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Minimising The Overhead Of A Successful Multisourced Environment

One of the hottest outsourcing trends over the past several years has been "Multisourcing". Since Linda Cohen and Allie Young's 2005 release "Multisourcing: moving beyond outsourcing to achieve agility and growth", vast amounts of the outsourcing world's brain trust, as well as client organisational resources have been invested in achieving an optimal multisourced environment. The ultimate goal is a sourcing landscape that allows an end-user company to control the target supplier and outsourced portion of each service with a fluidity approaching that of the financial markets (in normal times).

While such a model can be approached in scenarios where billions of dollars of services are outsourced annually, and an internal sourcing management team reflective of that spend is in place, how does it apply to the company with 5 to 25 million GBP in spend, and perhaps little or no internal supplier management capability? There are three general approaches that can be taken to benefit from a multisourced environment, without requiring a massive supplier management team.

Outsource Vendor Management
For some time, we've seen cases where companies are offloading the management cost of multisourcing onto select suppliers - which by some is considered a progressive step in multisourcing. This model generally consists of a primary supplier taking on the management of several suppliers working on similar or related technologies or processes. In short, you have the capacity and capability of several suppliers, with only one primary vendor management point. While cost reductions are generally minimal in these situations, this approach is more suited to organisations seeking best in class capabilities and flexibility.

Competition Without The Management
If you have a single-sourced environment, there are good reasons to introduce a level of competition - even if "Plan A" is to work with one provider. From a business contingency perspective, it is essential to have a secondary service provider that can provide support without a great deal of lead time. When it is time to renew contracts or source new services, competition is the best method of getting favorable pricing and terms. If there comes a point where a single supplier loses respect for the competitive sourcing environment, then it is time to award work to a different provider. Predetermine a price differential (e.g. 15%) that would make it worth the extra effort to do so and reap the benefits. Once you've completed the first project or service, the management overhead will decrease, and you will have the options of pressing your original provider, moving more work to the alternative, or continue to build a multisourced environment.

Multisourcing Without Touch points
While this goes back to our mantra of thinking holistically while acting specifically, a client's first multisourced action should have as few touch points as possible to other areas of the organisation. Good targets can include single-application maintenance and support, as well as application development depending upon the nature of the development, and a client's overall system architecture.

Every end-user will source services from multiple suppliers - the management overhead comes in part from the sheer number of vendor contacts, and in part from managing the handoffs between suppliers. By minimising the latter cost, small and mid-sized businesses can benefit from the capabilities, capacity and competition provided by a multisourced environment.  

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