Gone are the days of outsourcing and offshoring business processes and IT functions being a simple matter of choosing between a select few providers. The emergence of so many new providers with different skill sets, along with numerous potential offshore, nearshore and even homeshore locations has created a new complex global delivery paradigm known as multisourcing. But just what is multisourcing and what are the reasons behind its growth?

Multisourcing is simply the disciplined provisioning and blending of business services, most of the time IT related, in order to find the optimal set of both internal and external service providers. As a strategy, multisourcing treats every functional area as a portfolio of specific activities, some of which are then outsourced to third party providers while in house employees continue to perform other activities. Likewise, so-called multishoring or the use of multiple offshore, nearshore or homeshore locations can easily be considered an offshoot or, very much, a key component of any multisourcing strategy.

Benefits of multisourcing

Multisourcing offers an organisation superior flexibility and greater adaptability when choosing outsourcing solutions. In addition, multisourcing allows an organisation to objectively compare their internal shared services arms with external third party vendors. Thus, a larger resource pool is tapped and competition is initiated between providers to deliver the highest service quality for the best possible price.

Furthermore, with the traditional outsourcing approach of utilising one service vendor, there is always the risk that quality will deteriorate over time. Given the high costs associated with switching vendors and the subsequent loss of institutional knowledge after any switch, significant risks are associated with having all of your processes and projects tied up with one vendor. In the same manner, having one vendor who sends all of your work to one or two offshore locations may be considered unstable and pose significant risks to an organisation.

Potential risks and pitfalls

Although in theory, a multisourcing strategy offers less risk and fewer pitfalls than the traditional outsourcing model of using one provider, it is not a perfect solution. In fact, there are still potential pitfalls and added costs associated with a multisourcing approach. For starters, there is always the possibility that both the organisation and the vendor will under-invest in the assets necessary for the strategy to work or in the relationship aspects of the arrangement. After all, neither the client nor the outsourcing vendor is completely dependent upon each other.

Using multiple vendors may limit their capacity to use their economies of scale to achieve significant cost savings for organisations. Furthermore, there are inevitably larger management overhead costs associated with managing and monitoring multiple vendors. In addition, managerial turnover on the client side can, in fact, make it more difficult to switch vendors or to shift work between vendors.

Despite these potential risks, a successful multisourcing strategy can significantly reduce all of the risks associated with traditional outsourcing and have the added benefit of increasing operational efficiency.

Implementing a multisourcing strategy

Once an organisation has reached the appropriate maturity level and is ready for a multisourcing strategy, planning for, and implementing, a well planned strategy will be the critical key to success. The multisourcing strategy is a general outsourcing framework, consists of:

• Organisational Readiness

• Vendor Selection

• Contract Negotiation

• Project Planning

• Transition Management

• Metrics Tracking

Each of these phases has its own collective set of goals and challenges that will be critical to the overall success of any multisourcing strategy. In summary, successfully implementing a multisourcing strategy will still depend upon the maturity level and capabilities of the organisation seeking to pursue it and how well the implementation process is planned and then implemented and monitored. A successful implementation will not only save organisations money but it will also reduce the traditional risks associated with outsourcing and improve overall operational efficiency.