Multi-Sourcing – the Next Evolution in Outsourcing

Outsourcing has become an accepted model in the modern business, as increasing numbers of organisations begin to realise the advantage of procuring the skills of outside providers, particularly within the Information Communication Technology (ICT) space. Some of the tangible benefits of outsourcing include lowered costs, easier access to scarce skilled resources and improved turnaround times on issues, to mention a few.

However, the field of ICT is a complicated one with many different areas.

This makes outsourcing multiple aspects to one company somewhat problematic, and organisations are beginning to realise that if all services are outsourced to one provider, they are not guaranteed that service levels will be of the same standard across the board. This comes as a result of large outsourcing organisations absorbing smaller companies, which adds to their service stack but does not necessarily mean that these new areas will be specialities. Organisations end up locked into outsourcing contracts with providers who are not delivering according to their needs in certain areas.

As a result organisations are beginning to question the wisdom of placing all of their ICT eggs in one basket, so to speak. To address this challenge they are looking towards a strategy that involves multiple outsource partners for various niche areas, sourcing specialists who will provide high levels of service in each specific area. This has given rise to the next evolution of outsourcing, a trend that has become known as ‘multi-sourcing’.

Customers are beginning to demand better service levels in all industries, particularly in IT where any investment or service is a costly exercise.

When engaging with IT service providers, organisations now wish to ensure not only that they are addressing cost factors and achieving return on investment (ROI), but are also getting the very best levels of service without becoming locked into long-term service contracts.

By leveraging the multi-sourcing model companies can achieve smaller pockets of service capabilities that are easier to evaluate, which enables better fact-based decision making regarding continuation of services.

With the outsourcing model, where multiple services are stabled with one provider, this switch becomes more difficult since it involves multiple processes and systems. Multi-sourcing on the other hand allows for certain services to be switched without much fuss should niche providers not deliver on these areas, and drives a more competitive environment between vendors as they strive to obtain the advantage by delivering better service levels and greater value adds.

The outsourcing model, and multi-sourcing in particular, falls neatly into line with modern business operations. The skills shortage in South Africa is a reality, and hiring full time resources in-house to manage all IT operations is simply not a cost effective option, particularly when the majority of administration is not in fact a full time job.

Outsource partners can deliver services quicker than internal IT departments, since Service Level Agreements (SLAs) ensure set response times to resolve issues, whereas internal resources are not bound by such agreements. Using outsourced providers also enables organisations to leverage economies of scale. In addition, they have access to a far wider pool of resources to find the best solution and deliver this in short order, on demand, without the need to pay the high cost of a full-time resource.

The multi-sourcing model can be used to find specialists in each area, which guarantees that a specialised service is provided in line with the latest technological innovations and evolutions.

Multi-sourcing as a model provides numerous benefits. Specialist skills are available when needed and costs can be negotiated easily. If similar services can be obtained from another provider for a better price, or an organisation is unhappy with service levels, the provider can easily be changed. These services can be obtained without the consistent expenditure of a full-time resource, and services can be scaled up and down depending on current and future needs. Organisations are not locked in to a single contract with a vendor who may not be delivering consistently across all areas, and using multiple service providers ensures that replacing one area can be achieved with relative ease to achieve better service levels.

On the downside, multi-sourcing does involve a lot more administration, as multiple contracts and SLAs need to be constantly managed. This requires an internal resource to review reports from providers and make decisions regarding performance in order to effectively govern the model. This model also increases potential for suppliers to play a blame game, with one service provider blaming another for bad service across the board. This makes effective management even more important, since the multi-sourcing manager will have the information needed to make decisions based on the facts of service provided.

Using one outsource partner for the entire ICT department involves a lot less administration, however it does increase the organisation’s risk since if that one provider experiences problems the entire IT system could potentially be compromised.

At the end of the day, outsourcing in its various models makes sense in today’s business world. When deciding between traditional outsourcing or the emerging multi-sourcing model, organisations need to weigh up between increased administration versus increased risk, as well as the benefits of obtaining specialist providers in each area when it comes to dealing with mission critical IT appliances.

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  • Anonymous

    Good Work!!!
    Multi-sourcing is the disciplined provisioning and blending of business and IT services from the optimal set of internal and external providers in the pursuit of business goals. Multi-sourcing contracting structure can allow a customer to reduce its reliance on a single supplier, and allows the sourcing of service components from “best -of-breed” suppliers. However the essential value of a multi-sourcing structure is its potential flexibility. Multi-sourcing where judiciously employed, can be an effective model for conducting an outsourcing.

  • http://www.quantumplus.co.uk Quantum Plus

    Multi-sourcing is indeed a complex challenge, but too often the basics can be overlooked.

    Pre Contract:

    Defining the requirements for a multi-sourcing contract needs absolute clarity of roles and responsibilities, the need for a service integrator and need for collaborative working between suppliers.

    Roles and Responsibilities: There is nothing more frustrating for a service provider than lack of clarity over who is responsible for what, especially if there are several suppliers in the mix. Having an optimum sourcing strategy which includes commodity service providers, XaaS, Managed Services and potentially a Service Integrator puts a great deal of responsibility on the organisation.
    Service integrator: This is a potential solution for medium to large organisations to deal with the complexity of managing multiple service providers. The end to end service provision is the responsibility of the service integrator although the accountability for contracting for the service remains with the organisation. This differs from a subcontracting arrangement where the service integrator takes on the full management and financial responsibility of the service providers. It is essential that the service integrator role and associated relationships are clearly defined and that the service integrator is empowered to manage the end to end service.

    Collaborative Working: Even an SI does not replace the need for collaborative working between the suppliers. Tier matching of suppliers helps avoid the need for frequent intervention between suppliers, however irrespective of the tiers, requirements should stress the need for suppliers to work together. This is particularly required with problem identification and resolution, change management, transformation and innovation, essentially ensuring that the principle objective is focussed on what is best for the organisation.

    Contracting:

    During a contracting phase, where there are multiple suppliers either for different aspects of a service or for sharing elements of the same service (e.g. AD/AM or infrastructure provision) it is essential to observe suppliers working collaboratively. Are they prepared to share methods and tools, reporting standards, do they accept the shared responsibility for service availability? etc. It is essential that joint processes between the suppliers and the client are developed during contracting, covering all aspects of service delivery. It is also important to ensure that OLAs are in place that clearly describes the supplier eco-system, in addition to defining a consistent, collaborative governance framework across all of the contracts

    All of these points should be identified and resolved prior to contract signature. There is no doubt that some suppliers play nicer in the sand pit than others, some are less threatened in sharing best practice and others are positively collegiate in the way they operate their services.

    Much is driven by the contract structure. There are several models:

    • Absolute delineation of responsibility between the various suppliers;
    • Shared responsibility for service delivery of one or more elements (organisations tend to use this route if there is a risk that one supplier may fail, or the scale is sufficiently large to warrant two providers);
    • One supplier “first among equals” and providing some or all of the service integration with or without other delivery responsibility;
    • Ranked structure where some suppliers are subcontractors to a limited number of primes;
    • Step-in rights for suppliers overlaying the above.

    All of these have their advantages and disadvantages. What is clear that most suppliers of any significant size can cover the gamut of services that the organisation will require and therefore, even when working collaboratively, may demonstrate some competitive or defensive behaviours which are counter-productive to the organisation’s aims. Therefore the contract needs to be explicit as to the behaviours required, how they will be assessed and the consequences of not achieving them.

    Careful analysis of the delivery model and the cost structures of each of the suppliers will be required during this stage to optimise the business case. Organisations need to avoid the potential for duplication of dedicated management structures within the suppliers that can arise when sharing service provision. This must be supported by rate cards, which define the incremental cost of services, and a benchmarking regime that keeps pricing competitive without the need to use changes in scope (and the muddying of responsibilities which can ensue) to motivate the suppliers.

    Post Contract:

    Following the contracting process the highest priority is ensuring the retained organisation is, and remains, fit for purpose. With or without a service integrator the skills required by the retained organisation will be significantly different than with the previous operating model. The need for expert commercial and supplier management skills to ensure the best out of the suppliers, for the duration of the contract, to ensure the organisation receives the service defined and that the benefits of the outsource are achieved.

    The organisation’s skillset will need augmentation in the area of behavioural and relationship assessment and management, and all suppliers will need to abide by this common standard and the metrics involved.

    It should be recognised that all suppliers’ teams will be targeted to deliver the expected revenues and margins and also to grow their accounts. Growth will only come through scale and scope – the latter almost inevitably from a service partner’s area of responsibility; hence the likelihood that competitive behaviours will arise. The suppliers must recognise the danger in this behaviour and that their individual growth will only be achieved by collaborating to bring added value across process or by generating scale for their customer.

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