More Companies Outsourcing Innovation

Ann All

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.

Add Comment      Leave a comment on this blog post
Apr 2, 2007 5:21 AM Mohan Mohan  says:
Yes Ann,During my interactions with technology executives and leaders, I find that they are looking beyond such publications touting Innovation Outsourcing. Essentially asking what does this mean to me and my organization? or how do I ensure my team also leverages such practices and applies them in our context? And this was the topic of my recent Cutter IT Journal paper where I also illustrate a case study on IT Innovation by establishing a Globalized Center of Excellence (CoE). Reply
May 20, 2010 3:27 AM Maria Tal Maria Tal  says:

Hi Ann,

It's true.  A lot of companies now are into outsourcing product development because there are much more advantages than disadvantages in terms of cost to the operations. We cannot blame these companies for doing this, because the rationale for every business activity should always be "minimum inputs - maximum output". Diminishing investment on expenses gives more venue for profit maximization. Expect the boom of outsource product development as demand for outsourcing is the way most businesses go.

May 21, 2010 6:20 AM Chris Williams Chris Williams  says: in response to Maria Tal

There's definitely nothing wrong in companies venturing into outsource product development. Service souring companies not only help client businesses perform a specific business task or function but they also engage in conducting product and market research development for them.

Jul 23, 2010 8:40 AM outsourcer outsourcer  says:

The risk written here about development outsourcing

are very true but there are ways on how to lessen if not totally avoid them. One of those is choosing the best provider, looking for the best place to find them. If I may just suggest, is the site that you need, you can find skilled providers here and get the quality of work you. 

Oct 12, 2010 12:04 PM FutureSlave FutureSlave  says:

At some point there will be no more jobs left, people will be next to be outsourced, meanings Americans have to look for jobs overseas. That will be the day our own children work as slaves overseas.


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