Marketing innovation in IT services

Angel Dobardziev, Practice Leader, IT Services

Having seen the innovation mantra in overdrive in IT services in the last six months, we recently had a series of in-depth discussions with leading vendors around their approaches to this issue. Every vendor has a version of innovation and a unique approach to creating, and delivering and marketing innovation, influenced by its own position and strengths.

Innovation does not just exist in the realms of vendor marketing. It is a reality within vendors, and one that has been evolving for a while. The key reason that the vendor marketing machines have been latching onto innovation recently is client shift towards investing in IT to support revenue growth. Innovation - not just technology innovation, but business process and business model innovation - is once again seen by vendors and clients alike as key to supporting this search for growth. We are not suggesting that the focus on cost savings has gone away - far from it. However, enterprises are realising that while focus on lowering costs is necessary, it is insufficient. This is where IT services vendors feel they have an opportunity by riding on the innovation theme.

IBM has led much of the current debate around innovation. To us, IBM sees innovation as a way to deal with two competitive challenges. On one hand, it aims to maintain and strengthen its lead against strong Western players that compete with it on domain knowledge and bundled consulting/outsourcing propositions. On the other hand, it calculates that innovation (particularly consulting-led business-model and business-process innovation) will give it an edge over Indian players. Western players such as Accenture, Capgemini and Atos Origin, with consulting as part of their business models and with strong vertical domain knowledge, are very similar to IBM in their approach.

At the other side are the Indian players such as TCS, Wipro, Infosys and HCL. These players have built their businesses on the back of their low-cost, offshore models. They are keen to market their innovation capabilities, and our study highlighted that all of them had strong internal innovation networks and processes that enabled them to evolve their businesses to where they are today. However, in terms of delivering innovation in client engagements where detailed and industry knowledge is required, they are in development stages. To address this challenge, they are investing substantially in building consulting and high-level specialist resources in order to evolve their business model closer to the above group of Western players. The Western players, in turn, are building offshore delivery resources.

Services players with less-developed business consulting capabilities such as EDS and CSC differ on this issue. Their approach to marketing innovation talks mostly about technology innovation and to some extent process innovation, and less about business model innovation. This does not make them better or worse innovators, but it does make them different from the consulting/outsourcing hybrids such as IBM and Capgemini. We will be looking at the role of business consulting in IT services in a future report later this year.

But innovation is much more than a marketing tool. It is an activity that creates business value. There is an innovation network to be cultivated and invested in. People, not processes, innovate, yet getting the collaborative innovation process, and client involvement, right is critical. There is much more detail on all of this in the Innovation in IT services: vendor strategies report, which is available to Outsourcing@Ovum clients.

Angel Dobardziev is the IT Services Practice Leader, managing Ovum's advisory business in the IT services area. In this role Angel leads Ovum's research on IT services market trends, vendor strategies and IT user priorities, delivered as both reports and tailored client engagements.