Multi-sourcing –Minimizes Risks Associated with Large Global Sourcing Contracts
Outsourcing deals are beginning to shrink in size. No longer will mega IT contracts dominate the industry; instead there will be a focus on outsourcing to more than one vendor, which is also known as multi-sourcing. The reason for this change in outsourcing had to do with the immense risks associated with using only one outsource service provider. Some of the risks of using only one supplier include technology and knowledge dependency, unrealistic expectations, vendor failure to perform and lengthy contracts.
When only one supplier is used for IT services, the buyer and provider become so intertwined that it makes it very difficult to sever the relationship if needed. There is some business knowledge that will reside within the developer of the application and the buyer can be at an extreme disadvantage if a suppler holds the majority of this information. Multi-sourcing makes outsourcing companies less dependent on one supplier for all their IT or business needs.
For companies wanting to outsource a variety of IT functions, the vendor may fail to meet expectations. It is unrealistic to assume that one supplier has the knowledge and expertise to handle a wide range of tasks, such as networking, business processes and application development. Executives have started to outsource individual projects, services and functions to multiple providers. By multi-sourcing, buyers have the ability to utilize the resources and expertise offered by each supplier. The outsourcing company is also able to look for a provider with the best capabilities for performing a specific process or function.
In some incidences, the vendor may have failed to perform as agreed, despite all best efforts. If the outsourcing company did not have a contingency plan in place, this failure to perform can have a negative impact on the organization. Multi-sourcing allows the buyer to remove the failing vendor without significantly disrupting business.
Outsourcing contracts are typically for five to fifteen years. For a buyer who is outsourcing for the first time, this long term contract can be intimidating and risky. Basically, the outsourcing company is putting all of the faith on one vendor’s capabilities and locking into a lengthy agreement. Many outsourcing companies are now signing short term contracts with various suppliers.
Multi-sourcing is a way to minimize the risks of outsourcing IT services. A&E Consulting will help you evaluate the advantages of multi-sourcing versus outsourcing to one supplier. We will assist you in choosing the right outsource service provider and establishing the business relationship. In addition, we will manage the first outsourced project.
