The evolution of multi-sourcing to the market norm for all managed services has presented a range of new challenges. At ISG, we have tracked the continuous growth of multi-sourcing, and have seen the number of Forbes G-2000 companies reaping the benefits of multi-sourcing almost double between 2004 and 2014.
We have reached a point where the benefits of a multi-sourced approach are clear for all to see. These include the ability to adopt a best of breed approach, cost optimization and lower concentration risk – ultimately allowing organisations to better focus on their core business objectives. It is now important for organisations to take on board the challenges faced by early adopters of multi-sourcing, and to incorporate their learnings as to what was successful – and what didn’t work – into their future multi-sourcing strategy.
At ISG, we conducted a poll of 76 members of our global advisor community which helped to identify key lessons which an organisation should consider if it is to maximise the benefits of adopting a multi-source approach. Our poll revealed that the complexity of managing multiple service providers is the greatest risk , as an average more than 75% of the respondents raised this across all towers (Infrastructure, ADM etc.). To mitigate against this risk, a robust and integrated governance model is key, and to effect a successful transition and transformation an increased investment in provider management is required.
A multi-provider approach also strives for an integrated end-to-end Service Level Agreement (SLA) Framework while a collaborative attitude and Operational Level Agreements between the providers should be defined and encouraged. Furthermore, a high level of organisational maturity is required to manage the services, together with clear demarcations and defined responsibilities between all providers involved. Of course the deal itself remains important, but the management of the contract through its entire lifecycle is essential if organisations are going to reap the rewards of multi sourcing.
In addition to SLAs, enterprise tools or interfaces which allow seamless integration and communication between all parties are necessary to manage multiple suppliers effectively. The initial investment of such tools can appear prohibitive but not investing can, in the longer term, prove infinitely more expensive. It may even negate the potential benefits which organisations are seeking from a change in their sourcing approach.
At the other end of the outsourcing relationship, providers need to demonstrate flexibility and agility whilst constructively contributing to integrated service delivery. They need to take joint accountability for any issues and changes across the service delivery chain. Still, better they take a proactive approach to managing the client, something which is not always the case within outsourcing relationships.
Evidently, managing an integrated multi-sourced environment requires organisations to adopt a correspondingly integrated approach to fulfilling demand through orchestrated supply. True integration requires depth and breadth across multiple management disciplines, from strategy operations to business management and supplier management. To ensure that a multi-sourcing approach enjoys enduring success, not the making but the ongoing management of a multi soucing deal is critical.
Given the substantial increase in multi-sourcing over the last decade, there is now a real need to review how service integration and management (SIAM) is being utilised to effectively deliver flexibility, innovation and cost efficiency. Companies are looking to get maximum value from their service providers and ensure that any and all services are aligned to their business needs. Within ISG we can prove that SIAM has to be an integral part of a company’s sourcing strategy. In successful companies SIAM is a matrix of retained and out-tasked capabilities to integrate the evolving types of services.
The matrix includes a client retaining the accountability for the integration of services and playing a key role within the operation. Service provider staff, services and tools are leveraged as appropriate to provide some operational integration functions while various specialised third-party staff, services and tools are incorporated to integrate best-in-class capabilities.
Furthermore, the key to meet the requirement of flexibility, autorotation, visibility, service orientation and cost comes down to three things. Firstly, companies must break down service integration into the right modular components. Secondly, they must identify who is best to perform each component – something which will be unique for each client’s environment. Last but not least, how capable and mature is my own client organisation to manage multiple provider relationships?