The impact of outsourcing on innovation

In a recent post at Harvard Business Review, Susan Cramm asks whether outsourcing destroys IT innovation. She notes a commentary by Andy Grove, who argues that when companies outsource, the country loses not only jobs but also the “chain of experience,” which is necessary for technological innovation. Cramm questions whether this argument pertains to IT outsourcing, but what is particularly interesting is the responses that she received in comments on her post.

Some recent research into IT management in the banking sector found that banks that outsource IT “on a wholesale basis” have a harder time driving value through the use of IT and they are less flexible strategically. Cramm asks how companies can keep IT-savvy leaders if they outsource much of their developmental tasks.

The difference of the opinion on this topic is highlighted by the comments to this question. One commenter suggested that while IT companies shouldn’t outsource all of their IT, non-IT companies probably should so that they can focus on their own business. Another argued that this approach can leave product design engineers out of touch with end users. Several others wrote that outsourcing for the purpose of reducing staff expenses may be costly in terms of building competence within an organization.

A commenter who said he once worked for Chase, wrote that not only was innovation lost through outsourcing, but integration with existing systems and necessary nuances were lacking as well. While outsourced work was technically correct, it was “a blunt sword solution.”

Source: FierceCIO

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