IT Outsourcing: Single source or multi-sourcing??

[#1]

As the economy improves, I see an emerging
trend in outsourcing business:

• 
  Smaller deal size - from billions to millions


• 
  Shorter duration - from 7-10 years to 3-5 years


• 
  Functional/niche areas versus the complete
  outsourcing


• 
  From "Outsourcing
  single source deal to Multi-sourcing"


• 
  Client playing the "integrator" role

What I do not see is the reduction cost in responding to an
RFP or the time a client takes to make final decision!

The shorter, lower value outsourcing deals, and, at times in
the industry verticals or niche areas, open up doors for smaller suppliers
including low cost Indian competitors like Wipro, Infosys, and TCS are  creating a different level of competition
giving customers more leverage. As the cost pressure increases, I see large US
companies will focus on reducing costs by developing products in niches
specialties, and shifting work to lower cost onshore regions & other
countries. Large players seriously exploring the option of acquiring niche
players for increased speed to market. And that's not forgetting about the low
cost offshore competitors will expand their onshore capabilities &
resources - Indian
players, Infosys, Vipro and TCS have begun adding local staff in the Americas
and Europe to s...

As the client opts for number of smaller, short
duration deals with number of suppliers, governance and end-to-end integration
will play key role to achieve the overall business value.

[#2]

So Ben, does this mean that the costs for these smaller and shorter deals will increase for the company trying to outsource their work (both their internal oversight costs as well as the costs from the provider)? It seems like the inevitable result, unless there is an unending supply of lower end companies trying to enter the market and buy their way into deals.

[#3]

Yes Charlie. If you look at the large single source deal being broken into small deals, the cost increases for the client as well as for the provider. Jury is still out on the magnitude of savings a client will realize by breaking into small focused deals. As the # of suppliers increase, the cost of governance, integration and complexities increase as well.

[#4]

is this means that company will shrink in its size in the future?

[#5]

Yes Charlie..I'm agree with Ben Patel's statement that  As the # of suppliers increase, the cost of governance, integration and complexities increase as well. So..what is the benefit for end user to do it?

[#6]

we really should think about how to make outsourcing deals

[#7]

nice article you have, this is very informing and solving my questions. thank you..

[#8]

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[#9]

Thanks for the information