Service providers siloed by vertical industry are stifling innovation with clients

Achieving Innovation, defined as “deploying new and creative ways of achieving productivity or top-line growth”, has been a hot topic in outsourcing for years, but has now emerged as a key competitive differentiator for BPO providers. The lack of innovation has topped the list of client disappointments in outsourcing for years. Why is it so difficult to innovate with your provider? Aside from the typical reasons (organizational focus, funding and people), our research has identified an inhibitor; the provider organizational model. Outsourcing service providers have historically been internally organized around the industry verticals of their clients. This model served well during an era of building delivery capability and credibility, but is inherently limiting when innovation is the goal.

Over the last few years, core operational service capability and process excellence has become an expected given for clients. The ability to innovate and deliver effectiveness gains to a client’s business is now the differentiator. However, the industry vertical organizational model inherently restricts the breadth and depth of innovation potential across clients; many become too siloed in their sectors and miss out on gleaning best practices from other organizations in other sectors.