Can You Outsource Innovation in the Software Business?

On September 17 of this year, as part of Russian Innovation Week, I participated in the panel devoted to the interconnection between software development outsourcing and innovation. It started with the following (roughly summarized) question: “Can you outsource innovation?”

My personal take on this (again, if summarized in three words) is, “Yes, you can.” Before you start protesting, let me explain what I mean. You obviously can’t outsource generating the next big idea—it doesn’t work like that. It should be an idea that you trust unconditionally and that you are passionate about in order for you to invest your time and money into turning it into a reality. And sending an RFP for idea generation to <insert your offshore location of preference> and then selecting the best provider simply doesn’t lead to that level of trust and passion.

But, as it has been said by many, “Ideas are cheap; execution is everything”. Once you have an innovative idea, what you can outsource is that crucial part: execution. In fact, many companies do exactly that. I can’t provide any statistics, but my gut feeling, based on our own corporate experience, is that many innovative software and high-tech hardware products are built on the foundation of outsourcing. It’s because of those strict NDAs that bind the outsourcing providers that it’s not common knowledge.

In our case, we can hardly provide one-third of the names that we would like to provide on our ‘Clients’ page. In the case of many big names, we are simply not allowed to reveal that it was our engineering team that worked under the hood of their innovative initiatives. We are lucky enough to be able to disclose that we work or worked with IBM, Yandex, and Chrysler on developing their new products, but even in those cases, providing the details of specific cases is taboo. As we’ve been working with start-ups since the early 1990s, wouldn’t you think we’d like to tell the world the details of the case when one of our clients—a start-up company—has been successfully acquired for over half a billion dollars after a couple years of using our services to scale up? But we can’t—and without the names, it doesn’t sound convincing, since it’s hard to check.

Being a realist, I don’t think that Auriga is the only software services provider in this situation. That leads me to conclude that under-the-hood outsourcing is quite common for breakthrough innovative products, at least in the software/high-tech industry (with which I’m most familiar). I’d appreciate any thoughts and feedback on this issue. Am I delusional, or does your personal experience confirm my story? What do you think?

– Andrey Pronin, SVP, Strategy, Technology, Marketing, Auriga