Insourcing: The Future of Globalized R&D

You know that to stay ahead of the competition, you must deliver On-Demand/SaaS products that offer more features, are higher in quality and are delivered faster to market. You probably also know that globalizing research and development (R&D) gives you a significant business advantage by providing access to greater resources at less cost. What you may not know, however, is that current models of globalized R&D are no longer effective enough to help you keep that competitive edge.

The Problem with Outsourcing & Captive GDC's

Outsourcing R&D is a fundamentally flawed strategy because it assumes that after the client creates specifications and delivers them to the outsourcer, the product comes back complete and ready to market. Unfortunately, this is rarely the case. Due to dynamic product specifications, poor communication between client and engineers, and reduced team performance, traditional outsourcing models eventually end up losing ROI and savings.

The major downfall of outsourcing is that engineers are frequently reassigned to other projects, resulting in an inconsistent team and varying levels of product understanding. This practice wastes invaluable time and resources, discourages the client from creating a relationship with its offshore team, and compromises the overall quality of the product.

An alternative to outsourcing is establishing a "captive" global development center (GDC). Although this method promises the benefits of a dedicated development team, highly competitive recruiting realities often makes it difficult to attract and retain quality engineers. Clients also do not have the on-demand access to skilled experts that outsourcing models can provide, nor can they quickly scale their existing teams.

Establishing a captive GDC also involves major overhead costs and management bandwidth. Companies have to deal with the legal complexities of establishing an entity in a foreign country, as well as HR and administrative issues. Development teams are also inconvenienced by an immature and distributed R&D process.

Insourcing: A New Solution

The most successful model for globalizing R&D involves "insourcing," a hybrid of traditional outsourcing and captive GDC models. This model leverages teams of distributed engineers who are managed by a global services firm but dedicated to a single client. This model essentially delivers the best of both worlds: a stable, invested engineering team without the associated overhead costs or management risks.

By partnering with an insourcing firm, On-Demand/SaaS companies can build their teams from a pre-configured pool of skilled engineers without worrying about screening processes or HR issues. This simplified infrastructure also means that clients can quickly scale their teams or access specialized engineers on-demand. Furthermore, collaborating with a team of engineers who are permanently invested in your R&D yields higher quality products, accelerated time-to-market and significant cost savings.

Insourcing is a best of breed approach to R&D that delivers an ideal combination of quality and cost-efficiency. Unlike other means of globalization, this model focuses on long-term solutions for product development. As a result, insourcing R&D is quickly becoming the only guaranteed method to maintain a competitive edge in the On-Demand/SaaS market.

Article written by Peter Harrison, CEO of Global Logic Inc.