Gartner Blog Network


Is it fair to ask: can you outsource innovation?

by Andrew White  |  February 18, 2015  |  1 Comment

There was an interesting story on the front page of the U.S. Print edition of today’s Wall Street journal, the Business & Tech section.  The article is called, Why GM Hired 8,000 Programmers.  The article suggests that 2 year ago GM had ended a $3bn IT outsourcing deal.  Now the firm has built and deployed some innovative commerce-driving web site solutions to differentiate itself in the market.  These innovative solutions were built by the now “in-sourced” programmers hired by GM.  Note too the CIO is no newbie but none other than Randy Mott, firmer CIO at Wal-Mart.  At Wal-Mart Randy was leader during a period of great innovation in retail and consumer goods, namely what became CPFR.

So what do outsourcing agencies say about this story?

A couple of points and questions come to mind as I read the article.

  • What is the main value proposition for outsourcing?  Is it cost cutting and efficiency or is it innovation?

Outsourcing is a great way to access highly repeatable services.  The provider stays in business by scaling repeatable work.  If it were one-off work offered then the costs would skyrocket and the service provider would have to change business models.

Equally working with outsource companies often ends up being a discussion more around service level agreements and terms and conditions.  And this before you get to define the new requirements.  In contrast with your own resources, you just issue a new edict.

  • What role does a strong, effective CIO play in this decision?

A strong CIO that understands the business and how information and technology (they are different!) changes the game.  They ‘get’ outsourcing and put it in its rightful place.  A CIO that plans on making a successful career based only on outsourcing tends to be short lived: it will focus on cost cutting, not innovative investment for growth.

I believe outsourcing makes sense for that work which does not provide differentiation or innovation.  I believe it can free up funds. But you should try to sell the resulting new investment along with the cost savings- at the same time.  And you need a leader, not a pacifier.

On reflection I think the question, “can you outsource innovation?” is the wrong question.  I think you can use outsourcing to help fund innovation; and some services offered by outsourcing vendors can be consumed in some innovation.  But the idea that a core business differentiation or innovation can be outsourced is hard to accept, for anything but the shortest amount of time possible.

PS a little known secret related to CPFR: The original CFAR pilot with Warner Lambert (now Pfizer) used EDI transactions – there was no hint of using real-time messaging via the Internet at that time.  I know – I was the one that asked the question publicly of the pilot presenters at Benchmarking Partners.

Additional Resources

View Free, Relevant Gartner Research

Gartner's research helps you cut through the complexity and deliver the knowledge you need to make the right decisions quickly, and with confidence.

Read Free Gartner Research

Category: differentiation  innovation  it-cost-optimization  outsourcing  

Andrew White
Research VP
8 years at Gartner
22 years IT industry

Andrew White is a Distinguished Analyst and VP. His roles include Chief of Research and Content Lead for Data and Analytics. His main research focus is data and analytics strategy, platforms, and governance. Read Full Bio


Thoughts on Is it fair to ask: can you outsource innovation?


  1. […] Is it fair to ask: can you outsource innovation? “There was an interesting story on the front page of the U.S. Print edition of today’s Wall Street journal, the Business & Tech section.  The article is called, Why GM Hired 8,000 Programmers. The article suggests that 2 year ago GM had ended a $3bn IT outsourcing deal.  Now the firm has built and deployed some innovative commerce-driving web site solutions to differentiate itself in the market. … On reflection I think the question, “can you outsource innovation?” is the wrong question.  I think you can use outsourcing to help fund innovation; and some services offered by outsourcing vendors can be consumed in some innovation.  But the idea that a core business differentiation or innovation can be outsourced is hard to accept, for anything but the shortest amount of time possible. …” Via Andrew White, Gartner […]



Comments are closed

Comments or opinions expressed on this blog are those of the individual contributors only, and do not necessarily represent the views of Gartner, Inc. or its management. Readers may copy and redistribute blog postings on other blogs, or otherwise for private, non-commercial or journalistic purposes, with attribution to Gartner. This content may not be used for any other purposes in any other formats or media. The content on this blog is provided on an "as-is" basis. Gartner shall not be liable for any damages whatsoever arising out of the content or use of this blog.