The Innovation Debate

There are two schools of thought about whether IT organizations should look to outsourcers for innovation. "If you're a big retailer and you've outsourced IT to IBM or TCS, those are the guys who are going to understand the way technology is changing, whether it's SOA or green data centres or using Web 2.0 to reach the customer," says Kobayashi-Hillary. "If you're a bank or a utility, you're not going to be an expert on social networks or how to utilize Second Life in the business. The service providers are." Outsourcers, after all, have strong partnerships with hardware and software vendors. "They're looking at the technology space, and their expertise and knowledge is far greater than what exists in our IT organization," says Robert Taylor, VP of IS for the $US14 billion design, engineering and construction company Fluor. "The folks there know where IT is heading and we're looking to them to bring that expertise to us."

Others disagree. "I've had a few IT executives tell me that they were disappointed that their outsourcing vendor hadn't done much in the way of innovation. It's an odd expectation, and a tough one to put into the contract," says Jeanne Ross, principal research scientist at MIT's Centre for Information Systems Research. "Vendors will innovate to the extent it saves them money or helps them introduce new products or services, but that won't feel like innovation to the customer." For an outsourcing provider to offer competitive differentiation for a customer would be contrary to what they're set up to do, says Barry Rosenberg, a partner with outsourcing adviser Pace Harmon. IT service providers make money when they can standardize processes across their customer base. You're not buying an innovator, says Rosenberg, "you're buying a factory".

Outsourcing sales teams, however, haven't got that memo. "The providers will tell you they're going to transform your business," says Gartner Research Director Dane Anderson.

"A lot of that is hype."

Overinflated claims from salespeople? Say it ain't so. But whether CIOs ought to expect innovative, transformational help from an outsourcer may be a moot point. Could they provide that kind of partnership even if they wanted to?

Perhaps not.