Connections – information and insight from UXC Connect
Can you build true innovation into
outsourcing contracts?
‘Innovation’ and ‘technology’ are (almost) synonyms... but true innovation isn’t achieved by
technology alone. UXC Connect’s Steve Lennon looks at the nature of innovation and how
difficult it can be to recognise, let alone embed within your ICT outsourcing arrangements.
In any survey of C-level executives, CIOs included,
innovation is near the top of the list of desirable
organisational strategies. A Deloitte survey of
Would you recognise innovation if it
hit you over the head?
5,000 young leaders in January 2013 found that
In a Scientific American article, David Pogue cites
78% of these ‘millennials’ (the world’s future
some spectacular tech prediction ‘bloopers’ which,
business leaders) cited innovation as one of the
with hindsight, make amusing reading:2
top three purposes of business, along with driving
•
profit and benefitting society.1
A Western Union internal memo of 1876 stated:
“This ‘telephone’ has too many shortcomings
Unfortunately, true innovation is hard to actually
to be seriously considered as a means of
do. Only 58% of the young leaders from Australia
communication.”
believed they work in an innovative organisation
(compared to a global average of 60%), and
• Meanwhile, across the Atlantic, Sir William
just 46% felt their organisation helps them to be
Preece, chief engineer of British Post Office,
innovative (behind the average of 52%). This annual
determined in the same year: “The Americans
report, the summary of which is well worth reading,
have need of the telephone, but we do not. We
discusses what helps (or hinders) innovation, and
have plenty of messenger boys.”
concludes that Brazil, China, South Africa and India
and several others generally outshine Australia. Or
• Thomas Watson, chairman of IBM, famously
said in 1943: “I think there is a world market
to give us credit, do Australians perhaps set higher
for maybe five computers.”
standards in their definition of innovation?
In this survey, as in pretty much all others,
• Robert Metcalfe, founder of 3Com and inventor
of Ethernet, predicted in an InfoWorld column in
technology is seen as a leading source of innovation.
1995: “The Internet will soon go spectacularly
So in delivering technology to the business, how
supernova and in 1996 catastrophically
do you build innovation into your strategies and
collapse.” (Apparently he pureed a copy of this
service delivery? And how can you ensure it is
article in a blender and drank it while addressing
catered for in the contract you create with your
the Sixth International WWW Conference in
ICT outsourcing partners?
1999.)
The fact is, clauses in ICT outsourcing contracts
relating
to
innovation
are
typically
both
extremely limiting and impractical to deliver.
•
Although Bill Gates probably didn’t actually say
“640K [RAM] ought to be enough for anybody”
in 1981, he did state at the World Economic
Forum in 2004: “Two years from now, spam
will be solved.”
1
2
Deloitte, The Millennial Survey 2013
www.scientificamerican.com/article.cfm?id=pogue-all-time-worst-tech-predictions
© UXC Connect 2013
www.uxcconnect.com.au
Can you build true innovation into outsourcing contracts?
Page 2
The point all these predictions missed was the
through applying technical innovation developed
human factor. Many new technologies are invented,
by others (typically vendors), at least in a ‘leap-
but their success is dictated by inspired application
frog’ fashion, as older technologies become
that truly innovates the ways we work and live.
unsupportable or uneconomic. But that is not
From actually finding it infinitely more convenient
really innovation from your ICT department but
to interact in real time on the phone, rather than
rather the application of the latest technologies
asynchronously exchanging telegrams or letters, to
to keep abreast of change and maintaining
spammers continuously staying ahead of anti-spam
support for systems. For the ICT department to
technology (Microsoft or otherwise) and laughing
be truly innovative, it needs to find ways of taking
all the way to the bank.
technology improvements and transforming,
They also illustrate that, by its nature, innovation is
not easy to define or even recognise. To compound
this, many confuse it with continuous improvement.
In fact, continuous improvement is a linear process
aimed at creating stable systems and processes,
while innovation is a non-linear process often
involving non-stable processes and not necessarily
having a reference point to existing systems.
Why is technology innovation,
on its own, inadequate?
Sometimes technical innovation alone just doesn’t
cut it. If you are old enough to have bought the
technologically-superior Beta video player, you will
have felt the pain when VHS dominated the market
and hence the format of new movie releases! And is
anyone still running a BlackBerry in 2013, let alone
planning to base enterprise mobility initiatives or
App development on the RIM technology platform?
A safer strategy for most organisations is to
‘recycle’ technical innovation; adapting it for your
own purposes once it is proven in the market.
Your unique innovation then lies in adopting
the technology in the most beneficial ways and
leveraging it to further your other business
objectives such as reducing costs and risk, and
increasing revenues and market share or reach.
There are two kinds of technology innovation: the
technology itself, and the use of that technology
to enable the business to deliver services in a
way that had not previously been considered.
So, while technology improvement is simple to
embed in an ICT outsourcing contract, it only
goes part of the way. You can dictate technology
improvement (for example: increase our network
bandwidth, update our servers, enable remote
access). But that can only cover the implementation
of new technologies (feeds, speeds, mobility).
So how do you achieve true
innovation under an ICT outsourcing
contract?
For true innovation, your business users must be
able to put new technology to use and integrate
it successfully into their processes to enhance the
way they work internally and with their partners
and customers. Only then will they experience the
benefits of greater productivity, faster time-tomarket, increased revenues, or any of the other
ways your organisation can improve its bottom line
and create competitive advantage.
Creating true innovation for the business is
much more complex than just implementing
technology. It calls for working with the business
to both understand its imperatives and provide
the vision, expertise and means to successfully
enable, integrate and support them. This is why
business units are increasingly going around, over
to create true innovation within your organisation.
or under their ICT team to deploy SaaS solutions,
Technical innovation is supposed to be ‘business
platforms, to innovate their operations.
as usual’ for the ICT department, and expected
of them by the rest of the organisation. Most
ICT organisations are adept at putting the
business
case
for
continuous
improvement
or engaging in e-commerce and supply chain
If your organisation wants its outsourcing
arrangement to deliver true innovation, it needs to
engage with its service providers in a different way.
© UXC Connect 2013
www.uxcconnect.com.au
Can you build true innovation into outsourcing contracts?
Page 3
You must enable them to interact and work with
the business in developing innovative solutions
that make a real difference to the way they work,
communicate and take advantage of new revenue
opportunities.
This involves going beyond the standard contract
clauses that merely impose technology upgrades.
It requires establishing a governance regime within
the arrangement to create a close partnership
with shared goals, enabling the collaboration that
will result in a real, measurable difference on an
ongoing basis.
About the author
Steven Lennon has almost 20 years’ experience in the IT industry, along with deep business experience and
knowledge founded on the previous nine years in finance and banking industry and as a Company Director.
His special areas of knowledge include service management, IT outsourcing, Cloud Services, Infrastructure
Management and service design. Based in Canberra, he has worked on a range of projects in federal government and
private enterprise since joining UXC Connect in 2004.
© UXC Connect 2013
www.uxcconnect.com.au