Why Outsourcing Has Become A Valuable Option In Product Development

The practice of outsourcing product development to third party providers has caught

the attention of industry leaders and frontrunners in the modern business world. Companies often outsource the product development and manufacturing process to outside contractors for the purposes of reducing overhead costs, improving production and manufacturing speed, and saving valuable time and resource for core activities.

Outsourcing product development becomes a most valuable asset when there is a need for tools, expertise and resources that the company does not have but are important in the growth of the enterprise. Outsourcing often helps when keeping up an internal team to perform the same tasks becomes a drain on time, energy and resources.

Companies may encounter a sudden need for expertise in performing a particular task either because the task is a non-core activity or here is a sudden increase in demand that exceeds the companys current capabilities. One risk however is the security of proprietary information. This must be coordinated with the outside contractor at the onset of the project in order to avoid any information leaks.

Another reason some companies opt to outsource is to augment the number of development teams available to perform tasks and complete projects. Often referred to as resource expansion, outsourcing product development in order to swell the number of development teams effectively reduces costs when compared to enlisting the same number of teams to perform the same amount of tasks internally.

Outsourcing product development also allows companies to efficiently designate tasks to the appropriate departments. With proper cost-to-benefit analysis, companies can maintain low overhead costs while employing sufficient manpower. This also helps companies avoid errors brought about by overworked staff performing multiple tasks that span several projects.

The reduction in overhead costs received from outsourcing product development comes from all the costs that the company no longer has to concern themselves with, such as employee salary, tax and benefits, as well as infrastructure costs that would have included office space, desks, equipment, training, software, and other necessary tools. All these costs will be shouldered by the third party provider, which in turn receives a contractual fee from the company.

by: Maria Tal

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