Managing Outsourcing for Success

It is well known that medical device manufacturers face increasing pressure to develop quality products faster while controlling costs. In addition, many of these manufacturers have fewer resources to dedicate to lengthy development projects, or are reluctant to add staff to do so. Outsourcing product development is an option, but one that must be carefully managed to ensure success. The perils and failures of outsourcing have been well documented for some time now, but what are some approaches that have been successful from both the manufacturer and vendor perspectives?

Keys to Success

Some of the key factors of successful outsourcing product development programs can increase a company’s chances for success when outsourcing.

Know What You Want to Create. One of the first things  medical device manufacturers need to determine is whether they know what device they want to create. Regardless of the mode of development—outsourcing or internal—if the device is not well characterized (through use cases, user stories, requirements, or some other similar mechanism), device development is at risk. The most important aspect of the characterization is that it reflects the concepts, expectations, and needs of all the stakeholders of the device. 

Important questions to ask at this stage include the following:

? What are the important functions of the device and how are users and patients going to interact with the device? 
? Is this a stand-alone ­device?
? If not, how does it interface with other devices within its environment?
 

The device manufacturer must determine and clearly communicate with its outsource partner the development, cost of goods, services, support, and product evolution goals. 

Forge a Solid Working Relationship with the Vendor. It is important that the device manufacturer dedicate appropriate staff, not only to oversee and manage the project, but also to forge and maintain strong working relationships with the vendor. Establish clearly defined roles and responsibilities in agreement with the vendor for project management, process and quality assurance, regulatory strategy and guidance, development, and verification and validation (V&V).

The OEM’s project staff—sometimes referred to as a core team—must have the experience, approach, and personality that foster clear channels of communication with the vendor. These channels of communication are the most critical aspect for the success of the outsourced development. Trusted communication serves as the mechanism to ensure the vendor clearly understands the needs of the manufacturer in terms of device functionality, change management, development process, cost, and timelines. It will also encourage the vendor to communicate status, success, and the occasional and inevitable setbacks in a forthright and transparent way.

Make Sure the Vendor Understands Quality and Regulatory Needs and Strategies. During the vendor selection process, it is important to ensure that the vendor understands and can support the quality and regulatory strategies for the project. Ultimately, the OEM bears the responsibility for ensuring the quality system approach for the project as a whole, providing the design controls and evidence that it requires. This approach can include the use of the OEM’s quality systems, process, and tools; the use of the vendor’s quality system; or some blended approach for specific aspects of development. 

The agreed-on approach needs to be well documented in the quality plans that govern and guide the development of the product. These plans are heavily influenced by the product’s regulatory strategy, so it is imperative that the OEM establish a well-thought-out and complete regulatory strategy and factor these needs into the product’s development processes and controls. It is also important for all involved to understand and support quality audits and address any findings promptly to ensure the project is conducted in compliance with the agreed-on quality system approach. This enables confident and successful submission of product to the appropriate regulatory agencies.

Establish a Development Methodology that Works for Both Parties. Some consider a development methodology to be just part of the overall quality plan, but it really requires a special focus of its own so that the methodology chosen works for both organizations. What development life cycle approach is the vendor going to use to control the development process? Are the necessary controls in place to ensure that the project is properly progressing through development? Can the OEM support the development methodology preferred by the vendor?

For instance, if the vendor wants to use an iterative or agile approach to development, and the OEM’s organization has only ever managed or used waterfall-style development, there will be mismatches in expectations. These can include problems regarding turnaround time for reviews and approvals, the level of rigor and formality required for interim milestones and deliverables, and in communications. The development methodology used must be established early in the relationship, and agreed to by both organizations to ensure that the vendor can efficiently and effectively meet expectations, and that the outputs of the process meet the OEM’s needs and goals.

Demand Demonstrable Evidence of Accomplishment. The OEM needs to see real evidence of accomplishment in two ways when dealing the vendor. During the initial selection process, go beyond what is available on a vendor’s Web site or in its corporate literature to determine the vendor’s true strengths and weaknesses. Know whether it has been successful in developing similar products in the past, on time, and within budget. Although it would seem to be common sense, make sure to check references and ask questions about the vendor’s size, technical capabilities, resourcing strategies, and status reporting metrics, among other questions.

Once development begins, the OEM must see concrete deliverables—plans, requirements, design, and software that works in the target environment—at regular intervals so that it can independently judge progress and accomplishments.

Protect Intellectual Property. Although the OEM is outsourcing the development of its product, it must protect ownership of what is developed and preserve the intellectual property inherent in the product. This starts, of course, with the contractual relationship established with the vendor. This document must be explicit about expectations regarding ownership of algorithms, interfaces, information presentations, and any other aspect that represents the unique value of the product. Be clear about the use of third-party software and hardware; keep it in line with how the business manages its perceived risk in these areas.

Project Success

There are two sides to this outsourcing coin. From the vendor’s perspective, the following items can help ensure that the project is a success and enables a long-term relationship with the manufacturer.

Make Words Match Deeds. When creating or bolstering a trusted relationship with a manufacturer partner, regardless of the development methodology, the best way to demonstrate understanding of the product and the manufacturer’s business expectations is to regularly demonstrate progress with something tangible beyond a set of documents. Documents are an essential part of the process, but manufacturers benefit from seeing a prototype, a working model, or real software and hardware. It gives the OEM a chance to touch or interact with the product in a way that goes beyond requirements and designs. It can often lead to early course corrections that are much easier for everyone to deal with, rather than in the late stages when time, money, and patience are often in short supply.

Manage Requirements—Don’t Just Write Them. Real management of requirements goes beyond well-crafted requirements statements. The vendor must support traceability of requirements to other artifacts (higher-level requirements, tests, designs). It must also be able to articulate and track a variety of information about requirements (status, volatility, allocation to subsystem or component, dependency, risk). It is only by managing requirements with this extra information that informed adjustments can be made. The task helps determine the impact of potential or real change, manage scope, and perform the myriad of other activities that center on requirements. It is even better if such information is shared with the manufacturer—straightforwardly if the vendor is using the OEM’s requirements management tool, but possibly more involved if the vendor is hosting the system. It is this sharing and interaction that lead to a mutual understanding of the intent captured by the requirements.

Actively Manage Risks and Dependencies. All projects have risks and dependencies. In a collaborative outsourcing relationship, both partners must have the means to actively manage these risks and dependencies. Regularly scheduled communications that include reviews of risks and their mitigations are important in maintaining predictable schedules that include appropriate contingency and mitigation plans. Include product risks as well as project risks—it is not going to matter much in the end if schedule and costs were managed successfully but the product misses its intended use or business expectations.

Dependencies are the expectations placed on someone outside your project team to deliver something on time. Clearly state which party is managing the relationship with that outside source. Even if the manufacturer has accepted this ­responsibility, the vendor needs to closely monitor the situation and, when needed, intercede in a timely and appropriate way.

Establish a Strong Change Management Process. If there is one constant in product development, it is that things will change. Establishing a strong change management process to control changes, capture their potential impact, and confirm closure of agreed-on changes helps mitigate the problems caused by changes. The OEM should collaborate with the vendor to communicate any proposed changes and quantify their effect on the device under development while clarifying what scope creep might occur based on a given change. Unknown or unforeseen project scope creep is a significant risk to a project’s milestones as well as the characteristics of the final product. Predictable development timelines are essential in an outsourcing relationship and strong change management processes help to ensure achievement of goals against project milestones.

Set Acceptance Criteria Early. The manufacturer must be clear about expectations in the final stage of product development. The acceptance criteria, especially for medical devices, includes not only a demonstration or verification against tests, but development documentation, process and audit records, and sometimes user or operations manuals as well. The key point here is to make sure that expectations are set at the outset of the project. It can be challenging to do so, but experience teaches that acceptance can be contentious at the end without criteria accepted up front by both parties. The criteria may change as requirements and other changes occur during the life of the project, and acceptance criteria should be updated accordingly. Remember to define what is acceptable for open issues and defects as well as functional and nonfunctional requirements and performance.

Transparent and Constant Communication. Perhaps the most important aspect of a trusted relationship is to establish frequent, open, and straightforward communications. A vendor should initiate this communication through status reports (to have a written record) and status meetings (to make sure the message is understood and discussed). Remember that not everything goes well and both parties need to be open to both the positive and negative aspects of the development relationship. Budget, schedule, risk, and dependency missteps can all be mitigated when communicated early. Partners must discuss alternatives, and work together to define corrective action.

Conclusion

Most of these points are not new. Failures in outsourcing still occur all too often because some aspect of the key points are not actively managed by both parties. Both parties must understand what is needed by each side to enjoy a successful outsourcing relationship that mutually benefits both sides and results in a successful product development.

Tim Bosch is vice president of architecture at Foliage (Burlington, MA). David Ennen is project director at the company.