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Outsourced Product Development

Definition

Outsourced Product Development (OPD) refers to the process where a company hires an external organization to develop a product on their behalf. This could include stages such as ideation, design, development, testing, and support. The action is undertaken to leverage expertise, reduce costs, and accelerate time-to-market.

Phonetic

The phonetics for “Outsourced Product Development” is: Outsourced – /aʊtˈsɔːrst/Product – /ˈprɒdʌkt/Development – /dɪˈvɛləpmənt/

Key Takeaways

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  1. Cost-effectiveness: Outsourced product development often results in cost savings. This is because the hiring company doesn’t need to maintain an in-house team, which involves salaries, benefits, and overheads. Additionally, the outsourcing partner can leverage economies of scale and operational efficiencies which might not be feasible for the hiring company.
  2. Access to Specialized Skills: Outsourcing allows companies to access specialized skills and expertise that might not be present in their in-house team. Development firms usually have a diverse team of experts in different areas of product development, which improves the quality and efficiency of the product development process.
  3. Focus on Core Business: With the technical aspects of product development outsourced, companies can focus more on their core businesses. This means more time and energy can be allocated to business strategy, marketing, customer service, and other key business areas.

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Importance

Outsourced Product Development (OPD) is crucial in today’s technologically advanced business landscape for various reasons. It provides a way for companies to leverage external expertise and advanced resources to develop innovative products or improve existing ones, thus saving internal resources and fostering business growth. Reduced time-to-market, access to specialized skills, cost savings, and the ability to focus on core operations are among the essential benefits provided by OPD. Furthermore, outsourcing product development also allows for risk sharing and promotes a more efficient use of resources, enabling businesses to meet market demands quickly and effectively.

Explanation

Outsourced Product Development (OPD) is a strategy that companies often use to remain competitive, focus on their core competencies, and reduce costs. Its main purpose is to allow firms to delegate the process of developing certain products or software to external agencies or third-party entities. This ability to harness the skills and expertise of outside resources empowers companies to accelerate the product development process, enhance product quality, and mitigate the risk associated with product development. Furthermore, it avails a platform for firms to tap into a global talent pool and exploit the best that global technology and innovation have to offer.The primary use of OPD is seen in many technology sectors where the software and product development processes are outsourced. For instance, many companies in the IT sector use this strategy to outsource their software development projects to external agencies who specialize in this area. This helps the company to cut down on resources and time dedicated to training in-house teams to carry out such tasks. In essence, OPD is used as a tool to leverage specialization, utilize global talent, manage operational costs, and optimize time and productivity in the complex and increasingly competitive world of technology and innovation.

Examples

1. Microsoft and Infosys: This is one of the most popular examples where an IT giant outsourced its product development to enhance capabilities. Microsoft outsources many of its technology and product development aspects to Infosys to amplify the products’ productivity and improve market readiness of their solutions.2. Slack and MetaLab: Slack is a widely used team collaboration tool today, but in its initial stages of development, it was outsourced to a web design agency named MetaLab. MetaLab helped Slack with its user interface and design elements, transforming it into the user-friendly and visually appealing tool that it is today.3. Google and LG: Google, for its Nexus series of smartphones, outsourced product manufacturing to LG. While Google managed the design and software aspects in-house, LG was responsible for the hardware and manufacturing aspect of the products. This allowed Google to focus on its core competencies and launch a successful line of smartphones.

Frequently Asked Questions(FAQ)

Q: What is Outsourced Product Development (OPD)?A: Outsourced Product Development (OPD) is a practice where businesses delegate the tasks of product development to external agencies or third-party entities that are specialized in providing such services. It’s a strategy commonly adopted to reduce costs, enhance efficiency and speed up the time to market.Q: Why should a company consider Outsourced Product Development?A: Companies might consider OPD to leverage specialized skills not present within their own organization, reduce development costs, manage resource gaps, increase scalability, and to focus on their core business activities rather than the developmental challenges.Q: What kind of products can be developed through OPD?A: Essentially any type of product can be developed through OPD. This can range from software and tech products, to physical goods like electronics or appliances, depending on the capabilities of the outsourcing agency.Q: What are the potential risks involved in Outsourced Product Development?A: While OPD offers numerous benefits, it also comes with risks such as intellectual property theft, lack of quality control, communication barriers and cultural differences, and potential delays in product delivery due to unforeseen issues at the development end.Q: How can a company ensure success with Outsourced Product Development?A: Success with OPD can be improved by properly vetting potential outsourcing partners, setting clear expectations and guidelines, maintaining open lines of communication, regular monitoring and performance assessments, and a clear understanding of intellectual property rights.Q: What makes a good OPD partner?A: A good OPD partner should have proven expertise and experience in their field, positive client testimonials, transparent and ethical work practices, reliable and secure systems, and should be able to demonstrate a clear understanding of the business’s product goals and requirements.Q: Can you switch or terminate an OPD contract if you’re unhappy with the results?A: Terms of termination and the possibility to switch to a different provider usually depend on the individual contract set with your OPD provider. It’s important to thoroughly discuss and understand these terms before entering into a contract. Q: What is the influence of OPD on time-to-market?A: By leveraging the specialized skills and expertise of an OPD agency, you can typically reduce your product’s time-to-market. This is due to efficiency increases as a result of their experience and the ability to work on the product development around the clock. However, potential delays may occur and should be factored into your product launch timeline.

Related Tech Terms

  • Bespoke Software Development
  • Offshore Development Center
  • Software Prototyping
  • Product Lifecycle Management
  • Information technology consulting

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