Outsourcing’s Innovation Crisis is the title of a very interesting article by Stephanie Overby in CIO Magazine’s Advice & Opinion section this month. The thread of comments that follows the article is just as interesting.
The article is about IT outsourcing, but I see implications for many types of outsourcing, from large to micro levels, and for the "Hollywood Model" that we discuss here.
From Overby’s article:
Many IT leaders enter into outsourcing arrangements with an expectation that the outsourcing provider will not only live up to the letter of the contract, but by virtue of being a Big Outsourcer, will bring something more to the table.
Is that so wrong?
Some say, yes. It’s an unreasonable expectation. … Others say, if you can’t get IT innovation from billion-dollar service providers, who can you get it from?
In the comments, readers weigh in on both sides. One says that innovation isn’t really part of the business model: outsourcing is about fulfilling a contract that, in essence, states: "please do this for me." Another says that innovation is what will truly differentiate one vendor from another. The debate continues as commenters evaluate how realistic it is to expect a vendor to offer innovative projects and services–when they are really in business to deliver only what is expected, and earn the highest possible margins.
Inherent in Workforce 2.0–the rise of project-based workforces who offer highly specialized skills–is the assumption that a client is asking for a scope of work, and a provider is delivering that scope. It’s a simple model that applies whether I ask my Marketing team to build a sales presentation, or a multi-billion dollar company outsources its software development division to a company in Indonesia.
The request is: "please do this for me," and we must both be clear about what "this" is. But if the provider delivers "this" and only "this," then there is no innovation.
From our own experiences, outsourcing poses a great danger to innovation. Outsourcing partners will do "this" and nothing more. They cannot innovate; it is almost in the contract for them not to (afterall we ask them not to deviate from the agreement). So far, we have had little success with expecting any innovation from our outsourcing partners. But they do what they are asked to do quite well, in most cases.
So is the Workforce 2.0 innovation-challenged, by its very nature? Will delivering "this," as quickly and cheaply as possible, actually prevent us from pushing the best ideas out to the market? The hopeful answer is that the market will value innovation: that clients and managers will reward those who innovate. But will economic realities bear this out?
