Let's climb into the way-back machine for a trip to the 15th century, where we're going to check out an outsourcing trend. Portugal has decided it wants to seriously explore the unknown portion of the world, way out there beyond the big sea, where the sun disappears every night. Portugal has plenty of boats and sailors, but it lacks navigational expertise. So, the Portuguese hire the Italians, who are light years ahead of everyone else in Europe when it comes to the art and science of finding your way around the ocean blue.
Long story short, the Portuguese "discovered" Brazil and this big chunk of land many of us inhabit is named after an Italian.
You could say that what the Portuguese did was outsource innovation.
There's been a lot of talk about innovation in outsourcing circles in recent months. CIOs in many companies are expected to be like fountains of innovation. Judging by the latest Harvey Nash/PA Consulting survey of CIOs, innovation is becoming an increasingly integral part of the CIO's job. Today's CIOs "have a desire to pursue technology innovation aggressively," the survey authors say. But because these CIOs also have to keep the lights running, they are turning to outside sources for innovation.
Just like the Portuguese royals did.
But in a recent interview under the headline "How Offshoring Can Kill Innovation," two Harvard business professors said it's not a good idea to farm out the work that is higher up "the value chain." Their argument, which I will try not to botch up, is that turning over the "industrial commons" — a company's shared body of knowledge and collective capabilities — is a bad idea in the technology field. The profs provide a couple of good examples: Kodak ceasing to design higher-end film cameras in the 1960s, and U.S. computer makers giving up in-house design of mobile devices and settling for selling me-too products manufactured in China and elsewhere.
Their main message, I think, is that you have to be careful about which higher-value tasks you assign to an outsourcing partner. This is timely advice, because more and more companies are counting on those partners to come up with good, if not better, ideas. They're not necessarily expecting them to invent The Next Big Thing so much as to develop smarter ways of doing things. I talked to a services company last week about its huge new contract, and one executive said part of the reason they got the deal is that they guaranteed they will boost productivity by doing things smarter and faster. They're going to innovate new processes, he said.
As North American businesses invest less and less money in R&D, and the conservatives in government seem bent on turning the national back on scientific advances, we are going to see a decline in innovation born in the USA. This is not a good thing, but if it's the reality, companies are going to have to look elsewhere for creative designs and services. If a partner in some other country can come up with a brilliant solution, good for them, and good for the customer. If a provider and a client can collaborate to come up with an even more brilliant solution — team innovation — that's even better.
We're seeing more and more of that kind of collaboration in the Nearshore region. It's one of the things that IT buyers say they really like about working with Latin American software companies. You can call it "outsourcing innovation," but it's really just turning to the people who know how to solve your problem in a creative, cost-effective way. It's pretty much the same thing as hiring an Italian navigator who knows how to sail into the unknown and make it back home.
