 "Goodbye Outsourcing, Hello Multisourcing")
IT outsourcing has evolved and matured over time. A decade ago, outsourcing started with the aim to cut costs which was its primary driver. As the years progressed, the key driver for outsourcing changed from cost focus to leveraging the competence and partnering to create better quality of products and services. The latest trends in outsourcing are more geared towards partnerships to create efficiency, build capabilities and improve business performance.
The Changing Face Of IT
Today, the way we do our business is drastically changing. Consumerisation and commoditisation of IT is bringing in new concepts which we had not heard of before. For instance, cloud has changed the way we manage our infrastructure and opened up new avenues for empowerment. The traditional way of managing IT has also been challenged by BYOD. This is a big change, and it has shifted power from in-house IT to a different model where we need to re-think outsourcing today.
Businesses need more agility today in the form of shorter business cycles and expect technology to support this. We need more free cash flows, liquidity and reduced future risks which would mean more focus towards OpEx based models.
The demand and supply gaps also need to be addressed, both from the buyers’ and the suppliers’ perspective. The dramatic changes taking place in technology and business are widening the gap. Suppliers who are in the business of outsourcing will feel the heat as no single supplier will have all the expertise needed by the customer. Another area of concern in this regard is skill shortage.
Debates Around Outsourcing
The debate over what to outsource and what not to has always been interesting. Even while experts suggest that core business, IPR, etc should never be outsourced we still see outsourcing happening in these areas as well. Sometimes IT organisations find it very difficult to identify how and what to be outsourced.
The debate over whether to opt for single strategic partner or go for more than one partner to create a level playing field is also interesting, with both the options have their own advantages and pitfalls. We can also see that the objectives behind outsourcing may be different from those written in business case. And, hence we fail to drive them properly.
In many cases, in spite of the best endeavours, there are very few organisations that can say that they have achieved objectives of outsourcing fairly well. Some find that cost objectives are not met and payouts are increasing due to variety of reasons, some would feel that they lack strategic depth while some feel the partner is only managing business as usual (BAU) and is unable to provide competitive edge for which the outsourcing was done in the first place. Some might feel that they lack agility and control on the outcomes – something which they enjoyed prior to outsourcing. And, the list just goes on.
Goodbye Outsourcing, Hello Multisourcing
The next phase of outsourcing will be looked at more from a services perspective with the primary driver being achieving business outcomes from outsourcing. The approach overcomes various shortcomings of previous approaches and creates an entirely new ecosystem for outsourcing. The new approach is called ‘Multisourcing’ or at times ‘Agile Multisourcing’ which means disciplined provisioning business service through selected set of suppliers and internal teams working in tandem contributing to the various aspects of the business outcome. This is entirely different from choosing traditional model using multiple suppliers. A major advantage here is the potential of adding flexibility and agility to the business but the complexity of managing the chain becomes an issue and will need expertise in the form of sourcing governance.
The selection of different parties to deliver the service is based on core competence in that specific area. Overall management of outcome resides with the business organisation adopting this as a practice. While the outcome can be dramatic, management of multisourcing discipline is very important due to complexity involved in engaging multiple parties and creating the balance between them while keeping focus on outcome. Strong sourcing governance based on matured models will be a prerequisite before adopting multisourcing as a practice. There are quite a few models which are available from consultants.
Multisourcing removes the debate between core and non-core part of business by adopting a service and business outcome view to sourcing. Since the multiple activities are conducted by myriad of suppliers, there is a less chance that you are locked-in to a single supplier. Also the issue of competence is also addressed as wherever the in-house team has more expertise, experience and competence of doing a task, this is done in-house otherwise the activities are sourced to suppliers based on the competence and expertise of various suppliers. If integrated with rigour and discipline of SLAs and OLAs, the entire chain can provide desired outputs by leveraging strength of multiple parties. Thus, we will be seeing in the future, multisourcing and sourcing governance both will be very popular.
A Cultural Shift
Multisourcing is an ecosystem comprising of both the buyers and suppliers. This is a huge cultural shift from the existing traditional sourcing approach, and organisations will take time to adopt and mature. This will be an inevitable trend as the services industry is going through intense competition which will force it to polarise and form an ecosystem to compete and co-exist. Industrialised world will face skill shortage which will continue to grow and will be forced to look at multisourcing on how they can mitigate the risk. While doing this, in my view, strategy, architecture and sourcing governance should always be a retained activity. Innovation will become inevitable and will be joint activity with greater collaboration among suppliers. In my view, multisourcing will bring strategic depth as each party will be aligned towards business outcome which is a joint responsibility under the new ecosystem.