Following years of disappointment, company CIOs are now skeptical about vendors being able to deliver 'innovation' in their organization, mainly due to an expectations mismatch.
'The use of the word 'innovation' has grown dramatically among IT services vendors in the last six months. However, it seems that both clients and the players within IT services have different ideas as to what innovation is, and what it should deliver,' Ovum IT services practice leader Angel Dobardziev says in a recent report.
'The challenge is in the mismatch of vendor/client expectations and in the limitations of the contractual arrangements. This often means that the clients can be unhappy even when vendors deliver on all of the agreed metrics,' Dobardziev adds.
When clients demand innovation, Dobardziev says that what they are usually after are outcomes. Vendors should focus on these outcomes and take the time to understand these needs, no matter how different and conflicting these may be across various clients.
On the vendor side, it is important for them to manage their innovation ecosystem, which consists of an internal network linking research and development, portfolio management, sales and marketing and delivery, with external links to clients, partners, suppliers, and even the academia and startups.
Service providers, no matter how big, should face the fact that they will not have all the answers to the questions that their clients will pose. As such, they have to invest in and manage the links between their internal innovation networks and external members of the innovation ecosystem.
On the client-organization side, they should work internally to clearly define their business and technology innovation needs so that they could clearly communicate these to the vendors across multiple connection points.
They should likewise provide enough incentives to get innovation outcomes. Deals between clients and vendors should be characterized by a balanced risk-reward equation, clear ways to measure innovation outcomes, and mutually beneficial deals on intellectual property to be generated during the implementation of their projects.
'If you can address all of these issues in an equitable way, you will be on the way to providing incentives to your vendors to innovate before and during your engagement,' Dobardziev says.
'If you really want valuable innovation to be delivered as everyone expects, the deal should be treated as a partnership. It's not enough just to say that a vendor/client relationship is strategic. You have to be prepared to invest in the relationship. If you don't, then you'll have an old-style customer/supplier relationship on your hands,' Dobardziev adds.
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