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Selecting the Right Partner
At the beginning of a new project you may face the challenge of deciding whether to organize and train an in-house team for the new product development or hire an external design company to develop the product for you. Because this can often be a daunting decision, we wanted to offer our insights on what you need to consider when evaluating an outsourcing partner, to ensure you’re making the right choice for your project and your business.
When do you need to outsource your product development?
There are definitely times when outsourcing product development makes sense.
The most frequent case, is when you don’t have the technical experience in-house to develop the product on your own and need access to experts in the field.
But there are also other cases in which you will want to consider outside help. If you are time-pressured and need to get the product to market quickly, it may make sense to hire out the work. If you don’t have a team in place, or your existing in-house resources are tied up with other projects, it might take longer than the project timelines will allow for you to hire, onboard new team members, and get everything set up.
Likewise, you may need to focus on your core business instead, and need the time and resources you would otherwise put into product development to invest in marketing, market research, sales, customer service and other areas of your product launch and company’s operations. And if you want to upgrade an existing product to make it “fresh” again, the perspective of an outside design firm can ensure you have not only a fresh eye from a new vantage point, but access to the best practices and latest technologies in the market.
What to evaluate in a prospective design partner
There are any number of factors—both tangible (i.e. measurable) and intangible (i.e. “the magic”)—that you might consider when deciding which design firm to work with on a given project. Here are seven key areas we suggest you consider:
● Control: Make sure you will always have ultimate control over the project, and that you will be in the loop at every step in the design process.
● Skills & Expertise: Do the engineers or partners have the skills and expertise to deal with all the different aspects of the new product development process? Consider their skills and track record with hardware design, firmware development, software development, industrial and mechanical design, and any other areas relevant to your product.
● Understands Your Needs: Ensure from an early stage (i.e. product requirements documentation), that the company has a clear understanding of your goals, scope of work and requirements, and that the communication is clear and easy from the outset.
● Ownership & NDAs: Verify you will own the IP of your product. In some cases, outside design companies keep the intellectual property they develop. Typically, such firms develop the product for you (usually at a lower cost) but will not relinquish the design files, locking you into the arrangement. Make sure the company has a clear policy you agree with, about the commercialization rights and ownership of the design, and that both parts sign a non-disclosure agreement.
● Cultural Fit: Do your values and working practices align with those of your potential partner? Now is the time to find out.
● Pricing Model: The pricing model has to suit your needs and budget. Generally, companies have more than one pricing model—a fixed priced contract or time-and-material contract (where you will pay for the time and materials the company takes to develop your product). Make sure to discuss your options with your design partner and evaluate which pricing option benefits you the most.
● Industry Standards and Regulations: Make sure the company has a valid license or certification to operate in the area and that it follows all standards and regulations required for that industry. For engineering companies in Ontario, for example, you can check the Directory of Professional Engineers Ontario (PEO), that lists the accredited companies.
Benefits of outsourcing your product development
Deciding to outsource your product development can have significant benefits.
Outside partners give you quick access to experts in the field and their know-how for as long as it is needed, without the hassle of having to go through a hiring process for an in-house person. Likewise, working with design firms that have multiple clients will mean that you have access to the latest technology and best practices that are current in the market.
Outsourcing product development also accelerates time to market. Contracting a design house has been shown to speed up product development up to three times versus relying just on your internal team, our customers say. You also streamline your development process and minimize risks by eliminating the chance that you discover a lack of experience or technological know-how with your existing in-house team while you’re in the middle of development.
And because you are laying out in advance with your external design partner a full understanding of the costs associated with your design project, you have a clear understanding going in of the investment you’ll need to make in the program, while also limiting management costs and legal procedures associated with recruitment, training, salaries, and retention of in-house employees.
Comparative Matrix
This comparative matrix can help to lay out in a grid the pros and cons of in-house development versus design outsourcing and compare accurate information between alternatives. Consider the following criteria as you evaluate your current situation and assess whether you need to outsource your product development:
| Criteria | In-house Development | Design Outsourcing |
|---|---|---|
| Total Cost | Take into consideration all the costs needed to develop the project on your own: recruitment, salaries, training, benefits, retention, equipment, etc. | Total amount the company will charge for your product development. |
| Total Development Time | Calculate how much time you need to research, learn, iterate, and get the product market-ready. Advice: it always takes longer than first anticipated. | Total amount of time the company will take to get your idea into a market-ready product. |
| Technical Expertise | Do you have the required skills and field experts in your team? If not, how easy will it be to hire and access all the skills you need? How easy will it be to access the right component distributors and manufacturers? | How easy will it be to find a company that has the required expertise? How easy will it be to find a company that has the right partnerships with component distributors and manufacturers? Are there a lot of companies offering what you need? |
| Design Quality | Do we have all the processes in place to deliver the required results? If not, what do we need? | Are there companies with a proven track record of designing similar products to mine, that would be able to deliver the intended results? |
| Communication | If you have a team: how are its collaboration and communication skills? If not: what would I need to create a team with these skills? | How likely is to find a potential partner that is open and transparent in all aspects of the design? |
Once you have done your research, use a decision-making matrix (example below) to score each criterion and have a better idea of what is the best option for your company.
How to use the matrix?
Assign weights to each criterion by asking yourself: how important is that I stick to the budget I have? How fast do I need to get to market? How crucial is technical expertise for the development of this project? How important are the quality of the results? How important is ease of communication for me? The total weights should add up to 100%.
Then, once you have identified the right information for each cell of the previous comparative matrix (Figure 1), score from 1 to 5 (1 being lowest, 5 being highest) each criterion, multiply it by the weight you gave it, and add the weighted scores for each column. Add the total score, and you will have a more objective evaluation of your product development needs. The higher the score the more aligned that option is to your needs. Please note that the weights shown in figure 2 have the only purpose to exemplify the process, and you may want to change the criteria, and their weights depending on what is important for your company.
Decision-Making Matrix - Example
| In-house Development | Outsourcing | ||||
|---|---|---|---|---|---|
| Criterion | Weight | Score | Weighted Score | Score | Weighted Score |
| Lower Total Cost | 30% | 4 | 1.2 (=4*0.3) | 3 | 0.9 (=3*0.3) |
| Lower Total Development Cost | 25% | 3 | 0.75 (=3*0.25) | 5 | 1.25 (=5*0.25) |
| Higher Technical Expertise | 20% | 2 | 0.4 (=2*0.2) | 5 | 1.0 (=5*0.2) |
| Intended Quality | 20% | 4 | 0.8 (=4*0.2) | 4.5 | 0.9 (=4.5*0.2) |
| Ease of Communication | 5% | 5 | 0.25 (=5*0.05) | 3 | 0.15 (=3*0.05) |
| Total | 100% | 3.4 | 4.2 | ||
Figure 2: Decision-Making Matrix Download Template
How NeuronicWorks Can Help
Outsourcing and in-house development both have their own advantages. Deciding which to pursue ultimately depends on the specifics of your project and the needs of your company. You will need to evaluate the different alternatives to see what makes more sense in the short and long term for you.
As a full product development house, we understand what it takes to bring a design/product from the initial concept to the manufacturing stage, and even beyond. We’re proud to say that we have all the in-house resources—from hardware, firmware and software to industrial design, UI/UX, certification and manufacturing support—to develop products in a time and cost-effective manner.
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