Rethinking Innovation in Outsourcing: Part 1

A few weeks ago, the Wall Street Journal published a story that pronounced the word innovation dead. Well, the Journal didn’t quite put it that way, but if you look at the basic statistics that were reported you’d have to agree that “innovation” is now business jargon with little real meaning. Alas, no more so than in our world of outsourced services.

In outsourcing, the concept of “innovation” has been the cause of a ton of heartburn for both clients and providers. I think we can find a better way to think about it. I’ve been talking to my ISG colleagues globally and to the service provider community at our recent 2012 Americas Sourcing Industry Conference (SIC), and I’ve been listening in my practice and at conferences to clients and their providers talk about how they experience innovation. There’s a lot to report, and there’s hope for the future! But it will involve some changes in the way we think about it.

At the Sourcing Interests Group (SIG) Global Sourcing Summit in May, I had the pleasure to hear a presentation by a Chief Information Officer and his company’s Application Development & Maintenance service provider. The two men had an IT-related problem and a project that came out of it, and they talked about it in some detail from a technical perspective. But I was much more impressed with the attitude and enthusiasm of these two presenters. They were active, vibrant, invested stakeholders in this project initiative, and they had clearly become good friends in the process.

They preached all the good textbook stuff we all know is part of innovation, including the parts about building the provider relationship to be a true partnership — they called it “collaborative outsourcing.” They took a risk with a project that needed latitude to be developed, and they created an environment where ideas were king. But finances were the measure (and they measured), and they led their combined teams to a solution for their problem that all agreed was outstanding and innovative. I was charmed … and invigorated.

It might be possible to start the argument that this wasn’t innovation — merely problem-solving — and that there was no gainshare* issue because it was a new project and not a re-engineering of an existing process to drive out cost (what most companies want to see as innovation). However, to make this argument is to completely miss the point. These two organizations managed to work as though, for this one brief shining moment, they forgot they were separate, and they melded into one entity with an enthusiastic, guided, measured, creative process to solve their problem. And they succeeded.

There are many ways that innovation in outsourcing gets blocked, and a major one is skepticism on both sides that the innovation is actually achievable. Success stories are useful to prove that it is indeed possible, but it involves something greater than just a need and a contract. These two individuals were enthusiastic in the truest sense of the word — the breath of the gods was in them. They were believers that they could do great things together, and they did.

Stay tuned for Part 2!

By Cynthia Batty, U.S. lead for the ISG transformation market area

One Response to Rethinking Innovation in Outsourcing: Part 1

  1. Very informative article,especially that it opens up about outsourcing. Looking forward for your next article.

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