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When it’s time for fresh ideas from your IT team, it’s time for research and development, commonly referred to as R&D. However, should you hire more people and keep it in house? Or should you outsource your R&D? In this article, we explore the pros and cons of each.
The Rationale Behind Research and Development
The whole purpose of a company’s R&D department is to have an environment for the development of new ideas. That’s because a truly innovative and creative R&D team allows a company to compete in the modern marketplace. Such a team will experiment with new technologies, breathing new life into the company and helping it to compete in the rapidly changing global market.
Many large electronics companies keep their R&D centers behind closed doors. Outsiders are not allowed inside. In fact, the company keeps most of its own employees out as well. This is a closed-off world that’s almost impossible to penetrate.
However, the company will still try to attract leading specialists and scientists from all over the world on an ongoing basis. But while always striving to stay ahead of the competition, the company’s owners fiercely protect their intellectual property, sparing no expense to do so.
Why Outsource a Research and Development Department
Despite all the secrecy, however, the most important element of an R&D strategy is speed. The company’s number-one aim is to be the first to offer consumers the next new gadget or device.
Therefore, outsourcing R&D is not out of the question, and temporary consultants are sometimes called in, frequently on the sly.
To begin the process, the company’s managers cull tasks from the company’s various departments and set them aside for the newly forming R&D team. The tasks that are identified in this process are the ones that require an innovative approach the company has previously lacked.
Other reasons companies may turn to R&D outsourcing are to reduce costs, minimize business risks, and accelerate market entry with new products. Moreover, outsourcing contributes to the growth of the company’s core competencies. Plus, it reduces the demand for material resources.
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However, before a company decides to outsource R&D, its managers must grapple with being willing to share key ideas in order to benefit from new solutions and strategies. In other words, the company’s owners must share with the R&D service provider confidential information related to product development.
This decision to trust is absolutely essential if any relationship, however temporary, is to work. Therefore, any decision for hiring remote developers for R&D in the software industry is not made lightly.
In order to facilitate this process, the company might set up a joint development team that understands the competitive nature of the business as well as the strategic goals of the parties involved.
Advantages of Outsourcing Research and Development
1. Lower Costs
Simply put, it costs less to hire well-trained R&D consultants from developing countries. This explains the growth of R&D centers in Asia, where the cost of labor, even the most qualified, is the lowest in the world.
2. Access to a Qualified and Talented Workforce
Outsourcing R&D gives a company access to highly qualified and talented personnel. This takes a company in the direction of new ideas and innovative solutions.
3. A Better Understanding of the Global Market
Going global in their search for talent leads companies toward a better understanding of the global market as well.
4. Access to Fresh Ideas
Outsourcing R&D gives a company access to technological innovations that would not be possible with relying only on in-house talent. This particular benefit of outsourcing research and development helps the company to remain competitive globally.
Disadvantages of Outsourcing R&D
1. Cultural Differences
Outsourcing R&D brings with it enormous risks associated with the lack of infrastructure in the country the company is outsourcing to, as well as cultural differences.
2. Lack of Quality Control
The project could suffer due to lack of quality control and insufficient project management capabilities in the team to which it’s outsourced.
3. Salary Growth
As the economies of countries in the developing world improve, workers demand more in remuneration. This makes outsourcing less attractive in the long run, as such cooperation may eventually be unprofitable.
4. Risks to Intellectual Property
Perhaps the chief risk of outsourcing is the risk of losing a competitive advantage because of the risk it poses to the integrity of the company’s intellectual property.
New Trends with Research and Development
Only a few years ago, few companies were willing to outsource R&D tasks. However, today the game is changing. For example, Microsoft now outsources a number of R&D tasks. Similarly, other large manufacturers are joining this research and development trend.
This trend gives rise to a new development model. That is, companies create and develop some projects in house. Then the company gives over other projects to outsourcing.
Additionally, the “fabless” model helps to maintain the secrecy the company requires in order to protect its intellectual property. In other words, one R&D team works only on the development of the project and never fabricates a physical model. The company then outsources fabrication to yet another team, which remains completely separate from the first team.
In-House Research and Development
Experienced employees who have worked in a company for several years have more expertise in specific processes and are aware of some nuances. This depth of experience makes an in-house R&D department an unparalleled solution for routine operations as well as for new product development in many cases.
Advantages of In-House Research and Development
1. Developers Who Understand Company Processes
Highly skilled developers who are also employees understand the company’s established processes and can therefore create the most appropriate product for a company.
2. Maintaining Control of Product Development
Another advantage of in-house research and development is that the company retains its control of the process during product development.
3. Further Development of and by In-House Specialists
In-house developers are trained to fully focus on the generation of new ideas. As loyal employees, they routinely implement pilot projects and launch new products and services. Additionally, they improve processes within the company in the process, and further develop their own skills as well.
Disadvantages of In-House Research and Development
The Company’s Own Hard-Bound Rules
In-house developers may feel hindered in their ability to be truly innovative in the face of the company’s hard and fast rules.
The Bottom Line
R&D teams generate ideas by researching new technologies. They seek to increase their own overall knowledge in the process, as they develop new methods for capitalizing on their knowledge.
However, since most IT companies have fully focused on research since their inception, the team’s ideas can grow stale over time. Therefore, outsourcing can breathe new life into a company’s research and development projects, as long as management fully considers the risks of outsourcing and takes them into account.