A recent Gartner report presented the results of an effort to measure the perceived level of satisfaction customers had with the “innovation” being provided by their IT outsourcing vendors. The study claimed that the results were a measure of both technical and business innovation. From the perspective of outsourcing vendors the results were not flattering.
As someone who works in the outsourcing sector, my inbox soon started filling up with invitations to webinars on how to add “innovation” clauses to existing outsourcing agreements. The confluence of the two events soon had several questions buzzing in my brain like “How does one become an expert in a new topic of general interest, in a matter of a few weeks?” but recognizing how quickly the marketplace can produce and certify “experts” I set it aside for more important questions. For example;
The latter question was motivated by how important “cost reduction” is and has been in outsourcing relationships and the nature of outsourcing itself, the others, because concepts such as “innovation” can be so nebulous.
There are many different reasons one can recite to justify why outsourcing makes business sense but let’s face it; cost reduction is the main reason it has grown so rapidly in the last 20 years or so. Lowering costs has dominated both consumers and providers of outsourced services. Outsourcers have scoured the globe searching for the cheapest resources they could hire, to satisfy the insatiable demand of their clients to shave IT budgets further than they already had. As a result, most people now think outsourcing and off shoring are the same things. I suppose it is possible, but does anyone really think innovation can be done on the cheap? Profit margins are already so thin even the biggest outsourcing vendors may find it difficult to justify investments.
This will be an interesting topic going forward. There is no question that outsourcing vendors could do a better job on many fronts. For example, they do a poor job when it comes to financial and demand management. I hear this all the time; organizations have no idea what they are paying for, how to budget for the future or how to allocate the costs across their business hierarchies. In some respects IT vendors ought to be flattered by the requests to help innovate. These are exciting times in the IT industry again. It is a signal of how important technology has become to achieving corporate goals as technology may be the primary reason organizations can enter new markets. However, this may also be the time that organizations start thinking of other reasons for outsourcing non-core business functions, besides getting it cheap.