It’s been long enough since sourcingfocus.com last looked at the topic of innovation to warrant a return to the subject. Our last feature on this area looked into the reason for innovation and some of the precursors that should be in place to foster its development. To ensure we didn’t cover too much of the same ground, we asked key industry commentators and players what innovation meant to them. The results were as follows:

Dan Lieghio, managing partner at 4C Associates, explained that though some outsourcing can cost a little more, those costs can be offset in related costs. Procurement is a prime example where outsourced providers can develop economies of scale, streamlined processes and extra clout allowing them to drive down the costs of what is being procured, though their service may cost more.

“Interestingly, one of the fastest-growing areas of back-office outsourcing is the strategic procurement function, in which ‘innovation’ often means developing new ways of reducing costs.

“The service typically costs more than was previously spent running the in-house procurement function, with the trade-off that quality/results are substantially better – i.e. the firm ultimately spends a lot less on the goods & services it procures. Clients recognize that an outsourced service provider brings substantial structural advantages, e.g. scale of spend, breadth of expertise, in-depth market knowledge, detailed benchmarks, best-in-class reporting and supplier management tools, and a firm incentive to deliver results. On top of this, service providers who are able to demonstrate innovation reinforce clients’ confidence in making the investment in the outsourced service.

“The provider’s remuneration is often linked partially to performance, and ‘innovation’ is often one measure. Thus the provider is always on the lookout for innovation opportunities, and decisions are made jointly – based on a clear business case – when an innovative approach would require additional investment.”

Manoj Tandon, a director from CSC India, reiterated the importance of a close end-user supplier relationship in fostering innovation. He explained it is also up to the vendor to go above and beyond, to fully understand and regularly present new ideas to clients. However, the business case for any new innovation must be made very clear.

“A vendor should not restrict itself to what is written in the contract, as the world of IT moves so fast and vendors are often in a better position than the customer to know what is required. For example, cloud computing, virtual desktop, data virtualisation are just a few advances. All of the advances in the internet arena can be of immense help to businesses looking to increase collaboration and transparency throughout their organisation, as well as helping to integrate customers and vendors more fully within the company. However, just suggesting these to the customer is not the way forward. The vendor has to create a scenario of how this will benefit the business, make it clear how the business case stacks up, so that the customer can really see the benefits that can be gained.”

Douglas Scott, VP EMEA Services for Diebold, listed as one of the ‘worlds top outsourcing companies’, commented that in the financial sector, clients are looking to get more for less. They want added-value while reducing costs at the same time. Such demands put pressure on end users to both innovate for clients and internally to ensure such hybrid-product offerings can be achieved.

“During a difficult economic climate, long-term initiatives like redesigning branch networks look likely to continue but in the short term banks are looking for new systems and services to add value whilst reducing costs. The future of outsourcing is allowing banks to respond quickly, strategically and accurately to as yet undiscovered trends.”

Douglas layed out some of the items on the financial sector’s innovation wishlist, which included:

• A more consistent experience across all banking channels

• The ability to link all types of accounts for various transactions

• Increased security through biometric identification and other ATM security measures

• The ability to set language preference on ATMs

• Quicker, faster, more automated deposit automation

• Check imaging and detailed receipts for cash deposits

• The ability to print statements, order checks, pay utilities and make address changes

Guy Kirkwood, a multisourcing transaction broker at Unisys, expounded the wonders of multisourcing for creating new innovative outsourcing relationships and results.

“Multi-sourcing arrangements are in themselves not new but they do lend themselves to an innovative approach to outsourcing and mitigate against outsourcing suppliers taking on work they don’t have the necessary expertise and capacity to carry out. By involving third party advisors and specialist sourcing companies it's possible to establish a closer, more reciprocal relationship between the outsourcing provider and third party advisor, ensuring stronger governance and accountability. In this more heterogeneous environment, the advisor acts as a trusted advisor to the client, stringently reviewing the providers’ performance and ensuring that the outsourcing contract is open, honest and more flexible to business needs.”

An example of innovation in this area comes in Unisys’s work in one of the most promising public sector shared service projects to have been developed so far. If of course the benefits and savings are delivered as planned. The project is as follows:

“The Kent County Council shared services project unites numerous local public sector bodies to deliver the best services possible to its citizens, at the lowest possible cost. The new Kent Public Services Network connects approximately 1,100 public sector establishments including schools, council offices and libraries, across the county, offering improved bandwidth and inter-governmental collaboration. It is the first formal arrangement in the UK to bring local government networks into a single structure.

“A particular benefit of the KPSN will be a single link to central government. It is estimated this will save Kent's public bodies £338,000 over the next four years. By adding the Ashford exchange to KPSN the cost of existing schools' network connections in the town could be reduced by up to £70,000.

“Future plans for the KPSN include a single telephone service covering all participating public sector organisations and a single directory and extension number scheme. There is also a possibility for direct network connections for home workers, which could offer virtual office and virtual call centre opportunities. Video conferencing and multi media services could also be made available at all offices to help reduce travel.”

Dr Roger Newman of Mahindra Satyam, explained a project they are working on as an example of some of the cutting-edge IT that currently being developed.

“At Mahindra Satyam, we have developed an innovative web based video editing and publishing application where in end users can add, edit, add effects and then share their videos, thereby, providing a compelling user experience to the visitors of the social networking websites. This application has the ability to render widgets, rich internet application (RIA) artifacts – that are hosted separately and propagated across social networking applications such as Facebook and MySpace. It also enables end users to easily and quickly assemble motion and audio content, add tags, and with a click of a button, publish videos and music to social networking portals, making the whole experience more personal and customised.”

The trouble with innovation as readers may have gathered is that it is so difficult to pin down – ‘like nailing jelly to the wall’ as the saying goes. In this rough and ready rundown, rather than assess and discuss the relative merits of individual’s efforts, we’ve tried to keep it plain and simple. If you have your own views on innovation or want to pick apart any of the ideas above, feel free to post your comments below or start a forum topic to discuss.