Peter Reed, Lead Advisory Partner at Headforwards and former AXA Health CIO, discusses how outsourcing can empower CIOs to drive innovation during challenging periods.
Since the UK Government announced its plans to increase employer National Insurance Contributions from April 2025, capacity and capability challenges for CIOs may not have changed, but it has made them more expensive. Technology leaders across all industries will therefore be considering their cost-optimisation tactics as well as looking for new affordable ways to continuously innovate.
As technology leaders face economic pressures from multiple avenues, organisations need the option to scale without increasing permanent headcount. One solution for this – outsourcing – is nothing new, but is typically classified as a cost-cutting solution, as a way for a business to reduce their overheads. However, it can bring far wider benefits than CIOs typically consider, to keep their organisations digitally relevant and up to date with tech advancements and give competitive edge.
Outsourcing for innovation
Fundamentally, the meaning of outsourcing has changed over time. Rather than outsourcing in the traditional sense to reduce the cost of running the business, outsourcing for specialist skills such as integration and orchestration is now a strategic tool for innovation and agility. An outsourcing partner that’s used for running large operational processes isn’t necessarily a specialist partner that can develop more complex software, or support complex data and integration engineering. Yet all too often enterprises can end up using one partner for both things.
If you’re innovating, an outsourcing partner must be chosen wisely, as it’s rare that the same teams can deliver tasks to keep systems up and running and manage complex new applications. Let’s say, you wouldn’t service a Formula One car and a small modern car at the same garage. Often however you need both skill sets to work together and augmenting existing teams with new skills is a great way to build highly effective teams that can rapidly innovate.
Key components for a thriving outsourcing partnership
The most effective partnership is one where blended teams truly collaborate – one side with the business knowhow and the information on the current tech set-up, and the other with new tech specialisms. There are three key behavioural elements which are critical for an effective transformation team:
- Great communication: This is paramount to success as your existing teams, business colleagues and partner colleagues must work together as a highly effective team. Something new and complex requires many iterations and frequent communication. This is especially true when using AI or new software and you have a complex tech estate.
- Co-creation and collaboration: The digital partner must be collaborative as working together helps to frame the project and makes it more likely to succeed. There should be business outcomes rather than tech outcomes identified at the very start. For instance, clear goals such as reducing a business process that takes four hours down to four minutes.
- True consultancy: There can be six or seven answers to the same question. A partner who is a true consultant should challenge, ‘What do you mean?’ at concept stage, even offering an alternative approach.
Forward-looking tech leaders need to put the checks in place to make sure their outsource supplier is meeting their specific needs. If you’re innovating to make efficiencies, looking to leverage AI or making the organisation more data-driven, ensure your outsourcing partner has the digital skills to help you succeed.
The power of outsourcing digital delivery
There are a multitude of benefits moving forwards with a digital partner, which first and foremost includes the ability to get a project out of the starting blocks. Organisations often plan to undertake the design and development themselves when the CIO has 10 things to do ahead of this one. In trying to do this one complex thing without being able to stop the other 10 things, they can experience problems.
In this case a partner to help accelerate digital delivery can be the catalyst for critical change that will keep them moving forwards. The critical thing is doing this in a way which brings all the teams on the journey, the internal teams are crucial to the success of any transformation.
There are also benefits in terms of the injection of fresh ideas and perspective over either the in-house or ‘run’-focused outsourcing partner. Most importantly, outsourcing to an external specialist provider can offer a fresh pair of eyes, challenging a business’ ideas and helping it capitalise on an innovative approach. New, innovative ways to improve a business can often be found in nice little pieces of tech that have the potential to drive huge change.
Benefits also include access to the skills of transformation experts with a breadth of experience. If you’ve only done it once before, you will be learning on the job. Having done it five or 20 times, you will have learned from previous mistakes. The advantage of this continuous learning is invaluable. Having access to a wider talent pool and bridging talent gaps with specialised skills can in turn enhance competitive edge and innovation.
Outsourcing high-end software development can also help to manage risk through using experienced external teams. This can ensure compliance requirements are met and that cybersecurity is built into software and systems. We call it a 360˚ solution, but it’s more about eliminating risk by minimising blind spots.
Innovating for optimising or creating new capabilities
Innovations or transformations that result in new products and experiences are fundamental for organisations looking to achieve growth in a rapidly evolving digital world. But it’s important to remember that outsourcing to build value is not the same as outsourcing for cost reduction and will require a different approach. With technology advancement, continual transformation will be required for organisations to stay relevant and keep a competitive edge.
As tech leaders head into 2025 under mounting pressure, tempting as it may be to consolidate suppliers, finding the right combination of tech skills for the work that’s needed will be the key to creating remarkable business outcomes.
