Is it a good idea to outsource product Management?

"Who on earth would outsource product management?"

It’s not an uncommon question, given that product management is so intrinsically linked to the long-term success of your product that it might seem unnatural to trust anyone else with it.

Yet, according to Statista 74% of businesses worldwide are outsourcing IT services, with a further 87% expecting to increase or maintain their use of IT outsourcing. With outsourcing being more accessible and easier to manage than ever before thanks to instant communication technologies, there’s now scope to outsource functions that were previously strictly in-house roles.

Product management is one of the latest examples.

In recent years, outsourcing product management has become steadily more popular - both because companies are outsourcing related functions more and because doing so has several advantages if you do it right.

Is it a way of working that would fit your own organization?

Ultimately, that call rests with you. You know your organization’s strengths, weaknesses and general needs better than anyone.

What we can do is provide you with the right info to make that call, so you’re as well informed as possible about what your choices are in this area.

Below, we’ll cover:

• What outsourced product management is
• When you should consider outsourcing product management
• The pros and cons of outsourced product management

The basics

Here’s a quick ‘101’ reference guide for anyone new to product management outsourcing (or to outsourcing in general, for that matter).

If you’re clear on this, feel free to skip straight ahead to the next section - we’ll catch up with you there.

What is outsourced product management?

Outsourcing is paying a third-party company to manage a specific function for you.

When you outsource your product management, you pay an outsourcing partner to take care of some or all of your needs in this department.

Typically, companies outsource product management on a continuous basis, particularly if you’ve outsourced product development and maintenance to a third-party provider as well. Many software development agencies now offer outsourced product management as a value-added service. As it helps to ensure the success of the software products that they develop.

You can also hire freelance product managers as contractors to fill short-term staffing needs. It’s not super common as a practice, but the option is there.

Which product management functions can be outsourced?

Product management can be an incredibly broad role, and companies that outsource it might not outsource every role or task associated with it. You might not want a third-party product manager speaking on your behalf at an industry conference, for example, or to be put in charge of working with internal sales and marketing teams.

On the other hand, there are plenty of product management functions that work well when outsourced - and doing so might even provide a level of perspective you couldn’t gain from an internal employee. An outsider, free from the biases, office politics and emotional attachments everyone (no exceptions) on an internal team develops, is exceedingly well-placed to carry out:

• Competitive analysis
• Analytics on the success of existing products
• Requirements gathering for new products or existing product upgrades
• Prioritizing product features and developing product roadmaps
• User research and demographic analysis

When should you outsource product management?

To some extent, whether outsourcing product management makes sense will depend on factors unique to your organization.

That said, there are situations that call for some degree of outsourcing pretty universally. If you find yourself in one of the three listed below, it could be time to consider bringing in some external expertise.

1. Your internal team doesn’t have the expertise to manage a complex new product

Did you know that only 5% of product managers know how to code?

That might not necessarily be an issue if they’re managing an established product that your company has grown up with. But what about when the time comes to expand your product range? Will the management advantages that their organizational knowledge provides outweigh the technical know-how a third-party could bring?

Given that, in a recent challenges in product management report carried out by the 280 group, 56% of respondents said that their product managers’ skills were average or below average for the job at hand, we’d suggest technical ability is very important indeed.

When building a new product, there are a whole host of considerations that a technical-minded product manager is best placed to consider, particularly as the scope of what could change. Could your in-house product managers deal with a product that needed extensive AI capability, for example? Where would they start in terms of mapping the technical evolution of a product over the next decade?

Take an honest look at your product management function. If your internal employees lack the technical ability to manage a new, complex product it might be time to consider outsourcing part of the function - at least until you can provide adequate training or make some new internal hires.

New product launches have a failure rate of around 39%, depending on the estimates you read. If there’s a lot riding on the success of yours, there’s no point compromising it with a product management team that isn’t up to the job at hand.

2. You have Outsourced Software Development

Your internal product management team might be super talented, successful, and organized.

Equally, if you’re outsourcing product development and have no plans to maintain your new product in-house on completion, why make more work for them?

Product management requires regular, constructive interaction with the development team - and if you’ve outsourced this to a third-party provider it can often make sense to outsource product management along with it. This is especially true if you plan to outsource upkeep and maintenance of your product long-term. If the product is never going to be an in-house concern, why confuse things?

Whilst product management requires a good deal of collaboration outside of the product development team, you’re actually removing middlemen from the process in this instance - and by extension the potential for delays and miscommunication that comes with them.

An internal product manager needs to handle two-way communication between an outsourced product development team and internal functions like sales, customer experience and marketing. Rather than managing the product to the best of their ability, they risk simply becoming a go-between.

Outsourcing product management to your software development agency avoids this issue. An external product manager who interacts daily with the product development team communicates directly with your internal functions. There’s therefore no need for the extra step in the middle, and communication is clearer and faster as a result.

3. You’re having trouble finding the right hires

Product management is a notoriously difficult function to hire for. Very few people train specifically in it, which often means finding someone from within your own organization (often from engineering or pre-sales) to promote to a role.

This means that talented, established product managers are like gold dust and companies will throw everything at the wall to keep hold of them. Tempting one away from a lucrative, well-respected position elsewhere is no mean feat.

Avoid a lengthy hiring process, and give yourself enough time to train some stellar in-house talent, by outsourcing some of your product management functions. Using your software development agency’s resources or hiring freelancers to sit among your internal team will both work here - both will get your business access to the expertise it needs quicker than hiring or training an internal team will.

The pros and cons

There’s a lot to be gained from outsourcing product management - but like any business decision it has its risks.

Take a look at the pros and cons below, and consider how they stack up for your organization.

The pros

• Access to a wider talent pool: outsourcing connects you to a global network of talent which might not be available in your local area - particularly if you’re based outside of major population centres or tech hubs.
• A fresh perspective: ‘outsiders’ to your organization often spot issues, risks and opportunities internal teams become oblivious to. Whether it’s a new feature, update or marketing opportunity, outsourced project managers are no exception.
• Experience working with the right methodology: when building new products, working with the same methodology as your technical experts is essential. If your outsourced devs are used to working to a strict Agile methodology, they need a product manager that can work with Agile too.
• Cost savings: if you’re outsourcing offshore or nearshore, there are often cost savings to be had. Even if you opt for a US/UK-based partner, you’ll save significantly on hiring costs and the costs of maintaining an extended product management team.
• Time savings: outsourcing product management offers you near instant access to the expertise needed to make your project a success. Hiring, onboarding and training a team with similar expertise adds an unwelcome chunk of time to product development activities - and could be damaging if your strategy relies on being first to market.

The cons

• Loss of direct control: there’s a large degree of trust involved in handing over such a critical function to a third party. It can be difficult to persuade yourself (not to mention senior management) that a lack of in-house involvement in product management is a good idea. And, there’s always the risk that you pick a poor-fit provider for your needs, or one that underperforms.
• Potential management issues: if you’re bringing in contracted product managers, in-house teams can resent taking instructions from a perceived outsider. If you haven’t laid the groundwork for a cooperative and trusting relationship between your outsourcing partners and your employees, things could go south quickly.

So...is outsourced product management right for you?

No matter what your organization does, or what your product management requirements are, there will be risks associated with trusting a third-party outsourcing provider with such a core business function.

There are also risks associated with keeping all your product management activities in-house, particularly if you find yourself short of good hires, or lack the technical expertise required for complex new product builds.

Figuring out the right option for you is all about weighing up the risks and rewards of each, and comparing them against each other to create a plan of action that meets your needs.

Does the technical knowledge and experience you gain with outsourced product management outweigh the risk of selecting a poor-fit partner?

Is the benefit of a fresh pair of eyes during requirements gathering enough to spend time dealing with potential management niggles?

How much control can you really have if your product development is outsourced anyway, and what could be the consequences of this?

These are the questions you’ll need to ask. Be thorough, and give yourself time to think things through - there’s nothing to be gained by rushing into a decision.

Mitigating the risks

Risks can be mitigated with the right actions.

You could mitigate the risk of selecting a poor outsourcing partner by asking for case studies and following up on references, for example.

If you can mitigate your risks to a satisfactory level and the potential rewards are enticing enough, it’s probably time to give outsourcing some of your product management needs serious thought.

(And, if you do want to chat more about product management outsourcing, you can get in touch here. No pressure though - we’ll wait for you to make the first move).