Create Successful Outsourced Digital Product Development Partnerships

Technology disruption has accelerated the pace of innovation and growth, especially in the wake of global shifts witnessed in the past year. Organizations of all sizes are outsourcing their digital product development projects to meet ever-changing customer expectations for innovative and future-ready products. However…

…20% to 25% of all outsourcing relationships fail within the first two years, and 50% in the first five years – Dun & Bradstreet’s Barometer of Global Outsourcing*

How can you successfully outsource your product development needs to a trusted technology partner and not fall into this 20% – 25% group? I will show you how in this blog.

First, let’s dive into the trends and evolution of digital product engineering, and the value it can provide to organizations who wish to accelerate their pace of innovation and achieve faster time-to-market.

Trends Likely to Impact Digital Product Engineering in 2022

The current digital paradigm influences independent software vendors and enterprises looking to productize their digital offerings for better ROI. Whether generating increased top-line growth, delivering superior customer experiences, or building a strong bottom line, digital transformation creates a solid foundation for sustained growth. There is a substantial and ever-increasing shift towards digitalization in product development in the logistics, banking & fintech, healthcare, education, and retail sectors. This shift essentially began a few years ago when enterprises took the strategic decision to move from conventional on-premise systems to advanced cloud-based computing platforms.

Global spending on Digital Engineering is expected to reach $911 Bn by 2023 – Zinnov**

Several key trends have accelerated the global shift towards an outsourcing model, highlighting fundamental benefits and expectations of organizations racing forward in their digital journey.

• Technology acceleration is no longer a choice but now essential in today’s globally integrated digital economy
• Mass digitalization has resulted in new competition and new business models that create fresh challenges
• There is increased acceptance of working with remote teams
• Organizations of all sizes are leveraging technology to deliver superior digital customer experiences and to boost operational efficiency
• Businesses are becoming more data driven and expect real-time data visibility across organizational silos, for more transparency within the enterprise
• Software advancements have put enormous pressure on businesses to deliver innovative products and display technology leadership
• More organizations are leveraging the global talent pool to plug resource and skill set gaps in product development
• End-user preferences have tipped towards convenience, rapid service support, instant gratification, and consistently rich digital experiences
• Rapid business model transformation is creating intelligent digital operating models that build resiliency, boost technology ROI, and reduce transaction cost

These trends are a significant contributor in the rise of outsourced product development initiatives to third-party service providers. Businesses need a software partner who can decisively toggle between open-source technologies and plug-and-play architectures while integrating newer models into existing platforms.

Benefits of Outsourcing Digital Product Development

Outsourcing has accelerated product development not only in large enterprises but also for small and medium businesses. A recent survey by B2B research firm Clutch¹ indicates that 8 out of 10 business owners will utilize third-party services to perform business-critical operations. Outsourcing helps organizations drive growth and offers the following business benefits.

• Increases efficiency and saves time
• Helps businesses achieve scale
• Streamlines multiple business processes
• Provides access to skilled resources
• Facilitates dedicated SME support
• Expands technical capabilities
• Accelerates innovation

A business’s digital offerings are a representation of their brand and directly impact customer satisfaction and retention. Organizations that outsource should have high expectations of the partners they engage with to help them deliver on their digital aspirations.

Client Expectations from Product Engineering Partners

IT or C-level leadership want a digital engineering partner to function as an extension of their team and work closely with their employees. They look for engineering partners who not only have the right talent and skills but the strategic guidance to help take their vision and make it a reality via a digital strategy, technology roadmap, and more.

They look for a dependable partner with a flexible operating style, consistent communication, and strong cultural alignment with their teams. The relationship between you and your outsourced product engineering partner will be unique but to be successful, they must be able to:

• Adopt, develop, and sustain innovation
• Provide scale without compromising on quality
• Add value to the engagement through ideation and an extended knowledge base
• Share what they have learned from their diverse experiences

Recommendations for CXOs Looking to Outsource Digital Engineering Projects

For an outsourced product development engagement to be successful, it is important to first identify your objectives of the partnership – Are you looking for an application vendor to manage specific aspects of your software development OR a collaborative partner who can assist you with the full spectrum (an A to Z) of the product development lifecycle?

Once this is clear, here are seven aspects to consider when looking to onboard a third-party product development specialist:

1. Does your partner have the necessary capabilities (resources, infrastructure, security policies and practices, technology skillsets) to make your vision a reality?
2. Can your software partner work with both open-source technologies and plug-and-play architectures?
3. Is your partner and ecosystem in alignment with your operational culture and ethos?
4. Can your partner think out of the box and provide strategic direction?
5. Can your partner take ownership of the product ecosystem and make technical decisions independently?
6. Does your partner operate with flexibility or are they stringent in their practices?
7. Is your partner open to working with hybrid teams and multiple vendors?

What differentiates a good software engineering partner from the rest? The ability to extract specifics out of abstract requirements and bring them to fruition. The best way to evaluate your engineering partner’s strengths and capabilities is to start with a Proof of Concept (POC). A POC will allow you to assess the robustness of their technology landscape and the overall fitment of the partnership.

Technology commercialization is possible for those who leverage the expertise of an outsourced product development partner. Want to hear more on the subject?

Watch our latest on-demand webinar where I discuss this and more.

References

* https://winatalent.com/blog/2020/01/why-software-development-outsourcing-fails/

** https://www.prnewswire.com/news-releases/appetite-on-digital-engineering- spend-is-on-the-rise-as-companies-continue-to-strengthen-their-technology-arsenal-to-future-proof-businesses-from-covid-19-and-beyond-says-zinnov-301313743.html

¹ https://clutch.co/bpo/resources/benefits-of-outsourcing