The dictionary definition of innovation reads as follows: “something new or different introduced”. Quite simple, isn’t it? Therefore, to put it in the context of the outsourcing business, when a client says he expects innovation, does he mean he wants to see something different or new? Maybe!

Let’s look at some of the research and discussion on innovation in the past.

• A research by a leading consulting firm revealed that 43% of buyers viewed innovation as a critical element of their outsourcing relationship. The survey also found that both buyers as well as service providers were not able to meet each others’ expectations on innovation.
• Forrester Research, in a 2009 survey indicated that 38% of customers found innovation or continuous improvement lacking with their existing vendors.
• Alsbridge’s survey of 300 IT services buyers also had similar results.

There are numerous articles, interesting debates as well as research on innovation in the outsourcing/offshoring context. But there are many questions as well. From the service provider side as well as the client side, the expectation of innovation is still at parallels. There was a point in time when the outsourcing relationship was all about cost saving and labour arbitrage. But that’s passé. Then there was a time for process and delivery excellence, well beyond process improvement. Well……that’s passé too! So how does this outsourcing relationship now evolve? Is it about innovations and innovative approaches?

What are clients really expecting? Does innovation mean the same as process improvement? Perhaps not. Is it approaching service delivery with a new outlook that eventually saves money? Does it mean creating an efficient IT system that aids the business enough to positively impact the bottom-line? At a recent conference, the CIO of a large corporation pinpointed this issue really well – “It’s about the outsourcing provider helping me figure out what it takes for me to create a new mutual fund rather than just say how many lines of code.” Some take a completely contrasting view. Buyers look at outsourcing partners or vendors to provide services in such a productive and efficient manner that they themselves can concentrate on innovations in their business. Interestingly, these different views have similar implications, i.e. the outsourcing provider is the facilitator or even the catalyst in the innovation process and not the actual innovator.