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R&D Outsourcing As The Next Big Thing In Tech

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Ed Ossawa
Senior Contributor

Digital marketer turned technical PM.

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When it comes to tech solutions development, any B2B or customer-oriented product goes a long way from initial idea to implementation. As soon as you have finished estimating business value, outlining core functionality, and drafting the product specs, you’re done with only the first stage of this complex and multi-faceted process. As a business, you basically have 2 options to address your research and development (R&D) endeavor:

  1. Build your own in-house R&D, or
  2. Outsource your R&D function to an external provider that has all it takes to future-proof your business idea and create a clickable prototype or a minimum value product (MVP) to attract further investments for the full-fledged product development.

With the first option, brace yourself to embark on a long and restless journey. With the second one, you can significantly save costs, access unparalleled expertise and validate your business idea feasibility without making a substantial investment.

Here’s a brief overview of the essential steps you will have to take on this way:

1. Tech talent hiring

If your company is not specializing in software development, you probably don’t have a full-fledged dedicated development team working on your premises. Even if you do, chances are you will have to enhance it with qualified niche specialists, especially if you are planning to develop something genuinely groundbreaking. Here’s where the real hassle starts: the widely recognized problem of developed economies is tech talent shortage. As of today, nearly 1 million software development jobs in the US are likely to remain unfilled by 2020.

A survey conducted by KMPG in partnership with IT outsourcer Harvey Nash asked over 3,000 CIOs if they are facing any hiring challenges, and a staggering 65% answered they do indeed. Understandably, the salaries commanded by qualified software developers stretch far beyond reason. Alternatively, outsourced research and development is a viable solution to a problem and a natural market response to a talent shortage.

2. Retention

Now that you’ve spent months selecting and hiring the right talent for your project, it’s still too early to rest on your laurels. Unless you want your R&D developers headhunted by competitors, you will have to think of complex retention strategies to ensure they stick with your company. Offering hefty compensation packages (in addition to six-digit salaries) is one of the most widely applied strategies when it comes to attracting tech workers.

Usually, such perks and benefits include health insurance, retirement plans, gym memberships, free meals, paid vacations, and sick leaves, etc. Tech giants like Amazon, Netflix, and Microsoft can afford to offer something really fancy: for example, to pay for egg freezes for their female developers to alleviate their ‘ticking clock’ anxiety, so that they could focus on work. Needless to say, such companies have full-fledged HR departments managing employee compensation packages and working on retention strategies. If you are an SMB or a startup, you won’t be expected to go this far. Some kinds of health benefits, though, and a retirement plan will be mandatory.

3. IT infrastructure investments

Before you plunge into in-house R&D initiatives, make sure you are ready to meet all the technical requirements they usually involve. In-house development projects place high demands on an underlying infrastructure: you will have to provide your development team with ideal platforms and tools for building and testing products. You may argue: now that the cloud age is finally upon us, we can rely on cloud-based infrastructure solutions to meet our development goals. Managing enterprise-scale cloud-based infrastructure is a costly endeavor. Acquiring professional software packages and licenses is also quite expensive. Moreover, complex billing is usually quite frustrating. Offshore R&D centers, on the other hand, are fully equipped with full sets of tools for effective software development. If you opt to leverage outsourced research and development, IT infrastructure support and procurement will not be your hassle!

So why do businesses opt to keep R&D in-house? Most of the time, organizations are willing to retain the expertise and know-how to ensure they stay competitive. With tech R&D outsourcing, though, you can piggyback on the existing capabilities and infrastructures of outsourcing service providers with proven methodologies, expertise, and experience.

R&D outsourcing: success stories

If you feel the idea of R&D outsourcing to countries like Ukraine or other offshore destinations needs more support statements, below are some examples of successful projects built using outsourced R&D.

Skype 

This may come as a surprise, but the worlds 1# video chat platform emerged as a result of outsourced R&D. Initially, a brainchild of Niklas Zennström, from Sweden, and Janus Friis, from Denmark, Skype was created by developers based in Estonia and Ukraine.

Opera 

This popular Internet browser started as a project of a Norwegian telecommunication company Telenor. After it branched out into a separate company Opera Software AS, it had relied on developers from countries like Poland, China, Russia, Ukraine and many others for support and development.

Wix

One of the most widely used web development platforms, Wix has Israeli ownership. Headquartered in Tel-Aviv, Israel, the company has R&D centers in many countries, including Ukraine, with 500+ developers in Kyiv and Dnipro.

How IT Outsourcing To Ukraine Helps Israeli Companies Stay Ahead Of The Curve

Alibaba

An Asian alternative to Amazon and the world’s largest e-commerce platform creators initially outsourced its R&D development to countries outside China.

MySQL, Github, Basecamp,  Slack (hailed as the fastest-growing SaaS startup in history) and other world-renowned projects were built through outsourced R&D.

Outsourced research and development have become so common, ‘Big Four’ tech companies (Google, Amazon, Facebook, and Apple) are using it as well, reaping revenues and enjoying its numerous benefits.

Why outsource R&D to Ukraine?

R&D outsourcing to Ukraine is an attractive alternative to in-house software development for a number of reasons. Broad talent pools, good work ethics, high development standards, seamless communication, compatible culture, and competitive pricing make it one of the world top R&D outsourcing destinations. All of the world’s leading tech powerhouses including Samsung, Skype, Microsoft, and Playtech run their remote R&D centers in Ukraine.

Tips and Tricks of Hiring Software Developers in Ukraine

According to a recent UnitCity report, 18 Ukrainian companies have made it to the Top 100 IT Outsourcing companies list. Thus, overlooking Ukraine’s impact on the world’s IT industry would be unreasonable.

With its vast experience in offshore development, R&D outsourcing to Ukraine doesn’t come as a surprise to locals. A large percentage of Ukrainian IT specialists work on R&D projects for Western customers. So far, the customers have mostly been discreet as to their development team origins. Lately, several companies have openly announced their partnerships with Ukrainian R&D centers. The US-based data storage solutions vendor Violin Memory, global web analytics giant SimilarWeb and European media platform glomex (part of the German media holding ProSiebenSat.1.) have publicly revealed they are leveraging different collaboration models to work with Ukrainian developers.

“Firstly, Ukraine is in the top five most educated countries worldwide, and developers here are in abundance”, – says COO of Violin Memory Ebrahim Abbasi. “That’s why it is a suitable destination for tech companies. Before making a final decision in favor of Ukraine as the place for creating our remote R&D, we evaluated many places, including Romania and India. We paid attention to demographics, level of education, availability of resources, and most importantly, the willingness to go an extra mile”.

As a result, Ukraine became their best choice; the company started with 50 Ukrainian developers and is planning to increase their number as their products grow. Starting small and scaling up as the business develops is one of the best approaches, easily applied with outsourced R&D.

Ultimately, why set up your own software dev team in-house, bother with a lot of hassle if you, as a startup or product company, can outsource R&D to specialist providers as your proof-of-concept endeavor? If your business idea proves feasible, you can either transfer knowledge and resources from offshore to in-house or continue using your outsourced R&D for your core product engineering.

Do you need help building a dedicated/extended Team or getting ad-hoc resources for your software development project fast and cost-effectively?