Diego Lo GiudiceRegularly revisiting your application sourcing strategy is a must these days to ensure that you are employing the right strategy for each business area: on one side paying attention to modify your strategy as differentiated capabilities become commoditized, but likewise modifying your approach for the “differentiating” and “highly innovating” business applications.

Distinguish software that makes a difference from commodity processes and capabilities. Conventional wisdom suggests buying before building software. But as an increasing proportion of product and service value goes digital, there is a much greater scope for a firm’s application development professionals to build highly competitive digital differentiation into its offering. When determining which parts should get what sort of treatment to maximize business results, app delivery leaders should consider such factors as the nature of the process to support, available technologies, IT archetype, the rate of product- or service-offering innovation, the proportion of digital content in the product offering, and channel innovation.

The secret to releasing resources for digital differentiation lies in standardizing the support for commoditized or non-differentiating processes: centralizing and virtualizing their management and support, and outsourcing them when feasible to free resources to invest in innovation. Two main options can serve this purpose:  deploying packaged software with minimal customization to minimize costs, or making SaaS part of your strategy for both commodity processes and innovation.
Optimize a sourcing strategy to drive innovation for software that makes a difference. To provide differentiating solutions at a pace that matches volatile business requirements, application delivery professionals must focus on where they can add the most value. Smart application delivery leaders should consider how to focus in-house resources (whether employees or staff-augmentation consultants) on high-value-add tasks such as requirements, design and testing, while turning to partners for other work. In pursuing this innovation strategy:

• Optimize talent sourcing to build competencies that contribute to differentiation. First, determine roles you must invest in to build the talent required by your high-value, differentiating software projects. Key roles becoming more important today include business analysts, product managers, designers (of both user experience and architecture), and quality managers. When deciding where to focus innovation investments, you should also build talent in the technology areas you determine to be crucial. For each role or skill, map the mix you aim to achieve across the different options: building talent internally, using staff augmentation, or exploring other sourcing options. In some cases, offshore labs should take on particular specialties based on a record of accomplishment.

• Work with sourcing pros to create strategic partnerships to balance staff augmentation. You should build a sourcing framework that will supply the talent you need on a sustainable basis. As part of your ongoing working relationship with your colleagues in sourcing and vendor management, provide them with the map of roles and skills you have identified as crucial to your innovation success. For each role or skill, identify the approximate locations and quantities of resources you expect to require, along with your current cost for each. Your sourcing colleagues will help you define contracts with proper terms and conditions, define a request for proposal process, select the panel of partners, and manage the life cycle of each relationship, including regular effectiveness reviews and panel updates.

• Make user experience a key element of your innovation talent strategy. Application delivery teams can build a competency in user experience. Several clients cite user experience talent, especially for mobile, as one of the skills they are ramping up internally instead of relying too heavily on specialty agencies for this capability—in part because their experience with the results these agencies can achieve had been decidedly mixed.

• Innovate within your delivery processes to deliver more customer value more quickly. People play a crucial role in innovation, but you must establish the right organizational and process context to maximize your teams’ chances of success. A sizable majority of innovative firms we studied are relatively mature in their adoption of lean and agile practices.

Forrester’s research on software innovation, agile adoption, customer experience, and high-performance teams all points to a set of practices that are typical of the firms that are the most effective in driving software and business innovation. Talent sourcing is one of the most important of these practices. Whether it’s through creating a culture of excellence that makes your shop a destination that developers around the world would love to reach, or through adopting a more sophisticated approach to skills sourcing that supplies innovative talent from around the world, all the innovators excel at ensuring a good supply of the best people.

Diego Lo Giudice is a vice president and principal analyst at Forrester Research, where he serves Application Development and Delivery Professionals.