While it's not uncommon for companies to outsource routine business tasks, they have been less inclined to outsource activities that involve intellectual property, such as research and development.
But resistance to outsourcing R&D is lessening, according to a recent Economist Intelligence Unit survey. The EIU expects the number of companies with at least some R&D activity occurring overseas to increase from the current 65 percent to 84 percent by 2010. The number of companies outsourcing R&D to third parties is also expected to grow from 64 percent to 75 percent.
Drivers include a desire to reduce the cost of innovation, tap into a larger talent pool, increase speed-to-market and make the innovation process more efficient, says the EIU. Top concerns include a loss of control of R&D activities, cited by 60 percent of respondents, and fear of intellectual property theft, mentioned by 44 percent of respondents.
Not everyone supports this idea. Blogger Loek Bakker says outsourcing innovation doesn't work because cost reduction, companies' primary motivation for outsourcing, is inherently incompatible with strategic R&D.
Still, few companies can afford to pursue the traditional model of employing a dedicated team of scientists for R&D. In addition to outsourcing R&D, companies are acquiring peers, partnering with universities and taking over VC-backed start-ups. Remaining internal research labs are being integrated into teams of other employees in an effort to shorten and simplify the product development cycle.
Companies are also inviting outsiders to contribute to R&D by opening up their APIs. Microsoft, for example, recently released a free game development kit for its xBox 360 and launched an online marketplace where folks can market game titles they've developed in an effort to spur added innovation.