14 per cent of companies prioritising 'radical innovation' through outsourcing

25 February 2015

Companies are increasingly using outsourcing to innovate rather than just improve processes, according to a new study.

The Innovation Reality report from sourcing advisor Aecus said while ‘continuous improvement’ is still the priority for nearly a third of business leaders surveyed, almost a quarter are working on projects where provider and client work together on a significant initiative to improve the efficiency or effectiveness of the outsourcing.

According to the study, 14 per cent of business leaders are prioritising ‘radical innovation’ with their outsourcing partners, such as the implementation of a major new technology or global delivery model.

Nearly a third of leaders said they are hoping their outsourcing partners can provide benefits to the wider business, such as increasing revenues or improving products and services.

Paul Morrison, head of outsourcing innovation at Aecus, said that although companies have always sought innovation from their outsourcing partners, it was now coming to fruition.

“It’s the increasing maturity of outsourcing buyers and sellers, along with technological change, that’s making this possible,” he said.

The study said 90 per cent of buyers believe their outsourcing agreements can help them improve products and services, while 86 per cent believe they will help retain customers, and 85 per cent are hoping to achieve top line revenue growth.

Over half of businesses say they have already achieved improved customer satisfaction, while 45 per cent believe innovation has had an impact on their revenue growth.

But the study also found some organisations said that they were not well set up for getting innovation for suppliers. Almost a third of respondents did not think they had the knowledge in their business to manage suppliers for innovation, while two fifths said their contractual agreements were not currently set up for innovation.

Morrison said despite progress there were still hurdles to overcome to ensure organisations achieve the best results. “To maximise the impact innovation can have on a business, it is absolutely vital to invest in the right capabilities, and implement the right framework of suppliers, incentives and governance,” he said.

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