4 success factors for innovation in IT outsourcing

July 20, 2021 - 4 minutes reading time
Article by Edwin Lambrechts & Mike Wilmot

When outsourcing IT to an IT service provider, in addition to the contractual guarantee of continuity, security and availability, innovation is also mentioned as an important objective. Outsourcing is even seen as an accelerator for innovation. Nevertheless, the successes in the field of innovation through a sourcing contract are variable. Which success factors form the foundation for innovation in IT outsourcing?

1. Give direction

It is often expected that outsourcing IT strengthens the innovative power of an organization. An expectation indicates, if we consult the Van Dale, that there is an assumption or hope that an action or event will actually take place. And you may know the proverb assumption is the mother of all…, well it is known. Without a giving a clear direction to the expectation, disappointment lurks. First of all, it is important to be clear in which area and with what objective innovation is desirable. For example, is a substantive contribution expected in innovation aimed at the development of new or existing product-market combinations? Or is there a need for an innovative ̶ ultra-modern ̶ IT platform, with which employees and innovations are optimally facilitated? In order to be able to meet expectations, it is important to give clear direction to the catchall / umbrella? concept of innovation. This direction is captured in the enterprise architecture of the organization, with the aim of ensuring that an organization develops in the chosen direction.

2. Make choices

In order to respond quickly and adequately to new developments, it is important to be technologically up-to-date with the IT partner. In principle, active life-cycle management forms the best basis for innovations. This ensures that extensive IT projects do not always have to be carried out before new functions and applications can be put into use. However, keeping the entire IT environment fully up-to-date with the latest developments can be very expensive and is often not necessary for a stable run and maintain situation. This means that sometimes choices have to be made. These choices are made on the basis of a business case. Where is it important to stay up-to-date and where is it sufficient to maintain the IT environment without making concessions to interoperability (possibility to link between systems), continuity, availability and security? This is captured in the IT strategy of the organization. This creates the frameworks that ensure that IT is flexible and agile in those areas for which it is required that innovations can be implemented quickly.

3. Determine process

In the article The impact of DevOps on outsourcing, the impact of the working method on innovation and the collaboration with the IT partner is discussed in more detail. The way in which the collaboration with the external IT partner is managed is especially important for the success of innovation in IT outsourcing. On the one hand, we know the traditional way, where the performance of the IT service provider is assessed on the basis of operational KPIs. On the other hand, we know the modern way, which involves shared responsibility, mutual trust and KPIs that are linked to demonstrable contributions to the objectives of an organization. Successfully meeting the expectations of innovations also requires clarity per subject about the method to achieve innovation. In concrete terms: do you work in short sprints, in which development and operations work together iteratively, do you work according to the project-based methodology of the Waterfall, in which tasks are performed sequentially and responsibilities are assigned, or do you choose a combination of the methods? If there is no clarity about this, a mismatch in expectations is lurking and this is at the expense of the innovative power of the organization.

4. Involve people

In addition to technology and the process, the success of innovation is highly dependent on the knowledge, skills and intrinsic motivation of the people involved. Alignment between business (demand) and IT (supply) is a requirement, at a strategic, tactical and operational level. It is highly desirable that domain knowledge about business operations is available from the IT side and that there is affinity and basic IT knowledge on the business side. As a result, IT and business speak 'the same language'. However, knowledge and skills are not yet sufficient to enable successful innovation. People are social beings, cooperation and intrinsic motivation are largely determined by emotional aspects. To this end, it is important that business and IT do not limit contact to reports and formal meetings, but that there is also collaboration on the work floor. This promotes the ability to successfully adopt the changes that innovations bring within the organization. So get rid of that separation between IT and the business, ensure a high degree of mutual involvement!

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