Multisourcing: The New IT Sourcing Strategy Of Choice

The growing trend towards Multisourcing as the IT sourcing strategy of choice brings with it a unique set of challenges for both clients and service providers. If they hope to derive maximum benefit from their Multisourced relationships, both parties need to make a firm commitment to how they interact.

For clients, this means arming themselves with a new set of skills and management competencies, and a different mindset around how they communicate, interact with and oversee service relationships inside and outside the organisation.

For service providers, Multisourcing mandates a collaborative approach, flexibility, transparency and a change in the way they understand business goals and interact with the client and one another.

More from Biztech

Future Group - Reliance Retail Deal approved by CCI RBI ban on cryptocurrencies takes effect; prohibition could force investors to tap the black market

The popularity of relying on a single provider is waning with organisations demanding more from their outsourced service providers and seeking a partnership relationship where common goals and aspirations are targeted. This has resulted in organisations opting for selective sourcing or – Multisourcing – models where certain functions are outsourced and selected functions are retained in-house.

Dexter Wee, general manager of iBOSS, Datacraft Asia, suggests several reasons driving this trend. “Traditional outsourcing engagements, apart from not achieving expected reductions in IT spend, lack alignment to business objectives. In addition, service providers’ relationships with clients often contribute little in terms of innovation and thought leadership. By employing a variety of ‘best-of-breed’ service providers, organisations will enjoy greater agility and reap competitive advantage.”

Also, employing multiple suppliers allows companies to negotiate better deals and establish comparison points between internal service organisations and outside suppliers. However, companies must still address a range of complexities associated with this sourcing strategy. For example, how do companies deploy end-to-end delivery processes across multiple providers? What’s the best method of transferring accountability and responsibility?

Clients and suppliers must have a relationship based on trust

“In traditional client-supplier relationships, the primary focus is on cost or price. There’s often a lack of trust between organisations and their service provider, which can jeopardise the success of the overall engagement,” explains Wee. He adds that when implementing a Multisourcing model it’s vital for organisations to adopt the attitude that their service providers are strategic partners and not just vendors from whom goods and services are procured.

“Clients and suppliers must have a relationship based on trust that focuses on mutual business outcomes. Service Providers must better align their services and contracts to their clients’ unique needs,” says Wee, who believes Multisourcing is ushering in a new standard of client-supplier relationship where each party is committed to greater collaboration.

Effective measurement techniques key to trusted partner relationship

“Effective measurement techniques are the key to establishing a ’trusted partner’ relationship between clients and service providers,” adds Wee, who says a common problem in traditional sourcing relationships is that Service Level Agreement metrics have no bearing on business outcomes.

Adopting a Multisourcing model, however, requires a new discipline to measure and monitor the performance of sourcing relationships. Imperative to this process is commitment to full transparency by both client and supplier. For service providers, this means being willing to share true costs and delivery effort information with the client.

“At the same time, clients must provide service providers with as much information as possible on its organisation. This includes the short and long-term strategy, business goals and priorities, as well as current and future IT ventures. Both parties must find ways of linking this transparency to business value rather than only to costs,” he adds.

“Clients must develop a formal Multisourcing framework which sets out the rules of interaction and demarcates responsibilities between multiple vendors. This helps avoid disputes (between the outsourcing partners) which could potentially jeopardise the project’s success.”

Achieving healthy client-supplier relationships is not a one-way street

In the Multisourcing space, achieving healthy client-supplier relationships is not a one-way street: service providers need to adapt the way they interact with clients and other service providers in order to share other ‘pieces of the pie’.

Innovative price models where client and service provider share both risks and rewards are becoming increasingly commonplace in Multisourced engagements. To be effective, shared risk/reward engagements must be underpinned by a relationship based on mutual respect and flexibility, where both parties are focused on reaping the long-term rewards of each other’s successes.