Most manufacturers outsource some or all of their product development projects because they limit their internal capabilities to focus on success or because they’re following age-old notions.

This only makes sense when the company first builds the systems needed to manage the outsourcing tool. Unfortunately, many companies outsource before they have these systems, and leave the experience with a negative opinion of the firm doing the project or of outsourcing in general. A better solution is to outsource product development to gain expertise, add resources, lower development costs, or freshen internal teams.

But does this really make sense?
If the company outsourcing the project builds the systems necessary to manage the outsourcing tool, the answer is a resounding “Yes!” Such systems include:
• The capabilities to find, evaluate, and hire the outsourcing firm
• Methods, protocols, and resources for communicating and managing the outsourcing firm
• Tools, resources, and plans for gaining, storing, and using knowledge transfer

Unfortunately, many companies outsource before they plan the systems they need to effectively do so. They generally leave the relationship with a negative opinion of the firm doing the project and of outsourcing in general.

Of course, in the near term, most companies that sell a product will maintain some level of product development expertise. This expertise will be used to help evaluate new product ideas, to manage product development, and/or to maintain and support existing product offerings.

Then, when does it make sense to outsource product development?

Outsourcing makes the most sense when:
1. There is a need for expertise the company doesn’t have or need full time.
2. There is need for resources the company currently does not have—there are simply not enough people on staff to complete all of the required work.
3. It costs too much money to maintain internal teams to do some or all of the development projects that must be completed.
4. There is a desire for improvements in the product development processes through best practices or a “fresh” approach to the development project.