Innovation in outsourcing:towards a practical framework

The outsourcing industry is now up for a new challenge: to understand how innovation can be realized from outsourcing engagements. While innovation has been explored and prized within businesses for decades, it is a relatively new topic in the context of outsourcing. And, as such, the perceptions regarding what innovation in outsourcing is, what inhibits or enables innovation in outsourcing, and what client firms are willing to do to ensure they benefit from innovation in outsourcing are still being defined. This paper provides insight into some of the critical aspects in innovation in which both client firms and vendors have taken interest in recent years. We go beyond the simplistic approach we have seen in some recent reports that advocates for the development of trust and close relationships between client firms and vendors as the main enablers of innovation in outsourcing. In our view, innovation in outsourcing can be properly understood only when both contractual and relational aspects are examined as well as the nature of the innovation, i.e. incremental or radical, is explored. Further, we posit that the sourcing model applied has also an impact on the ability to innovate. © 2011 Springer-Verlag.

Understanding innovation in outsourcing services

Recent years have witnessed an expansion in service industries such as finance, travel and retail. Firms in the services have shifted their traditional occupation with products to consider how value can be created and appropriated in the service industry [1]. In particular, information technology (IT) and IT-enabled business services have become central to a firm's ability to deliver value to its customers, driving firms to seek ways to improve their services and maintain their competitive position. In this regard, the last ten years have witnessed significant growth in the outsourcing industry which shifted from focus on low cost simple tasks such as coding to end-to-end delivery of services that range from IT services and customer services to more complex business services such as Finance and Accounting, Human Resources, Procurement, and knowledge-intensive services such as customer analysis and research services [2]. © 2012 Springer-Verlag.

Location, control and innovation in knowledge-intensive industries

The rising share of intangibles in economies worldwide highlights the crucial role of knowledge-intensive and creative industries in current and future wealth generation. The recognition of this trend has led to intense competition in these industries. At the micro-level, firms from both advanced and emerging economies are globally dispersing their value chains to control costs and leverage capabilities. The geography of innovation is the outcome of a dynamic process whereby firms from emerging economies strive to catch-up with advanced economy competitors, creating strong pressures for continued innovation. However, two distinct strategies can be discerned with regard to the control of the value chain. A vertical integration strategy emphasizes taking advantage of ‘linkage economies’ whereby controlling multiple value chain activities enhances the efficiency and effectiveness of each one of them. In contrast, a specialization strategy focuses on identifying and controlling the creative heart of the value chain, while outsourcing all other activities. The global mobile handset industry is used as the template to illustrate the theory.

Strategic innovation through outsourcing:the role of relational and contractual governance

There is growing evidence that client firms expect outsourcing suppliers to transform their business. Indeed, most outsourcing suppliers have delivered IT operational and business process innovation to client firms; however, achieving strategic innovation through outsourcing has been perceived to be far more challenging. Building on the growing interest in the IS outsourcing literature, this paper seeks to advance our understanding of the role that relational and contractual governance plays in achieving strategic innovation through outsourcing. We hypothesized and tested empirically the relationship between the quality of client-supplier relationships and the likelihood of achieving strategic innovation, and the interaction effect of different contract types, such as fixed-price, time and materials, partnership and their combinations. Results from a pan-European survey of 248 large firms suggest that high-quality relationships between clients and suppliers may indeed help achieve strategic innovation through outsourcing. However, within the spectrum of various outsourcing contracts, only the partnership contract, when included in the client contract portfolio alongside either fixed-price, time and materials or their combination, presents a significant positive effect on relational governance and is likely to strengthen the positive effect of the quality of client-supplier relationships on strategic innovation.

Phenomenological turbulence and innovation in knowledge systems

Most considerations of knowledge management focus on corporations and, until recently, considered knowledge to be objective, stable, and asocial. In this paper we wish to move the focus away from corporations, and examine knowledge and national innovation systems. We argue that the knowledge systems in which innovation takes place are phenomenologically turbulent, a state not made explicit in the change, innovation and socio-economic studies of knowledge literature, and that this omission poses a serious limitation to the successful analysis of innovation and knowledge systems. To address this lack we suggest that three evolutionary processes must be considered: self-referencing, self-transformation and self-organisation. These processes, acting simultaneously, enable system cohesion, radical innovation and adaptation. More specifically, we argue that in knowledge-based economies the high levels of phenomenological turbulence drives these processes. Finally, we spell out important policy principles that derive from these processes.

Innovation in Queensland firms: implications for the smart State

The challenges in the business environment are forcing Australian firms to be innovative in all their efforts to serve customers. Reflecting this need there have been several innovation policy statements both at Federal and State government level aimed at encouraging innovation in Australian industry. In particular, the innovation policy statement launched by the Queensland government in the year 2000 primarily intends building a Sman State through innovation. During the last few decades the Australian government policy on innovation has emphasized support for industry R&D. However industry stakeholders demand a more firm-focused policy of innovation. Government efforts in this direction have been hindered by a lack of a consistent body of knowledge on innovation at the firm level. In particular the Australian literature focusing on firm level antecedents of innovation is limited and fragmented. This study examines the role of learning capabilities in innovation and competitive advantage. Based on a survey of manufacturing firms in Queensland the study finds that both technological and non·technological innovations lead to competitive advantage. The findings contribute to the theory competitive advantage and firm level antecedents of innovation. Implications for firm level innovation strategies and behaviour are discussed. In addition, the findings have important implications for Queensland government's current initiatives to build a Smart State through innovation.

Concept of Customer Relationship Management as an example of innovation in banking sector

Banks that has introduced CRM system, had to make some difficult changes in their organization in order to become more customer oriented. Beside the pure CRM banks try to adopt other innovative tools related with the core CRM. Some of these solutions are constructed in such a way so that ensured could be also access to the information beside to bank’s organization.