Can Offshore Outsourcing Vendors Innovate?

For quite a while, every offshore outsourcing service provider has cited lower costs as a reason to outsource--the latest "news" is innovation as their key differentiators. But, what is their definition of "innovation"?

I once heard someone say (actually that someone happened to be me!), "Offshore Outsourcing is dead!" But before you jump off your seat, let me clarify what I mean by dead. I mean dead not with reference to its importance, relevance or future; I mean dead with reference to its character—it is devoid of vibrancy, excitement, creation and innovation.

When offshore outsourcing emerged into the limelight decades ago, it was a disruptive innovation, challenging convention and redefining what could be done where, by whom and at what cost. It created a cheaper labor pipe, through which any transactional, discrete piece of work could flow. Developments since then have resulted in the pipe growing fatter (a larger volume of work can flow through the system at a given point), having an ability to accommodate different types of flow within (applications, infrastructure, business processes), and in some cases, an increased rate of flow (how much work can be transferred to or done by offshore in a given amount of time).

Today innovation is high on the hype cycle. Every offshore outsourcing service provider cites innovation as its key differentiator. Catchy taglines, flashy messages appear on websites, brochures, casestudies...adaptive innovation, collaborative innovation, applied innovation...To prove the point they win innovation awards from organizations you've never heard of. Their case studies scream offshore outsourcing has made their customers more innovative. They conveniently, selectively retrofit their revenue streams to produce an impressive, "x% of our revenues come from innovation" figure. At the core of course they chose the definition of innovation that suits them—new to the world is too hard, new to the industry, hmmm easier, and new to the company...very, very easy.

If you look deeper, authentically and honestly, without biases, you can easily see the lack of authenticity in most messages around innovation. First of all, the ensuing developments in the industry cannot even be termed innovations. Have we really created anything new? Is changing the attributes of a pipe (making it fatter, increasing its flow, making it versatile) creating something new? And in what way has it generated value for the customer? When productivity increases and more work flows offshore, does it go to only improving the provider's margins or does the customer get a price benefit as well? How much of the proclaimed value is theoretical versus actual? Is doing things faster and cheaper all that's required to be innovative? Isn't there something more to it than that?

There is talk about innovation (and its manifestations of incremental and radical innovation) not being enough for today's times. The next stage, experts say, is transformation—from creating something new to creating something with a dramatic change in nature, form, or appearance. Unfortunately again, the users of the word transformation fall into that same trap—delivering multiple services together is not transformation, merely moving the workforce offshore is not transformation. Unless it changes the cultural DNA of the company, unless it results in a significant shift in form or performance of a company, it is not transformation.

What we have done so far in the offshore outsourcing industry can be at best termed as evolution—a gradual development and change in characteristics while the core remains the same.

We've used and abused innovation and transformation for far too long. It's time to accept that and start innovating and transforming in the true sense of the terms.

Arpit Kaushik runs the London-based outsourcing service design firm, Crystals, that helps forward-looking companies to realize the promised benefits of outsourcing.

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