by David Rosenbaum

Want Innovation from Outsourcing? You Have to Pay for It

Oct 08, 20073 mins

To get new ideas from your outsourcer, you have to be willing to rethink your approach, including how you pay for the services.

I remember my dad’s Model A Ford. (Yeah, I’m that old.) It had a rumble seat in the back that I loved to bounce around in, and it was a beautiful, deep, bottle green. The fact that it came in green was a big deal because its predecessor, the Model T, didn’t. As Henry Ford famously said, “Any customer can have a car painted any color that he wants so long as it’s black.”


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Old Henry knew that the way to build cars that were cheap (the Model T debuted in 1908 at $850, and the price dropped after he introduced the assembly line in 1913) and reliable was to divide the work into discrete, repeatable processes and limit customer choice. As a manufacturing strategy and business model, it was a roaring success. It still is.

That’s a hard truth that CIOs bump up against unhappily when they (increasingly) look to their outsourcers to provide innovation. Forrester Research reports that 41 percent of buyers are dissatisfied with the innovation provided by their primary outsourcer, and a recent, exclusive CIO survey of IT execs reports that 44 percent are unhappy with the innovation provided by offshore outsourcers. (Read the survey results here.) As CIO Senior Editor Stephanie Overby explains in her article What Does It Take to Get IT Outsourcers to Innovate?, this shouldn’t come as a surprise.

Outsourcers understand that one of the best ways to make money is Henry’s way: Define the job as narrowly as possible (“any color as long as it’s black”) and divide it into repeatable steps. Not exactly a formula for innovation, for generating new ideas and improving business processes.

Can you get innovative ideas from an outsourcer? Of course. You can get anything you want. But just as the Model A’s riot of colors (it came in four) helped make it more expensive than the Model T’s basic black, getting innovation will cost you. And the paradox there is that lowering costs is still the primary reason companies outsource their IT work in the first place.

Asking for innovation from your outsourcing partner makes sense. Doing so under the old service-level agreement terms—you do X, Y and Z and we pay you for that and not a dime more—doesn’t.

The truth is, if you want new ideas from your outsourcer, you first have to be willing to approach outsourcing in a new way. Overby’s story is a good place to start to learn how.