Under tough economic conditions many companies and organizations are (re-)evaluating their sourcing strategy in order to reduce cost and optimize overall business performance. Although outsourcing is considered to be an established business practice, more than 70 percent of the outsourcing deals fail to live up to their potential because of their ad hoc, compulsive way to solve current business problems. As a result IT organizations face issues in managing the increasing amount of external service providers and changing business needs which ultimately leads to suboptimized operations (read: redundancy, higher cost and service disruption).
Turning this around requires a more strategic, structured and disciplined approach called multisourcing. Let's first take a look at Gartner's definition of multisourcing: "the disciplined provisioning and blending of business and IT services from the optimal set of internal and external providers in the pursuit of business goals. Think of multisourcing as the overarching framework for optimizing sourcing strategies and actions."
The ITIL v3 glossary breaks down the term multivendor sourcing into three sourcing structures (as part of the Service Sourcing definition): "Multivendor Sourcing - Prime, Consortium or Selective Outsourcing using Type III Service Providers". These sourcing structures are further defined within Table 6.2 of the ITIL v3 Service Strategy book:
Prime - a single contract with a single service provider who manages service delivery but engages multiple providers to do so. The contract stipulates that the prime vendor will leverage the capabilities of other best-in-class service providers.
Consortium - a collection of service providers explicitely selected by the service recipient. All providers are required to come together and present a unified management interface.
Selective Outsourcing - a collection of service providers explicitely selected and managed by the service recipient. This is the most difficult structure to manage. The service recipient is the service integrator, responsible for gaps or cross provider disputes.
Although multisourcing is an emerging concept industry analysts recommend it as the dominant model of the future. Compared with the ad-hoc tactical outsourcing indicated at the beginning of this post, multivendor sourcing provides significant benefits, such as best-in-class transaction costs, leveraging external expertise for continual service improvement, increased flexibility to adapt to customer demands, turnkey capability at reduced investment cost and ability to integrate M&A activity quickly.
The transformation however is not easy (to say the least) and organizations adopting a multisourcing strategy must be prepared to undergo a lot of change. There will be many challenges among the way such as technical complexity (e.g. level of customization / standardization, data and information flow, etc.), organizational interdependencies (e.g. aligned contracts, coordination across suppliers, etc.) and integration planning (e.g. end-to-end service reporting, Integrating processes and tools, etc.).
The ITILv3 service strategy book provides interesting generic guidance when it comes to topics to consider for a sourcing strategy. However when it comes to architecting and implementing, ITIL v3 only provides (descriptions of) ingredients that can be used for a multisourcing meal without the cookbook instructions for putting everything together. Do you know an approach that does?
Regards,
Jeroen Bronkhorst
