businesses. Technology companies are consequently requiring their R&D function to significantly enhance their innovation yield so as to drive innovation, surmount these challenges and remain competitive.
The enormous pressure on the R&D function is further compounded by shrinking R&D budgets, rising costs and increasing complexity of the R&D process. Further, the current economic downturn is only making matters worse.

Faced with this scenario, a large number of technology companies are increasingly outsourcing product R&D to address this situation and achieve greater efficiencies at economies of scale. A leading research house notes that, on an average, 40% of the R&D work can be potentially executed by using external resources. And, this would mean a contraction of R&D expenses by about 20%, conservatively.

This increasing trend towards leveraging Offshore R&D and Outsourced Product Engineering Services is substantiated by the KPMG International / Economist Intelligence Unit Survey. The survey expects the proportion of companies with at least some R&D activity taking place abroad to reach 84 percent by 2010. Similarly, the number of companies outsourcing R&D to third parties is also expected to grow to 75 percent.
Networked R&D or Collaborative R&D offers a plethora of benefits to significantly better performance per R&D dollar.

A few of the benefits that companies are deriving from Outsourcing R&D / Offshore R&D include:
- Leveraging the know-how and key development strengths of partners for faster time-to-market and additional revenues.
- Using global talent for skills in shortage at a definite cost arbitrage.
- Optimized asset utilization, enhanced focus on core competencies and increased customer-focused research/listening more to customers.
- Enlarged innovation capacity with new knowledge and experience across the globe.
- Getting new and innovative products to market faster with enhanced efficiency and productivity.