¶ … outsourcing design and innovation. The issue has become more topical of late as the practice has become more widespread. There are benefits, such as lower development costs, associated with the practice that makes it popular with some companies. There are costs, however, in that the product will typically be less differentiated if companies buy off-the-shelf designs or other low-end technology. While the story is not about any company in particular, if I ran a telecommunications hardware company I would have to think about whether or not I wanted to outsource this aspect of my business.
Alternative Solutions: Without a problem, there are no alternatives to consider. For firms in this industry, there is a decision that they need to make with respect to how much innovation and design they would like to outsource. If all is outsourced, the...
In some other cases, companies will outsource their low end, "commodity" products, in order to meet the pressures of price competition. With this option, the company can sell design as a feature in its high-end products, but will be able to remain competitive in low end as well. The case cites Apple and its choice to keep its innovation outsourcing in house. One outcome of this choice is that the company as little ability to compete at the low end, because its costs of development would have to be too high. For Apple, this has led to a strategic decision to pursue only the high end.
The final option, therefore, is to ensure that all of the development for innovation remains in house. This might result in a product being higher-cost, but…
