Is it Safe to Outsource Your R&D? How to Make an Informed Decision

R&D is the life and blood of every business, no matter the niche. It helps you improve existing processes and invent new ones that pave the way for innovation, revolutionizing an industry, or the whole world. But such innovation involves a huge cost. Apart from attracting a huge investment (in terms of time, effort, and money), it also needs a very skilled team to carry out the actual research and development. Resultantly, many entities are increasingly making a conscious decision to outsource this process to R&D suppliers. But the question on everyone’s mind is the same – how safe is the process and the intellectual property thus developed?

Most businesses, therefore, shy away from contracting out their core functions and R&D. However, with the world growing increasingly competitive, there is an urgent need to ensure that all novel endeavors are fruitful and stay ahead of the competition. Thus, the need to de-localize or outsource your R&D efforts can hardly be overstated. If you are looking to outsource this process or want to learn how it can be made a safe choice, here is how you should make an informed decision.

The process of choosing an ideal R&D supplier involves careful consideration of various factors; right from obvious cost issues to the less obvious streamlining of organizational identities. Here, we look at the important factors you should consider before outsourcing your R&D for the best results.

Figure: Factors to consider before outsourcing R&D

1. Competence of R&D suppliers

One of the biggest factors when deciding on a third-party R&D supplier is to consider how competent and unique your research provider is. Since outsourcing involves hiring a third party, it makes sense to do your own research on them; ironic, but necessary. Your supplier must be dynamic and valuable when it comes to the services being offered. How do you judge that? By looking at their organizational design, its resources, and the kind of technical expertise they offer. It needs to align with your requirements to ensure the best results.

R&D is a very important aspect of every entity’s growth strategy. Without the effective implementation of the same, a lot of time, effort and money, can go down the drain. Therefore, it is extremely necessary that you do your due diligence.

2. Organizational identity and costs

It is also prudent to ensure that the costs involved when outsourcing an R&D branch make sense; not just on paper but also practically. If the costs are low when opting for the supplier, what are the reasons? If the costs are higher, why is that? What unique advantages are you being offered, and does the benefit match the cost? These are all important factors to consider.

But of course, do not let the bottom line fool you. With R&D, this can never be the be-all and end-all. You also need to analyze various qualitative and intangible aspects, like, whether your organizational principles match. Do you believe in the same principles as an organization? Is there space for a mutually trustworthy relationship? Analyze all these questions and ensure that your answer is 101% a yes.

For without it, you can go down a dangerous hole that can seriously hamper your innovation efforts. The R&D supplied by the third party engaged by you needs to be in consonance with your goals and objectives. In the absence of this, the whole exercise can turn out to be futile.

3. Status of your current process

If there are current projects that are being developed, can they easily be deployed by the R&D supplier? The maturity of the process, its goals, and objectives need to be smoothly absorbed by the third party to ensure no hiccups are caused, affecting the ongoing work on a research and development project. It also tells you that the supplier is able to understand the company culture, its goals, and of course, its identity, which is extremely important and a positive sign when it comes to selecting the right R&D supplier.

So, as they say, lay everything on the table and have an open discussion. What do you expect? Can it be done? If yes, then how? Make sure you have answers to all these questions and more, before signing on the dotted line. Over-communicate, if needed, for it is extremely important at the beginning.

4. Supplier reviews and location

They say there is no better feedback than word of mouth. So why not ask around about your potential supplier as well. Go over the internet, ask an industry colleague and you will certainly get an inkling about the kind of entity you’re getting into business with. But of course, do not let it be the only deciding factor. It is important to take everything with a pinch of salt, whether good or bad.

Also, do not forget to consider their geographical placement. Is it necessary for your business to be in close proximity to them? Or can you outsource your R&D from anywhere in the world? Take stock of your requirements and list out potential suppliers accordingly.

5. Contracts and other obligations

Look at the standard contracts offered. Is something missing? Is there room to make healthy discussions during the R&D process? A good R&D supplier ensures that there is enough space for open discussions, reviews, bouncing of ideas to ensure a free-flow of information, communication, and consequently, innovation, which is the ultimate goal of all the parties involved. Though a no-brainer, many businesses face an issue regarding discussions and reworking ideas that can be best avoided when one is clear on their requirements.

If you are looking to outsource your R&D while ensuring a smooth sail, keep this checklist handy. It offers many advantages right from increasing your business’ competitiveness to reduced costs, but only if managed correctly. Ensuring that you research your R&D supplier, align your goals, and undertake regular feedback to help you make this an important factor in positioning your business strategically in your industry and beyond.

Apart from this, a well drafted NDA agreement with a proper confidentiality clause can make this whole experience an extremely fruitful and beneficial one for all the parties involved.

-The Editorial Team

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