Cracking the Innovation Code: LatAm IT Companies Need to Foster, Demonstrate Innovation

Talking about innovation and being innovative are two different things. For software development companies, the need to innovate is paramount, yet the question always remains: how do you …

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Talking about innovation and being innovative are two different things. For software development companies, the need to innovate is paramount, yet the question always remains: how do you demonstrate innovation? More importantly, perhaps, how do you instil a culture of innovation among your developers? In an increasingly competitive IT environment, answering those two questions has never been so vital.

During a Nexus panel discussion at the end of April, Alex Robbio, Co-Founder and President of Belatrix Software, pointed out that it is very easy to claim innovation, but more difficult to prove it. He noted that his company has adapted Ideo’s Design Thinking concept to foster innovation among its developers.

In a statement on the Ideo website, president and CEO Tim Brown, explained that Design Thinking is “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.”

Drive For Innovation

This concept ties into a larger trend to combine design into the broader development framework. Gustavo Aguirre, the new VP of Innovation at Latin American software development company Globant, said: “What we are seeing lately is a stronger and stronger demand to merge design and innovation from the very beginning in all our software development engagements.”

Aguirre added that this is driven by customer demand. “For example today, as customers when using a mobile banking application, we do not compare its design and user experience with other mobile banking apps, but we expect it to be as ‘cool’ as any other application we have on our smartphone,” he said. “We are seeing the same behavior with corporate employees; they expect the company’s internal applications to be as user-friendly and innovative as the applications they use outside the corporate world.”

Aguirre noted that previously innovation and design were done by specialized boutique companies and then were specifications sent to an engineering company. “This was obviously a very inefficient process, so nowadays the market demands all these practices – innovation, design and engineering – to be integrated,” he said.

One possible approach to greater innovation is what Sam Elfawal, President for U.S. Operations at Neoris, calls co-innovation. Co-innovation, he noted, is about partnerships that help to stimulate innovation. He emphasised in a Practical Insights post that “In order to succeed, co-innovation efforts must have the 4Cs: collaboration, cost-containment, continuity, and commitment. For today’s global IT and consulting services providers, it is imperative to mold ourselves into top rated co-innovation partners for our clients. This can be accomplished by adopting on-shore or near-shore models to deliver the 4Cs, and promoting the advantage of regional proximity and lower labor costs.”

Creating a Culture of Innovation

Aguirre explained that innovation is about culture. “It is not a single thing. For example, at Globant the offices layout is built thinking about innovation and collaboration, special rooms for brainstorming, whiteboards everywhere, 3D printing labs — even the desks are organized such that there are spaces in between for collaboration,” he said.

He added that they also do many innovation-related activities, like brainstorming sessions, or organizing FlipThinking Sessions where they bring experts from different fields to talk about subjects that may seem unrelated to our business: NeuroScience, Rockets and Satellites, Biotech, Nuclear Engineering, and so on.

Patrick Millar, Co-Founder and CMO at Formatic.Ly, emphasized that if providers in Latin America want to succeed — within the context of, for example, SMAC (Social, Mobile, Analytics and Cloud) technologies — they need to demonstrate their ability in the innovation space. “Providing software development services is a low margin business. In this ‘me too’ space where skill differences are quickly leveled, the advantage goes to providers who can add clear value by innovating with their clients during the development process. In many cases this will require clients to be more agile in their processes, but it also requires providers to create an environment that encourages innovation and to coach employees on how to innovate,” he said.

Not Ideal For Innovation

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Recent steps towards insourcing in some quarters has been linked, by some, to lack of innovation in outsourced environments. Bill Huber, Managing Director at Alsbridge, explained that one key driver behind the move to insourcing is that outsourcing has fallen short of its promise to deliver innovation and transformation. “By taking services back in house, organizations often believe that they can achieve the benefits of labor arbitrage, while bringing more flexibility and focus on the customer,” he said.

Huber added: “The problem is that in traditional outsourcing, business cases are focused on cost take-out rather than improving the effectiveness of service or enabling business objectives. The result is that contracts are structured with rigid service levels to reduce costs rather than enrich business services.”

Mike Slavin, Managing Director of Alsbridge said: “Traditional large infrastructure outsourcing relationships have been unsuccessful at driving innovation because of their basic commercial constructs.” He added that very few, if any, agreements have items such as a standing innovation committee or an innovation fund built into the deals.

Slavin said: “Many innovative projects, such as moving to cloud, potentially cannibalize existing revenue streams and assets that are not fully depreciated. That means that, under the traditional constructs, providers have a clear disincentive to push for innovation.”

He agreed that functions being repatriated are often related to innovation, and the data does clearly shows that lack of innovation is one of the top three complaints that clients have about outsourcing. “So while there are certainly other factors driving smaller and shorter deals, that repatriation of certain functions has been a contributor,” he said.

Huber went on to explain that lawyers seek to “de-risk” outsourcing contracts and fail to include innovation elements, which in any event are difficult to define legally. “Another problem is that sponsorship and governance of outsourcing are frequently done at an operational rather than strategic level, with a ‘keep-the-lights-on’ focus,” Huber said.

The potential perception that outsourced environments may not foster innovation means that Latin American companies need to ensure that their innovation is recognized and that they put in place strategies to encourage the required kind of innovation in their development teams. As Aguirre noted: “You should have innovation as an important corporate value, and encourage and reward innovation.”

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