As companies struggle through the current austere times, many are investing in processes that will be cost-effective and beneficial in the long-term. Modern outsourcing relationships now offer and deliver much more than just cost savings. Businesses are often transformed through innovation to achieve far greater efficiency and productivity.

Innovation is perhaps the most mis-interpreted term in outsourcing. It seems everyone wants a slice of the pie, but many are unsure of what the pie actually consists of..

It is extremely hard to narrow down one definition of innovation in outsourcing. One man’s innovation is another man’s day-to-day activity.

Innovation can be both incremental and radical and does not simply have to be continuous improvement. Innovation can be new ideas or ways of working to drive commercial gain or competitive advantage. It is does not have to applicable to all service provider relationships. For example no innovation expectations may exist for smaller or commodity relationships.

There has been much talk about the development of an innovation framework. To date, thinking has been that this framework is comprised of two distinct areas:

1) The hygiene factors for innovation: essentially the processes, the way in which a problem is approached, which can be included in contracts.

2) The governance structures, which are used to manage and progress innovation. The innovation management process itself provides the operational governance framework and a structured approach to fast track projects through idea generation and selection, development, confirmation of sponsorship and business case validation and on into hand-over to project delivery and tracking of benefits realisation.

On the other hand, many believe that innovation shouldn’t be put into a framework and ‘managed’ as it should naturally evolve from a partnership. Regardless of your position, a modern outsourcing relationship should help a business to innovate - whether metrics are set from the start or organically produced as a product of the relationship. However a framework can assist outsourcing partners to determine their objectives and formalise the innovation achieved. Developing metrics will also help to share the results and prove the worth of outsourcing-led innovation.