Global product companies or Independent Service Vendors (ISVs) are always under performance pressure as would any of us in our respective jobs. They strive for market expansion, increased product features and new product ideas and face the regular constraints of decreasing profitability, increased competition, dearth of resource and skills and rising costs with simultaneous pressure to upgrade and widen product offerings while using fewer resources.
Product-development planning remains crucial to organizations' survival.
Some key challenges (and hence success factors) are as follows:
Development Speed: Faster and faster is the mantra of product development. One way to hasten development speed is through digital design, analysis and collaboration tools to get products to market faster. Using collaboration software, file-sharing software and more, engineers can transform ideas into digitized virtual designs for testing and viewing a new product in three dimensions, in months rather than years.
Platform Flexibility: Every product guru will acknowledge that a key success factor of a product in the market is its platform flexibility. This results from using modular product architecture to provide more product variety to customers. Computer aided design and engineering tools permit easy reuse of already-completed design files. All these files make product design much more efficient, cost effective and accelerated than ever before.
Complexity Management: A product stands apart from an application in its complexity. It involves engineering complex systems through analysis of interaction networks. Research has resulted in network modeling methods to examine a network of interacting elements that are in complex systems being developed. The challenge of engineering complex systems with many components, sometimes called systems engineering, remains a key success factor.
Customer Involvement: Involving customers to improve the product features and user experience is an open secret but perhaps pose the biggest myriad of challenges to a product developer. Some companies are using the order information about what features, components or configurations customers are ordering and are interested in, and they use that in real time, or as quickly as possible, to reconfigure the next generations of the product. Paying attention to these trends can help managers and design engineers plan their product design processes and achieve their goals with higher efficiency, lower cost and less time to market.
Outsourcing and Offshoring: Finally, the biggest challenge remains as optimizing in-house skills, supplier skills and capacity, international operations and new markets. Sometimes outsourcing saves considerable cost and sometimes a little cost, but more importantly, they're actually taking advantage of global product development networks, largely to access new markets in places and leverage global talent pools. Let us look at the outsourcing opportunities closely.
Modern communication tools and the Internet have reduced the need for product development partners to be geographically close. Indeed, product development is increasingly being divided into parts, created in multiple centers around the globe, and brought back together for integration and testing. The ability to succeed at global project management is the key challenge in this model.
As the challenges grow in the face of global inflation, strengthening currencies, slowing economies, dried up venture funds so will be the opportunities, to springboard ahead of competition by globalizing. Two immediate channels to bring in the advantages of globalization are building captive centers across the globe and the other being outsourcing. Both have its pros and cons, but given the scale of expansion and flexibility, outsourcing is well acknowledged as the greatest opportunity in the globe for the entire product engineering ecosystem.
The opportunities using outsourcing, leveraging local presence of partners, 24x7 development and support centers, multi-dimensional skills and matured processed and best practices, are fairly known as follows:
At this stage the founder(s) start pondering about their next step. Must they exit ? If so how ? Should they take the company public or should they sell the company to a larger player. Should they step back from the company and let professional management take over completely? The answers to these questions decide the path which sometimes leads them to the beginning of their journey once again i.e. to start another product company.
a) Skill leverage
b) Speeding up time to market
c) Global market expansion
d) Superior Customer support
e) Enhancing product development processes
f) Localization benefits
The emerging best practice for software development is to decouple product design and development (along with testing and support) elements in the value chain. The life cycle of product development is increasingly being divided into phases that require internal expertise (and value-adding) which is essentially in product definition and design phase where as steps that are highly commoditized include development, testing and support.
The division of responsibilities between IT personnel and outsourcing staff is a critical factor in the success of the project specifically and the outsourcing relationship generally. Moreover, outsourcing vendors have made tremendous advancements in the metrics for quality and investment that drive greater efficiency into the overall process.
Offshore is usually regarded as a tool for labor arbitrage. However, it has its hidden benefits like higher quality and development discipline of the “right partners” which lead to greater efficiency and productivity levels that are sometimes superior to the in-house engineering organizations of ISVs. Moreover, during the coming years, outsourcing vendors will expand further into the value chain of product development. Additional expertise are emerging to dominate emerging technologies (e.g., Web2.0) and develop deep vertical expertise.
Let me use a brief Innominds case study here to bring out a product engineering story using the global resourcing model.
An Innominds Case Study
A Bay Area company develops and sells a compatibility server, which is an affordable and high-performance relational database that is compatible with popular databases. The Compatibility Server enables applications to run against consolidated databases with minimal to zero rewriting. This compatibility server helps customers who are looking for reduced operational expenses on licensing, maintenance and hardware, reduced complexity by consolidating multiple database and single/simple data access and ease of migration.
With its flagship product of a database server, the company was getting into a high level competition zone. The business situation demanded aggressive scale-up and a high performance next generation product. In this scenario, the need of the hour was a product engineering partner to design, build and test the features of its compatibility server, leveraging the economies of scale and global talent pools. The requirement was to build an extended offsite engineering and QA team with the expertise of building database kernel and drivers, which will co-develop, test and release the product for multiple platform certifications.
In Innominds, the company found that competent partner and an expert in building complex database servers and applications. Further more, utilizing its brand pull, Innominds attracted the best available talent from the industry and technology schools that was one of the primary success factors of the outsourcing engagement.
Innominds started building high performance development and QA teams for database compatibility, database server internals development and quality engineering for the customer in early 2007. Agile ramp up of the team and executing the knowledge transfer flawlessly using innovative training methodologies in a blended offsite-onsite model was the key factor to begin the engagement with quick wins. Innominds brought in leadership in database internals and cross experience in multiple RDBMS and connectors that created the new features in the compatibility server.
Innominds created long term value to the customer in mitigating maintenance and QA risks and reducing costs by remote management of the server regression beds by more than 45%. The team that Innominds created utilizing a global pool (there are talents from outside the country as well, namely from Vietnam!) is a pillar of the customer’s engineering success and market growth today.
To conclude, today’s nextgen software products are evolving with a distinct global flavor. The products are developed with the globalization model already deployed by large companies like Microsofts and IBMs, but are extending down to regional and specialty players — enabled by offshore outsourcing. Offshore vendors are increasingly being involved in architecture, development, and deployment, ranging from embedded products to software and hardware design. Products that are not born out of the Global Sourcing model will lose its competitiveness in the coming years.
Published in
1. HYSEA Infowire, 18th issue May 2008
http://www.hysea.in/18infowire-article2.htm
2. Smart Techie October 2008 edition
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