A recent article in Strategy+Business attempted to address The Elusive Right Path to Engineering Offshoring. They proposed a five step plan to making it work, and while the advice was okay, I think the article missed the point. In my view, the right path to engineering offshoring is not to do it at all if you are developing products for the local marketplace.
While I will freely admit that there is innovative talent in the outsourcing hotspots of India and China, it’s not necessarily the right innovative talent for you. As a for-profit enterprise, an innovative product alone is not enough — you need an innovative product that will sell in your target market, and, frankly, just because something is hot in India or China does not mean it’s going to be hot in North America (and vice versa). In terms even a layman could understand, just like most of the population in India would not buy a Big Mac, most of the population of North America would not be that interested in a McVeggie or a Lamb Maharaja Mac (although the doctor would prefer if his local MacDonald’s served a cheese-free Chicken Maharaja Mac instead of a Big Mac and a McAloo Tikki Burger instead of a Junior Hamburger).
Taking a more technical focus, while sales of a low-cost affordable car like the Tata Nano will probably skyrocket in India, such a small, cheap car would never even leave the showroom for a test-drive in North America as long as fuel prices are half of what they are in Europe. And clone merchandise will never reach the mass market in North America that it has in China (and not just because of much better intellectual property laws, but because of the high status North Americans bestow upon to brand name goods).
However, on the flip-side, if you are trying to create innovative products for international markets, you should certainly, at the very least, augment your R&D organization with a local-team on the ground in the target market. An experienced engineering or development shop in China or India would be much more adept at producing killer products for the local market than you would be thousands of miles away in the midst of a different culture. In this circumstance, the advice of the article applies, and I encourage you to read the article and take its advice.