Offshore Versus Onshore Product Development: Here's the SkinnyOffshore Versus Onshore Product Development: Here's the Skinny

Offshoring has been with us for a long time. From manufacturing, to customer service, to technical support, roles in a variety of functions are often sent to offshore locations. Not surprisingly, product development activities have been offshored to sites in Asia and Eastern Europe.

Yet while the offshoring of product development is still significant, a small but growing reverse movement is happening, as product development activities are being redirected to domestic locations. There are four key drivers for this trend:

1. Security Concerns Around Intellectual Property

Issues related to protecting intellectual property and know-how used in product development have been legendary -- particularly in mainland China engagements. There have been many instances where controls are not in place (or even respected) at the corporate level related to protecting clients' confidential information and plans. In some cases, corporations have been able to forge relationships where intellectual property is protected at a high level. However, another important potential security risk still lies outside the control of both the client and the Asian partner's corporation: the individuals who are privy to confidential information.

While staff turnover certainly exists in the US and European markets, individuals moving from company to company are legally bound to protect the intellectual property of their prior employers, these legal protections, even in the rare instances when they are in place, are not common or routinely respected in offshore workforces. Employees frequently leave and go to work at direct competitors' enterprises, bringing with them valuable trade secrets and intellectual property.

Worse, the turnover of staff in many offshore economies is very high. This creates an open-door channel for trade secrets to leave client control. In such economies, a key driver is a strong focus on wages -- with lower loyalty toward the corporate entity. Simply stated, engineers will frequently change companies if there is any way to achieve even a minor increase in direct compensation. While there is turnover in the US economy related to compensation, it is rarely the sole rationale for taking a new position; often, other factors serve to offset minor salary discrepancies.