Outsourcing without a plan is bad. Multisourcing without a plan is even worse. Manage the enterprise's multiple outsourcers holistically, or risk gross inefficiencies and wasted money.

Outsourcing Failure Abounds

Although most companies outsource, Info-Tech's research has found that only 40% of enterprises have a formal system in place for managing outsourcer arrangements. In addition, outsourcer management is among the lowest rated priorities for mid-sized IT decision makers. This lack of effective management and governance over the multisourcing process could help to explain why over 50% of outsourcing projects fall short of expectations.

Multisourcing refers to the practice of outsourcing multiple IT functions to two or more providers. A solid majority (62%) of mid-sized enterprises have outsourced some portion of their IT services. More will be looking to outsource multiple IT functions in the future. Application development, Web design, and application maintenance are primary outsourcing targets, as well as data center and help desk functions.

Multisourcing Tradeoffs

While multisourcing can increase complexity, outsourcing multiple functions to a single provider has its pros and cons too. Benefits of single-vendor outsourcing include single point of management, simplified governance, and reduced overhead. Drawbacks include limited best-of-breed options and lower negotiating power.

A Structured Approach to Multisourcing

Like any other major project, a structured approach to multisourcing must be used during the planning, execution, and management phases.

1.Centralize information and vendor management. If multiple vendors are used, it is important that all information is centrally collected, controlled, and monitored. A single point of contact for all internal technology support issues and all outsourcer communications allows the enterprise to target recurring technical issues, improve operational efficiencies, and support decision-making. A central management strategy can monitor vendor performance and ensure that different vendors and providers are meeting service levels and warranty obligations.

2. Centralize all IT purchasing. The enterprise might be multisourcing without even knowing it. Rogue IT purchasing and decentralized spending can lead to the IT department supporting vendors that no one had intended on supporting. Put an end to this activity - read "Reducing Rogue Purchasing," from McLean Report.

3.Establish holistic contract management. Overseeing externally provided services requires a different type of management than the same service managed in-house. Develop a standardized contract to optimize efficiencies or synergies. This includes service scope, pricing, KPIs, SLAs, governance, and transition process. General Motors, for example, uses a standardized contract for its fully-outsourced IT functions.

-The main purpose of multisourcing management is to track key performance indicators for vendors, such as failure rates, response times, and resolution rates. One tracking method to consider is the Balanced Scorecard.

-Another tracking tool to use for assuring service levels is ITIL. Two of McLean Report's Business Centers, Service & Support - Service Design & Delivery and Process Management - Best Practices Frameworks, contain valuable information on implementing ITIL, as does "Multisourcing with ITIL," from ITWorld Canada.

-Ensure that providers and vendors are aware of each other's relationship to the enterprise should conflicts or overlaps arise.

-Prepare and issue a single RFI and RFP document.

-Establish a transition team and manage transitions as per each contract.

4.Align multisourcing with corporate objectives and culture. Executive management must have a "culture of core focus" to effectively engage multisourcing. Many aspects of corporate operations - not just IT - can be outsourced. This includes HR, finance, operations, supply chain, and so on. Engage processes, procedures, governance, and disciplines to drive corporate-wide value from multisourcing, as opposed to using it as a tactical tool.

Bottom Line

The benefits of outsourcing are well known. The pitfalls of multisourcing are also real, but they can be avoided if they are recognized early and mitigated by centralized management. Whichever approach the enterprise chooses, do it well.