Outsourced design : strategic implications and effective management of dispersed, inter-firm product development

Abstract

The growth in outsourcing is one .of the dominant trends in business today. As the acceptance of outsourcing grows so does the willingness to outsource more functions, some of which are critical to a firm's success. For a company that develops innovative products, the most crucial function and typically the last to be outsourced is product design. Yet there exists a growing trend toward more outsourced design, particularly in the electronics industry. This trend has been accelerated by the appearance and growth of electronic manufacturing services (EMS) companies and original design manufacturers (ODM). In deciding to outsource a company must first understand its core competencies or key competitive advantages. These competencies typically take the form of technological know-how, unique process capability, or valuable partnerships. This work proposes that when outsourcing the design of products with integral type architecture products, the strength of the collaborative relationships is the most important of the triad. The way these relationships are considered and managed is crucial to their performance. The nature of the relationships is first considered based on a literature review and woven throughout are excerpts taken from interviews conducted at a large product development company that is in the process of growing its outsource design capabilities. The work concludes with some recommendations for the firm to improve the performance of its current relationships.