The Pros and Cons of In-House Versus Outsourced R&D Activity for Essay

The Pros and Cons of In-House Versus Outsourced R&D Activity for Technology Firms - Essay Example R & D is the basis behind the creation of new inventions in technology firms, and it is an ongoing process that does not stop as companies are always looking to better the products they have on the market so as to avoid being overtaken by the competition. When dealing with R & D, there are two ways that a company can go about matters; one is through doing these activities in-house while the other is outsourcing these activities to other companies. In-house refers to doing these R & D activities internally (that is, within the company) through company employees while outsourcing refers to contracting out the activities to another company who then sell back their progress and discoveries to the company in the form of services rendered. Though outsourcing has become quite popular among companies over the years there are still some organizations that prefer to keep all their activities in-house, and both (that is, outsourcing and in-house) have pros and cons that a company needs to look at before determining which is one would best suit their company (Krugman, 2006). In terms of outsourcing, there are a couple of Pros that should be taken into consideration, the first being the avoidance of various regulations that may prove to be burdens ome to the company and are present in the country but not in others. These can regulations can refer to issues involving the workers where having the R & D performed in-house would mean that the organization has to concede to extra costs that are demanded by the various labor unions, for example, which may prove to be costly on the overall expenditure or may working conditions that may take a while to set up thus eating into much valued time in the process (Gordon etal 2009)The process of outsourcing allows a company to circumvent all these issues as they are no longer responsible for the workers performing the R & D activities and therefore do not have to deal with such regulations. Another Pro is the cost saving implications that outsourcing provides as in most cases it is much cheaper to outsource activities to another firm than to perform these activities in-house (Koulopoulos, 2006) This can be due to a number of reasons including the tax differences between the countries where by the taxes in the countries where the outsourced companies are based are not as high as those found locally and therefore, they are able to charge less than it would cost to set up the activities here. These savings on money can be used in other sectors of the company that may need it meaning that the company does not have to struggle for means of acquiring this finances thus churning out a win-win situation for all. In terms of Cons with regard to outsourcing, the major one would be the weakened ability of the company to protect its information from its rivals as a result of outsourcing these activities to a foreign based firm. Ensuring that any essential discoveries made remains strictly within the company’s database and is not leaked out to any of its competitors may be difficult as the company will not have a choice but to trust the company that they have outsourced their R & D activities to and hope that they are not susceptible to leakage as the issue