A brief exploration into the meaning of "multisourcing", its benefits and relevance in today's outsourcing world.
There are many definitions of multisourcing, as well as many attributes deemed essential to multisourcing successfully. Gartner defines multisourcing in the following manner: multisourcing refers to the disciplined provisioning and blending of business and IT services from the optimal set of internal and external providers in the pursuit of business excellence.
After weeks of soul searching, and several visits to my local... em... church, I finally concluded that multisourcing is, by most accounts, "sourcing intelligently", with two distinguishing (albeit not entirely essential) characteristics:
- Multisourcing leverages multiple internal and/or external suppliers as a strategic advantage in itself.
- Multisourcing involves using multiple internal and/or external suppliers to more effectively fulfil a single process or objective.
Any elaboration beyond these points isn't really a definition of multisourcing, but rather strategy around how to multisource well. As a methodology, multisourcing serves as a contrast to traditional outsourcing - whereby entire functions or processes are outsourced to a single provider.
Let's take a very simple example of multisourcing across a system development process: A company uses supplier A for application development, supplier B for testing, and an internal team for user acceptance. Certainly not an uncommon scenar... but not necessarily what most experts would consider multisourcing unless that company is explicitly trying to achieve the two characteristics listed above.
Using multiple suppliers as a strategic advantage in itself:
- Value: If supplier A has testing capability, and/or supplier B has development capability, each represents a truly credible threat to the other which should favourably impact cost, quality and innovation.
- Speed: If the company has relationships with additional suppliers C and D, with capabilities similar to those of A and B, the company can quickly replace an underperforming supplier, without the delay associated with vetting and incorporating new suppliers.
- Flexibility: If a supplier consistently underperforms, the company can make a replacement without having to re-outsource the entire process.
- Quality: By splitting the process into more granular components, the company can choose best-in-breed suppliers for each segment of the process.
- Innovation: If the company builds an open, collaborative relationships with its suppliers, there are greater opportunities for ideas, process improvements and new solutions.
- Control: By virtue of retaining overall process ownership, the company will have more visibility into the process as a whole, enabling it to more collaboratively find efficiencies or troubleshoot variation with its suppliers.
Ensuring that multiple suppliers fulfil the above process more effectively than if it were outsourced to a single supplier (a.k.a. governance):
- Measurement: The company has established a meaningful but usable system of metrics to continually assess the performance of each supplier and of the overall process.
- Management: The company has agreed on a set of rules (ideally laid out in the outsourcing contract) around how the metrics will be acted upon (e.g. escalation paths if something goes wrong or bonuses if certain targets are met)
- Process: The company has laid out the roles & responsibilities of each supplier plays in the overall process - in particular how hand-offs or activities that involve multiple suppliers are handled.
The primary difference between the above example and a much larger "enterprise-level" multisourcing environment, are the increases in the amount of potential benefit to be achieved, and the scale of management and governance required to realize those benefits. There are an endless collection of process, legal, management and governance structures corporations can put in place to maximize the value of a multi-supplier environment, but the basic tenets and virtues of multisourcing can all be found in the principles of traditional outsourcing.
Gartner's definition of multisourcing can be found here: http://www.ciol.com/news/news-reports/multisourcing,-mantra-for-sourcing-success/14208103684/0/
Quick Contact Form
Contact Name *
Telephone Number *
Email Address *