R&D teams are our company’s critical forces responsible for coming up with fresh & functional designs and products. According to a recent study conducted by PWC, there are several industries which constantly spend large amounts on R&D which influences the rules of supply and demand in the market. Industries such as: Automotive, Computer & Electronics, Healthcare, Industrials, Software & Internet generate global R&D investments. The following will analyze the main reasons why large corporations in critical industries choose to outsource their innovation activities.
Challenges of R&D outsourcing
Many critics state that there are a number of risks and challenges that come with outsourcing hi-tech R&D and rightfully so. The added complexity it takes to manage the process throughout the organization with a poor supplier with unfit capabilities, and the lack of clear requirements specification are the main sensitive aspects of R&D outsourcing. Also there are many projects protected by patents or involving sensitive trade secrets. Because of all the mentioned factors companies tend to just hire more staff even though it’s costly and time consuming, and may not provide the expected results in due time.
Why hi-tech companies outsource projects to R&D centers
Previous studies suggest across industries that outsourcing has matured beyond cost reduction. Companies that choose to outsource R&D do so for a variety of reasons:
- They need to innovate or develop products that are more suited for certain target markets.
- To access the best talent on the market, unavailable in their own country or region.
- Unburden in-house teams from projects not related to core activity (for example a farm-equipment manufacturer needing to code its own mobile app).
- They need to accelerate time to reach deadlines and respond quickly to competitors’ advancements.
- The need to reduce capital investment in equipment and other technical or non-technical assets.
Achieving success with the right R&D supplier
A PwC Annual CEO survey found that many top global executives believed that they gain major competitive advantages from outsourcing functions including R&D. Here are a few ways on how to overcome daily operational issues and achieve success through outsourcing R&D projects:
- Understand suppliers’ capabilities and relative technical strengths and weaknesses compared to in-house expertise.
- Implementing continuous reporting of meaningful KPIs to analyze project’s performance.
- The partners should agree in advance on formats, technical details and progress reporting.
To be sure you R&D project is a success you have to build a strong, long-term relationship with your outsourcing partner. Read more on how to achieve this and find inspiration through insightful case studies on Enea Services website.