Ivesia Solutions Inc

When you look at ISVs annual reports, their R & D spend remains consistently in the range of 15% to 20% of their turnover. With the global slowdown, many of them have reduced their R & D spend considerably and some of them even went to the extent of moving their product releases to a future date just to ensure that their liquidity is not compromised.

Mckinsey’s survey on R&D spend says that high performing innovators that have derived maximum benefits from R & D have in fact increased their R & D spend during 2009. These are companies that completely understands that innovation in product development not only improves the bottom line but also increases overall R & D efficiency. Many of these high performing ISVs adopt strategies that doesn’t really reduce their R & D activity and at the same increases the value of every R & D dollar spent.

It works in two ways for them – there are instances where they outsource their professional services and instances where they outsource the product engineering and quality. Outsourcing professional services work ensures that it frees up their core team’s time allowing them to focus on innovation. In the second case, they still manage the core of product management and marketing and outsource the product engineering and quality of their products.

This allows these ISVs to excel, drive significant added value to its stakeholders and outsmart competitors. This typically has been the case with mature ISVs and how does it work for the early stage ISVs? It is equally applicable for start-ups and emerging companies to outsource their innovation.  It allows them:

• to release their products to market faster
• access to better processes and hard-to-find skillsets without the associated overheads.
• better customer reach due to mature professional services team  

Essentially, innovation outsourcing is allowing significant changes in the ISVs business model and a mature multi-sourcing ecosystem is evolving.