Global Sourcing Blog

One client was quite clear on this point, saying “Rate reduction is not differentiation.  Sure, a company will take it but then what else is there to the relationship?  In hard times you know who your partners are.  Now is a great opportunity for service providers to innovate internally to further solidify bonds.”

When asked for an example he described a brainstorming session Infosys initiated a few months ago.  The outcome was an agreement to start a BPO pilot program, a first for the client company, a long-time ITO sourcing practitioner.  On the surface, the program appears to be a simple labor cost reduction play where a few industry-specific back office activities will be performed in India by specialists in the field. 

In the view of the client stakeholders the act of outsourcing business process, particularly to India, was itself innovative.  But there’s more and just offshore delivery involved.  Infosys is investing in a system to “operationalize” the processes on a per-unit transactional basis.  The client also noted that since each transaction is relatively complex with potential for more bells and whistles,” that is additional innovation.

Process automation was a reoccurring theme in most of the conversations but not the only one.  One client describe an enterprise wide application development initiative where Infosys was called upon to not only build but design and architect an interactive portal for the client’s sales organization, business partners, and end-customers.

Described as a “mega-project” involving 30 different applications, the initiative was measured not only by the usual timeliness and quality criteria.  More important was its business impact; including market acceptance, which was three times the estimated target, and achievement of first year sales goals, which were met in five months. 

Again, innovation was not only in the results but to the process.  According to the client Infosys role was not that of a typical outsourcing partner but rather as a key participant and in some cases a leader throughout the entire life cycle.  That is, the client and Infosys collaborated to create an innovative way of sourcing application development.

This raises another point about the topic at hand, the importance of innovative service delivery; even when applied to the most basic outsourcing driver, cost management.  To this end some clients have adopted managed services models, assigning significant responsibility if not outright ownership of large portions of their application portfolios to Infosys and other service providers.
 
Instead of seeking cost reduction through labor arbitrage they have set service level targets based on reducing operations costs, typically on an annual basis.  To meet the client targets while achieving profitability the service providers must innovate; consolidating, enhancing, and transporting applications so that it takes less effort to manage them.

Now, some will argue that coming up new sourcing models and service delivery methodologies is not really innovation, at least in a business sense.  Indeed, there are those who claim that the very nature of outsourcing relationships – where deliverables and service levels are contractually defined and pricing set accordingly – runs counter to the idea of innovation.

There are also people who say that client business and IT stakeholders often can’t agree among themselves on what is innovative as well as those who wonder if outsources can even innovate.  Then there is the question if innovation can be measured in an outsourcing relationship. 

The whole discussion seems at times like the old joke about lining up a group of economists end to end only to discover that they all point in different directions.  

The fact is that for as long as I’ve been following and participating in this particular discussion I have never heard about or read a consensus definition of innovation in the context of outsourcing.  To this end I’ve come up with a simple set of criteria that, whether others agree with it or not, helps me deal with the complexities that lay beneath the surface of the more obvious aspects of outsourcing. 

It starts with the premise that if a client thinks that something is innovative then it is.  Second, no matter who originates an idea – the client or its services partner -- if the two sides can agree on its scope and measurability it can be turned into projects or a program.  Third, if the project or projects can be broken down into deliverables that can be defined and measured in terms of service levels the whole thing can be outsourced.

As the old saying goes, “the devil is in the details.”  But, at least this simple proposal takes the discussion past the point of getting hung up on the definition of innovation and whether or not it can be achieved through outsourcing.  After all, isn’t innovation really in the eyes of the beholder?