R&D as a service: the strategic role of outsourcing in product development

R&D outsourcing offers substantial advantages for companies of all sizes. It provides access to specialized expertise and resources that might otherwise be out of reach or be a financial burden, especially for startups and smaller companies. In addition, it can reduce costs and speed up time-to-market for new products.

“One of the key advantages of outsourcing is access to niche expertise. In today’s tech-driven market, many R&D projects require highly specialized skills or advanced technology that may not be readily available within the company,” Maciej Sibiński, VP of Embedded Software and Hardware Solutions at Etteplan, explains.

Companies undergoing digital transformation, for example, can access cutting-edge technologies and skills in areas like AI, IoT, and cyber security. Maintaining a large or highly specialized in-house R&D team can be expensive, particularly with fluctuating project demands.

“Outsourcing R&D offers flexibility, that allows companies to scale resources up or down as needed. Not only does outsourcing make R&D more cost efficient, but it lets companies focus on their core competencies. A smart outsourcing strategy is vital for staying competitive in the market,” Sibiński continues.

By entrusting R&D projects to experienced professionals, companies can concentrate on their primary business activities and strategic goals, leading to better overall performance and growth. Additionally, outsourcing R&D can give a competitive edge to companies in fast-paced industries, allowing them to accelerate development and bring new products to market faster than their competitors.

To successfully outsource R&D, companies have turned their eyes towards a modularized design approach. By breaking down products into interchangeable modules, companies can streamline development processes, reduce costs, and enhance flexibility.

One of the primary benefits of modular design lies in its flexibility and scalability. Companies can easily add, modify, or replace components without the need to redesign the entire product. This allows companies to react to end-customer trends, changing regulation, or market-specific needs swiftly. From the outsourcing point of view, modularity gives companies a low hanging fruit to pick.

“Internal R&D efforts often lean towards innovation rather than lifetime extensions for existing products, although addressing emerging demands can create additional revenue with moderate effort. An outsourced R&D team can solve this need efficiently,” Sibiński says.

Additionally, the modular design approach is particularly advantageous in outsourcing scenarios, where specific modules can be developed externally without exposing the entire system. This helps to mitigate many risks associated with outsourcing.

“Protecting intellectual property, for example, becomes much easier as companies don’t have to share any sensitive information to external partners. They can simply choose which modules to outsource and have in-house teams working on most critical areas,” Sibiński explains.

A prerequisite for modular design is master data management. When it is properly done, companies can control what information is shared with a partner. They can also ensure that all modules are compatible, and that information is managed centrally.

Overall, modular design has the capability of accelerating the R&D process. Leveraging pre-tested and verified components enhances quality and reliability. While a module tested for one product may not fit all, it provides a solid foundation, reducing the need to re-establish quality assurance or verification processes. This allows internal teams to concentrate on creating new features and exploring innovative applications, enhancing the final product's quality and reliability.

Several emerging trends and technological advancements are set to shape the future of R&D and outsourcing. Artificial intelligence, for example, is poised to revolutionize R&D, enhancing efficiency and enabling faster innovation. It can analyze vast amounts of data, identify patterns, and suggest optimizations that would be impossible to achieve by hand.

“While AI itself does not innovate, it serves as a powerful tool to assist human researchers in discovering new possibilities and accelerating the innovation process,” Sibiński points out.

As training artificial intelligence algorithms requires plenty of accurate and relevant data, companies with good master data management are better off. They can manage large amounts of data and utilize the opportunities offered by AI more effectively and reach better results.

However, with greater digitalization comes heightened concerns around cybersecurity and data privacy. Companies increasingly rely on outsourcing partners who can offer robust cybersecurity protocols to safeguard intellectual property and other critical information.

Another growing trend lies in tightening environmental regulations and growing consumer demand for sustainability. Outsourcing partners with sustainability expertise play a crucial role in helping companies pursue more sustainable product development and ensure compliance with environmental, social, and governance (ESG) goals. This also closely links to managing legacy products, where R&D outsourcing will become increasingly important.

“As companies handle a growing number of legacy products, effective lifecycle management will be crucial. Outsourcing provides the resources and expertise needed to keep these products updated and compliant with new regulations, ensuring they continue to meet customer demands,” Sibiński concludes.

Find out how to make product lifetime extensions effortless with Etteplan’s fixed-price R&D service!