Can You Afford the R&D Cost Cut during Recession?

Research expenses are mandatory for all technology firms and they have to support research, even during these recession times, as any breakthrough can aid them in surmounting this recession demon.

This gives an immense opportunity for all technology-based companies, to invest in R&D towards their mission. Companies can smartly advance in their business cycle, without spending massive amounts of money. This planning, can become the most crucial step in deciding, the next generation technology leaders having the brightest future in the new environment.

KAnalysis Solution towards R&D Cost Optimization

  • Stretching their work capacity
  • Optimize the Intellectual property departmental expenditure
  • Saving overhead cost of hiring full-time professionals for ad-hoc requirements in diverse technical domains
  • Increasing the team size by, prompt allocation of resourceful team for short turnaround time, for urgent requirements

Thereby, reducing the impact of recession on overall R&D functioning.

KAnalysis conducted this study and has successfully established that outsourcing patent research work pays dividends which and can similarly apply to most technology based companies.

The major requirements for any technology based company rallies around:

  1. Scaling up of R&D activities
  2. Continuous increase in work-force (effective man-hours) to support scaling of core R&D
  3. Active Intellectual Property planning, inclusive of asset management, technology pathway, and litigation strategies
  4. Monetization of existing Technology/IP to generate value in the long run

The Model

  1. An offshore team of domain experts having enriching experience in the domain of patent research and analysis
  2. All measures to streamline processes according to company specific requirements for smooth delivery and integration
  3. Building a team with enhanced capabilities that can add to the existing workforce for any company
  4. Reducing extra liabilities of having full time employees with fix cost with a floating cost model
  5. A major cost saving without compromising on scalability of R&D

Validation of Solution and Advantages

The Problem

A company XYZ required scaling up the effective work volume of the in house IP team but had the budgetary constraint. The company also wanted to take care of the intermittent spikes in the work volume, without incurring any overhead expenses in hiring full time resources.

The Solution

KAnalysis suggested that company “Patent research outsourcing” for their requirement. After applying KAnalysis suggestion, the company could increase the work volume by about 156% but surprisingly the overall cost of the IP department reduced by 33%.

Assuming the hourly charge rate for in-house IP team to be at USD 150 per hour (on minimum side) and that for an offshore team to be USD 40 per hour (on maximum side).

After one year, the combined hourly charge rate of the team was found to be reduced by 33%. This reduction was observed, even after taking into consideration the effective output of the offshore team, to start with at 50% with respect to the of the in-house team.

The same offshore team with a particular client moulds its delivery style to suit the client’s end requirement and an streamlined knowledge transfer helps improve the effective output, in due time.

The knowledge transfer and experience has shown at par effective output, acknowledged by clients, after first year of engagement. However, to keep our estimates on a conservative side, the same has been raised from 50% to 65%, with a 5% rise quarter to quarter in a year.

The Consideration

Considering the increase in team size to be at a conservative pace, the total work volume delivered per month without increasing any in-house workforce can show a significant increase of 156%, with 2/3rd cost as compared to getting similar work done in-house. Thus, providing you with an arsenal to fight cost cuts, especially during these recession times, without compromising on future promises.

Assuming an individual works for 180 hours per month and building a ten member strong offshore team over a period of one year to assist a preexisting five member in-house team, with same charge rate function as above

The Concern that Might Arise…

Much larger than the issue of cost, various issues might be put-forth like confidentiality, quality, regulatory etc.

However, these issues have cropped up ever since any such industry has come into existence. The data security infrastructure and other possible measures make any outsourcing vendor, a safe choice even up to the level of internal data security. Further, I would like to quote that “American Bar Association (ABA) released a formal opinion accepting legal outsourcing as a permissible practice. The ABA opinion supports legal outsourcing so long as there is protection for client confidentiality and preservation of attorney-client privilege.”

These issues are for the outsourced vendor to take care of, as the industry thrives on repeat business and any slack on any front means a loss in business, which any one can not afford to be complacent about.

All comments for and against are most welcome…