Thursday, September 3, 2009

Trend Watch -- MultiSourcing

Over the last few years “multi-sourcing” has been heralded as a new era or new trend in sourcing. The concept has been around for many years, albeit under other names --- such as “best of breed” and “selective” sourcing. I see this model as a natural evolution for certain organizations, whose high process discipline, governance and sourcing /organizational sophistication allow it to work with multiple providers and act as the “prime” in the overall delivery model. There are organizations that have used this strategy to great success for many years, but there are also those that have tried it and failed. Why does it work for some and not others?

There are two important considerations surrounding multi-sourcing: clear vision/ strategy and management discipline.

Multi-sourcing is the tactical realization of a service delivery strategy. It is a path that should be undertaken purposefully, with careful planning and coordination. Sometimes, organizations find themselves in a “multi-sourcing” environment after making serial, and sometimes independent, decisions around sourcing – I call this “accidental multi-sourcing”. This multi-sourcing-by default model is riddled with pitfalls, including the possibility of disjointed processes, inconsistent methodologies and technologies, duplication of effort and costs, lack of accountability and customer dissatisfaction. Done correctly, it can be a very flexible way to get the best solutions for a complex environment. In either case, the hard work is up front. Defining the portfolio of services, and determining their suitability for internal, external or joint sourcing, and determining how to group services and deal with the “grey” areas and touch points is critical preparation to engaging with service providers.

Secondly, most organizations who undertake a services sourcing agreement for the first time seriously underestimate how challenging it can be to manage the agreement. A multi-sourcing delivery model requires far more attention, interface and coordination than a single source service delivery model. Enormous challenging exist in managing three or four different services providers, and the touch points, processes and communications between each of them and the client organization. I would not recommend this approach for a company that is resource or process challenged, or one whose time horizon is short term. Getting multiple service agreements in place will be only the first challenge. Getting the operating agreements and common processes set up among the various service providers could take many more months. If the legal arrangements are pursued in isolation, without any consistency in requirements, a clear, overarching strategy and complementary responsibilities -- the resulting disconnects, white spaces and duplications will consume resources and create headaches for a very long time.

There has been a trend lately to recommend multi-sourcing as the "new" and “right” way to source -- without consideration of the client circumstances. I believe strongly that multi-sourcing is not for everyone. Clients should be aware of the considerations inherent in this model and carefully investigate whether or not it will work for their organization. If the organization is up to the management and process challenges, and the strategy enhances and optimizes its delivery of services – multi-sourcing can be very effective.

So in the end, is single or multi-sourcing the best approach? Neither is best, and the answer lies in the careful examination of one’s strategic goals, organizational and operational maturity, and temperament.

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