Innovation & India Outsourcing Industry – Case Study of Top Indian Vendors (TCS, Infosys & Wipro)

Indian outsourcing companies realized that clients are more interested in innovation along with cost and process efficiencies.  Clients are interested in paying more for the transformational and innovation projects and product offerings. Initially it was sending technology workers to companies in the west for work onsite, then came the offshoring which is the traditional model of outsourcing based on the client needs and the latest third wave in Indian outsourcing is where companies design the platforms and systems that facilitate innovation and efficiency. But the fact remains that till now there has not been a disruptive offering from the Indian Outsourcing vendors. According to a 2011 Forrester survey, 41 percent of outsourcing clients cited lack of innovation as the biggest challenge with their existing IT services relationships.

Clients interviewed by Jan Erik Aase, (Sourcing & Vendor Management analyst-Forrester Research), identified three types of activities offshore vendors may try to pass off as innovation that failed to meet their expectations: innovation-for-pay (vendors creates a solution for one client and then licenses it back as a product to that client and the larger market), innovation for innovation's sake (emerging tech from vendor R&D labs that don't solve a customer problem), and administrative innovation (IT services buyers don't view process improvements, project management tools, relationship dashboards, and the like as real innovation). Clients want innovation relevant to their specific needs such as solve business problems, transformation in doing business, commercially viable solutions, creates competitive differentiation, improve market share, or have "an ROI with a multiplier of at least two”.

Innovation @ Top Indian Outsourcing Vendors (TCS, Infosys, Wipro)

Indian Vendors realize that Innovation is lifeline of business and is a critical factor for success in outsourcing industry. They know innovation is a complex process and is a vital component in their business strategy and in order to stay ahead, companies should increase the speed of innovation, be focused on the customer experience, understand their behavior, and co-create with customers and partners. Innovation has to be instilled into the organization at all levels and companies have done this successfully. The top three Indian outsourcing vendors have around 500,000 employees working in their organization for clients across the globe. They constantly innovate and improve the process efficiency there by leading to cost and other benefits for the clients. They work 24/7 for the clients and the innovation which most of the employees do on the day to day basis is called derivative or sustainable innovation.

All the three vendors are using their in house intranets, employee engagement and social media platforms for the idea generations. These platforms provide an opportunity to express their innovation ideas to the management. Managers and Leadership are being trained to act upon these ideas by the employees, evaluate them, commercial viability of the ideas and finally implement them and develop product and service offerings. Formal trainings for the employees include innovation and creativity. For the training programs they are employing third party consultants and experts and also tying up with the academics and other research institutions. Rewards and recognitions are provided for the employees who provided successful innovative ideas and Innovation is also part of the employees’ formal annual performance reviews. The vendors have invested on the training of the employees, provided them with necessary platforms and are investing and developing the ideas into final products and services.

Annual Innovation Events are being conducted where the employees are allowed to present their ideas, conduct demos not only to the management and leadership but also to the academic, clients, research, alliance partners and other stakeholders. These events bring together all the stakeholders of the innovation process and provide a platform to discuss and debate on the various innovations. All the vendors have tied up with the academic organizations, consultancies and other specific research organizations and do work with them in developing the innovative offerings. Wipro Technologies and Knowledge@Wharton together started conducting this tournament in 2010 which selects the most innovative managerial "tools" that companies can use to improve their business by increasing revenues, reducing expenditures and improving customer experience

TCS and Infosys have setup exclusive Innovation labs and these labs TCS Innovation Labs and Infosys SETLabs have been in existence for the past 30 and 20 years respectively. These labs has developed several process frameworks, methodologies, service platforms and work with standards bodies on future technologies, share best practices and maintain peer relationships with academic bodies, industry forums, conferences, and journals. Around 600 and 800 associates work in the R&D in the TCS and Infosys labs respectively. Wipro on the other hand provide third party R&D outsourcing services to their clients and they dominate this market. Infosys' SETLabs incubated the Innovation Lab in collaboration with Prof. Venkat Ramaswamy in 2005 as part of its research and innovation capability.

Frameworks are used by these vendors like TCS adopted Professor Clayton Christensen Innovation frame work and Co-innovation network with Clients and other stakeholders, Infosys adopted a Co-Creation framework based on the book published in 2004 “The Future of Competition: Co-Creating Unique Value with Customers" by Prof Venkat Ramaswamy and management guru the late C K Prahalad. Co-creation is the practice of developing systems, products, or services based upon innovative ideas from stakeholder experiences, that enhance strategic capital, increase returns, and expand market opportunities.

Wipro’s Innovation initiatives were developed based on a study of innovation methods in companies like Nike, 3M, and Home Depot that were reputed for their innovative practices and Applied Innovation which is the ability to infuse newer ideas and newer ways of doing things into all parts of the organization, and improve business outcomes, often without major disruptive change. Wipro Technologies, Innovation Evangelism happens through a series of vehicles that include: Wipro’s Innovation Camp, Innovation Bazaar, Story Book on Innovation, Systematic Creativity Workshops, and Inflection Point newsletter, etc

Despite all these efforts and investments India Vendors have innovated products which are more of sustainable kind and platforms that are mid range platform innovation but they are not able to innovate a disruptive offering. They have involved the employees and managers, provided tem with necessary infrastructure, established labs with exclusive focus on innovation and creation of new products, employed PHds and highly qualified people in these labs, provided with necessary infrastructure and other technologies in the labs, collaborated with all the stakeholders like clients, industry groups, research and academic organizations etc. Co-Creation with the stakeholders and forming strategic alliances with product companies and technology startups and investing significant amounts of money and resources are the major strategies adopted by these vendors. But success still eludes them.

Clients too have to make serious investments to profit from the vendor’s innovation strategy. Clients should treat the vendor not just as the cost reducing and process efficiency improvement partner but have to look at the vendors as strategic partners for the business growth. Clients should provide the vendors with the overall organization business strategy and make them understand that their role is not only limited to the IT department but also towards the overall organizational performance improvement. They should foster such relationships with their vendors and look for vendors with good innovation culture and strategies in place. It will be a win- win situation for the vendors and clients if they work collaboratively towards developing the innovative products and services.

All the players in the Indian Outsourcing industry realize the fact that only way to survive in this highly competitive outsourcing industry is to constantly innovate products and services that are relevant to the clients and lead to revenue growth to both of them. Innovation is highly complex and critical process that need significant amount of resources like monetary investments, technologies and highly skilled and trained professionals. The innovation Return on Investment is essential factor for both clients and vendors and they have to work together for this.

Further Reading:

Innovation @ TCS

Innovation @ Infosys

Innovation @ Wipro