Why the Market is Moving Toward OutsourcingWe can cite a number of ways outsourcing improves competitive advantage and, consequently, why more companies are taking advantage of the proposition.
- First, there has been an increase in the number and types of capabilities that external product development contractors possess. Suppliers concentrate on mastering and building upon a core set of competencies, so they built to handle the toughest challenges within their domain and continue to offer a broader scope of services.
- Second, advances in technology and other innovations make it more advantageous for firms to outsource because of the difficulty in simply keeping up with the latest advances.
- Third, even if companies could keep up with changes, it is not cost-effective to make the investments necessary to be on the cutting edge of countless technologies. With ever-shorter times to market and product life cycles measured in months, not years, speed has become a defining competitive advantage for many businesses.
Competitive Advantages Realized Through OutsourcingSpecific advantages, or reasons for product development outsourcing, vary from business to business. Whatever the reasons, the advantages are compelling.
- First, a major advantage referred to earlier is that it offers firms a way beat the competition to the market by engaging a partner with the expertise and capacity to rapidly bring new innovations to market.
- Second, experienced development partners can also provide the catalyst for firms to swiftly enter and execute within new markets.
- Third, reducing investments in non-critical functions gives firms the flexibility to act with reduced financial burdens and, as a result, the ability to respond opportunistically in new markets.
- Fourth, outsourcing enables businesses to focus on core competencies and build those skills that directly add value to customers.