Vested Outsourcing Makes the Innovative Impulse Real

We all talk about the need for innovation to energize, grow and add continuous value to outsourcing relationships.

Innovation is easier said than done however, and a recent article by Stephanie Overby in CIO magazine underscores this. A survey of European CIOs found that 67 percent of IT leaders rely on outsource providers to turn ideas into new and improved processes, but only one-third of those same CIOs measure the impact of innovation delivered by service providers.

Overby writes, “Two-thirds of the CIOs said they would benefit from a framework for innovation, and half would be willing to pay more for an outsourcer that could help them formalize and maintain a successful innovation process, according to the research conducted by the United Kingdom’s Warwick Business School (WBS) and sponsored by offshore outsourcing provider Cognizant.”

Researchers interviewed 125 CIOs and 125 CFOs for the study and found that less than half of CFOs expected service providers to help turn ideas into new and improved processes and only 39 percent of them would be willing to pay higher rates for an outsourcer that could deliver proven innovation on a regular basis. Another case of getting what you pay for and not necessarily getting what you wish for.

As outsourcing activity picks up, the CIO article continues, moving beyond business-as-usual deals could benefit customers and providers, according to Ilan Oshri, WBS associate fellow and associate professor at Rotterdam School of Management and co-author of the study.

“Many client firms are still occupied with sourcing operations—trying hard to make outsourcing deals work, constantly monitoring SLAs and doing everything possible to avoid failure,” Oshri says.

That doesn’t leave much time or energy to nurture and implement innovative ideas.

While many CIOs hold onto the traditional notion that IT should outsource commodity work in order to focus on higher-value tasks such as innovation internally, Oshri says mature IT leaders approach outsourcing differently. “More sophisticated outsourcing clients seek innovation from their vendors,” he continues, “while newcomers to outsourcing hope that by outsourcing a function they will be able to free up in-house talent to focus on higher value activities.”

Oshri points to Shell as a company that has partnered with outsourcers to build a solid internal innovation function.

Vested Outsourcing’s Rule 5 says the governance structure between company and service provider should provide insight, not merely oversight. Innovation–and its cultivation–is a basic ingredient of a Vested agreement’s governance framework.

The Vested Outsourcing Manual, which Palgrave Macmillan will publish next month, focuses on creating and operating a collaborative ecosystem that rewards innovation and a mutual culture of continuous improvement.

Innovation is more than a wish or suggestion box hung outside the CEO’s office. In the Vested model it’s about nourishing and encouraging ideas and creating the conditions for innovation to flourish.

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