The challenges of multisourcing
Today, research* reveals that multisourcing is considered to be the dominant sourcing strategy of companies. Specifically, in the field of Information Technology (IT) it’s a common practice that companies outsource their IT domains to various vendors, ranging from application development to IT infrastructure maintenance. As companies experienced, multisourcing provides various pros, such as access to specialized expertise, specific (legacy) knowledge and innovative capabilities. However, the flip side of multisourcing is that the Services, as provided by all parties, have to create a coherent structure*. And that goal is hard to achieve. The rationale why companies fail to do so are various, including unambiguous contract agreements, neglected attention to strengthen relationships, and insufficient focus on collaboration between involved parties. Personally, I do believe that four governance aspects can be perceived as important as they all influence the goal to achieve coherence.
Four aspects of moving towards coherent multisourcing
- Inter-organizational governanceFirst of all, inter-organizational governance will create clarity in the multisourcing ecosystem as companies have to discuss and describe their strategic roles and responsibilities. Examples include: a coherent and integral landscape architecture and service/application portfolio that comprise both the client and its vendors. By means of a corporate framework strategic guidelines may support the parties in ‘who is doing what’, which avoid fierce disputes regarding mutual strategic responsibilities.
- Contractual governance between vendorsSecondly, as vendors might be dependent on each other in providing end2end Services, contractual governance is required to align agreements between client and vendors but also between vendors. Often the complexity of multivendor arrangements is increased as the client establishes bilateral agreements towards its vendors as well as end2end agreements. Consequently, agreements (e.g. OLA’s) have to be set up in case vendors are mutually dependent in providing services to their client. In the end, someone needs to govern these type of agreements to provide a seamless delivery of services.
- Strengthen mutual relationshipsThird, all parties have to strengthen mutual relationships to support the provisioning of Services. They have to pay attention of setting up meeting structures, including meetings between vendors to discuss mutual dependencies. On the other hand, cross-vendor processes have to be managed to ensure service integration. Moreover, as part of relationship management strategic aspects like personnel, staffing, escalations and disputes need to be discussed and agreed as well.
- Collaborative governance to encourage innovationFinally, collaborative governance is needed to encourage innovation and define work-arounds. Specifically, paying attention to shared values and understanding and knowledge management supports the exchange of service more smoothly while the perception of stakeholders is positively influenced. Various aspects can be supported by state-of-the-arts governance and technology tools that contribute to coherence. So the most important challenge of companies involved in multisourcing is to govern the ecosystem in a coherent way. As a result, all parties are able to achieve their sourcing objectives.
Author: Albert Plugge, manager and consultant IT Risk Advisory