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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.

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.