We've all heard the business legends that float around the executive meetings, from the secretary who suggested making the hole bigger in the tube of toothpaste to the blue collar worker who suggested adding "repeat" to the instructions on a bottle of shampoo. These stories of entry-level innovation almost always result in a significant increase in the sales for the company. So what happens to the level of in-house innovation with companies engaged in offshore outsourcing?
Often it comes down to a specific line item on a budgetary cost sheet. However, as every process analyst knows, there are hard costs as well as soft costs. Deloitte's recent study indicated that a small but growing percentage of companies are bringing offshored services back home, citing customer service as the primary reason for this decision. What's not mentioned here is the cost to the business in terms of brain drain and talent retention.
The thing to remember about offshore outsourcing is that your customers are no longer the customer: you are.
As the key performance indicators focus very acutely upon what is delivered, how much innovation have we lost? How many innovations in history were made because factory workers had ideas that improved the company’s bottom line -- like our shampoo bottle instructions?
The thing to remember about outsourcing is that your customers are no longer the customer: you are. Those contracted workers have less motivation to improve your bottom line, because it will make little to no difference to their own take home pay. Add in the inherent sense of nationalism -- the people "over there" are mentally and geographically more alien to us than the people who live in our neighborhoods, and vice versa. There goes the happy shiny view of offshore workers that the outsourcing vendors like to propagate.
This is where CIOs have the opportunity to support the business' bottom line: by thinking nationally but acting locally. While selective outsourcing is a facet of today's business, it pays to cultivate innovation closer to home. You can bank on it.
What do you think? How have you retained innovation in-house while still using selective outsourcing services? Have you seen any negative impacts of sending work outside of the company? Let's start a discussion in the comments.
This was first published in April 2013