Motto: Innovate or die
Take a look to the pharmaceutical industry, where independent biotechnology research adds 100 gigabytes per day to the databases of the GenBank alone (the National Institutes of Health genetic sequence database, an annotated collection of all publicly available DNA sequences). No company can hope to keep ahead of such an outpouring by itself. As a result, hundreds of small, sophisticated firms have entered the field as potential suppliers of innovation —radically changing the opportunities for outsourcing and restructuring the entire industry.
Next, consider both the large services industries, where most innovations are dependent on software, and the manufacturing world, which increasingly relies on embedded electronics. In both cases, a mere 15 sequences of software can be combined in more than 10 trillion ways, each creating a potential new product or process. No internal R&D group can possibly predict, evaluate or cover all possible designs or competitive positions. To prosper in this environment — even survive — companies need to systematically tap the capabilities of external knowledge leaders, not just for state-of-the-art products and services but also for the continuous innovation and evolution of ideas that will keep companies at the frontier of their industries.
It depends on how the innovation promise is formulated. The heavy point is on the client's work with the vendor in order to develop the precise framework which will define the conditions of the execution and the key success factors of a joint innovation program. Innovation doesn't happen by chance, it requires focus and planning. Another important aspect of the program is the financial, often minimized component by management. However, without financing, innovation can not be delivered. It is also true that most of the clients want innovation for free- especially when taking into consideration the embedded in outsourcing contracts. Basically, clients that appreciate innovation are ready to pay for it and know already what it costs. Most of the failures, often come from clients who haven't understood that innovation implies an investition. In this cases, the vendor has also the role to educate its clients, in the interest of both parties.
“Any customer can have a car painted any color that he wants so long as it’s black.”- Henry Ford
This classical saying has become now true more then ever. Henry Ford knew the way to build cheap cars. The secret was to divide the work into repeatable processes and limit customer choice. And that's the principle that guides the also the outsourcing providers today. Outsourcers understand that one of the best ways to make money is Henry’s way: Define the job as narrowly as possible (“any color as long as it’s black”) and divide it into repeatable steps. But this is not exactly a formula for innovation, for generating new ideas and improving business processes.
In a recent research report from Gartner, titled, "How to Get Vendors to Deliver Innovation in Outsourcing Deals", Frank Ridder and Helen Huntley write, "...Clients often have differing expectations about what "innovation" really means and how to get innovation done. Outsourcing contracts are often vague when mentioning innovation, the innovation process or how innovation will be measured to ensure that it is delivered."
Forrester Research reports that 41 percent of buyers are dissatisfied with the innovation provided by their primary outsourcer, and an exclusive CIO survey of IT execs reports that 44 percent are unhappy with the innovation provided by offshore outsourcers. According to an Alsbridge survey of 300 buyers of IT services, the biggest gap between outsourcing benefits sought and achieved exists around innovation. The same research found that suppliers themselves say that their inability to innovate to client requirements is their biggest challenge. Once the contract is signed, the providers need to service the SLAs. Providers are delivering to a contract, and it’s difficult to build any kind of innovation into the language of the contract.
So that's why we get to situations when the outsourcers hit all the key indicators and the client still isn't happy. Most of the clients are looking for a company that would do more than just manage the IT service delivery. But providers cannot solve problems or help clients achieve business goals unless they understand the issues, so clients who expect providers to bring innovation forward to solve business challenges or meet business goals must share business directions and issues with the providers. Clients must also establish clear guidelines in the outsourcing contract on what innovation means, how it will be delivered, who will be involved in the innovation process and potential results for both parties.
So can you get innovative ideas from an outsourcer? Of course. You can get anything you want. But you have to pay more.
Outsourcing has reached the highest level of the manufacturing supply chain: R&D. By outsourcing R&D offshore, original equipment manufacturers can freeze a portion of their R&D budgets while growing their product offerings. Leading companies have lowered innovation costs and risks 60% to 90% while similarly decreasing cycle times and leveraging the impact of their internal investments by tens to hundreds of times. Strategic management of outsourcing is perhaps the most powerful tool in management, and outsourcing of innovation is its frontier.
Having innovating ideas is good, applying them is better…
All the projects must have a common goal: go from technology to innovation and from innovation to long-term value. They will consist in delivering POC and services which have a very high added value. Through its IT activities, Pentalog enters in contact with numerous experts in various fields, which gives it access to a large sphere of creativity. We intend to use this asset in the best possible way, within an incubation strategy which will allow us to increase the benefits of innovation projects that Pentalog is going to launch, and to use once again new leverage in order to ensure continuous growth and a stable leadership.
Therefore, we created the Pentalog Labs - an incubator programm, which will certainly be closely linked to the partnership approach of the development strategy of Pentalog Group. Innovation is not a product of chance, as it requires investments, commitment and organization. Capitalizing on expertise, the pooling of the force and talent together with those of the future partners which will bring innovating projects, this is what will make the difference. Start-ups, grow-ups, entrepreneurs, investors are all possible partners for developing synergies. Together with them, Pentalog Labs will soon be able to meet the challenges of “planetarization” for the creation and intelligent use of the technologies and business models of tomorrow.