Monday | 8 September, 2008
CIO
What Price Innovation?
CIOs say they want more than the traditional “your mess for less” relationship with their outsourcing providers. And the providers want to market themselves as partners in innovation. So why isn’t it happening?
Stephanie Overby 05 November, 2007 13:44:31

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"There's so much change management embedded in outsourcing processes to prevent them from missing an SLA, their ability to innovate to support our business is very limited," agrees Robert Fecteau, CIO of BAE Systems Information Technology, a line of business within the UK-based BAE Systems. Fecteau was hired in 2005 to oversee the backsourcing of US IT services previously outsourced by its parent company in a $US2.2 billion, six-year IT contract with CSC. (The rest of BAE Systems will continue to work with CSC as "a trusted partner critical to our success", says Fecteau.) According to Fecteau, BAE's outsourcing had been driven by a desire to cut costs. (In addition to the design, manufacture and maintenance of military vehicles and equipment, BAE Systems provides IT services.) But there were trade-offs.

"It's very difficult to write a contract with an outsourcer that says: 'Give me more innovative IT processes'," says Fecteau, who will complete the backsourcing process during 2008. "They're not there to transform your organization," he continues. "They're there to deliver IT as a commodity." Fecteau should know since BAE Systems is itself in the outsourcing business. "The very nature of outsourcing naturally restricts innovation," he says.

Processes further inhibit the kind of client-vendor interaction that would yield innovative solutions. "I don't think the big outsourcers do well with customer intimacy," says Fecteau. "They're huge, matrixed organizations with revolving doors. You never know who's coming in on a given day."

"We would clearly disagree with any assertions that large outsourcers such as CSC can't bring innovation to outsourcing engagements," says CSC spokesman Mike Dickerson. "In this case, BAE Systems' decision to insource certain operations was based on a long-term strategic objective to grow its computer services business in the [US] federal IT services market, an area in which we obviously compete, and is not a reflection of the services provided by CSC."

If you really want innovation, you can get it, says Fecteau, "but you'll pay for it". Dearly.

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