Forrester: - Making Leaders Successful Every Day

Product development — though small in size — is one of the fastest-growing segments of the offshore services market. As companies across a range of verticals, from aerospace to medical instruments, grapple to add more value-added software to their product while cutting their overall research and development (R&D) costs, this offshore segment will expand dramatically. Its unique requirements mean that it will develop separately from traditional outsourced IT work. The overall offshore product development market will consist of three different segments: 1) R&D and embedded, 2) classic engineering, and 3) software. However, taking product development offshore is not a quick fix for firms. The organizational resistance, the hurdles to running a successful captive, and the process investment needed to manage third-party work half a world away dictate that firms plan a three-plus-year migration.