With businesses going global, product companies are facing stiff competition with changing consumers’ need and rapid technology advancements. This has led product companies to launch more and more new products with advanced features. This has definitely helped companies in maximizing their revenues but launching new products in a quick succession of time has shrunk the product development lifecycle, and as a result product companies are finding extremely difficult to increase, or even just maintain the revenue from maturing products.
Sustaining old products have given a tough time for product companies, close to 40% of investments on products are focused on product sustenance and support, and up to 30% of operating expenses for a mature product line comprise customer retention and service. This is a huge cost for any product development company. Above all this eats up lot of bandwidth of the core engineering group who can focus on new product development. All in all it becomes a Catch-22 situation for companies.
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Looking at the industry trends and rapidly evolving product development ecosystem, senior executives have started looking out for partners to outsource their product sustenance and support division. Outsourcing product sustenance is not just a cost centric decision anymore; it has turned out to be a strategic decision where a company can address time-to-market challenge and a shortage of engineering talent. I need not to say how important it is for a product company, to launch their product at the right time in the market.
Although there are number of advantages of outsourcing but I just want to highlight few points that why any senior executive will think of outsourcing their product sustenance and support department.
1. Retaining Tech Talent
Startups and enterprises complain that they face tough time in retaining their technical talent, especially engineers working on product sustenance. This could be the prime reason why a product company would think of outsourcing product sustenance and support.
2. Focus on Innovation
Product companies want to spend time on new product development and innovation rather than product support. Even from the ROI point of view new product development makes more sense and is more significant for any product companies. This is the prime reason why companies look out for partners to support their matured products.
3. Improving bottom line
Certainly by outsourcing product sustenance and support activities, an organization can easily save up to 20-25% of their total expenses, which they can use in innovation and new product development. This will certainly impact the bottom line of the organization and will give a better profit margin.
4. Strategic business model
Product companies are looking at their outsourcing partners as not just bottom line reduction centers but as a strategic partner who can complement them in their product development initiatives as well. Creating a strategic partner means a lot to a product company; hence they look out for companies with services mindset, mature but flexible delivery models and ready frameworks for delivering excellence and continuous improvement of service levels.
5. Customer support
It becomes very difficult for any senior managers to simultaneously manage a team of product development engineers focusing on building an innovative product and another one supporting multiple products across multiple regions. Hence they look out for partners who can analyze support requirements, set up an effective ticketing system, reduce average handling time, and achieve 100% SLA compliance.
These pointer are based on my research and understanding. There could be many reasons for a company to outsource or not to outsource their sustenance and support division. But any product company (if they are outsourcing their product sustenance and support) will definitely look out for partners who will take complete ownership of their product sustenance and support services.
