Multi-sourcing - the next evolution in outsourcing

Tuesday, 15 November 2011 15:41  |  Jaroslav Cerny, CEO of RDB Consulting

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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