Wednesday, April 16, 2008

Multi-Sourcing - Some Common-sense Do's

posted by ShyK at 23:12

Industry Analysts have of late (for the last 1-2 years) been harping of the growing trend of Organizations outsourcing to multiple vendors. Whether this is genuinely a deliberately thought out strategy leading to such trends remains a moot point. Perhaps organizations are forced to multi-source because their existing vendors are unable to provide specific skills / services or worse unable to scale up with them as they grow.

Without getting into that debate, let me address some of the common sense / operational actions that would need to be taken if you were multi-sourcing. They are common-sense yes, but they are also the kind of things that get easily lost when people only talk strategy and forget execution.

  1. Limit the vendor panel for each function (IT, ITES, Engineering Services) to 2 or 3 Vendors. Vendors will invest in you as a customer only if they see sufficient business coming from you. A typical company with US Fortune rank of around 500 will spend around US$ 50 MM a year on IT including capital expenses - probably only half of that on IT services. A service provider with less than 50% wallet share of services is unlikely to pay any serious attention to developing partnerships.
  2. Try and find vendors with different strengths. Different technology areas, different geographies served or different delivery location (near-shore / offshore). It wouldn't make too much sense to have two similar vendors in the panel.
  3. Give vendors preferred status / first right on projects that are below a threshold value in their areas of expertise. Undertake reverse auction / multi-vendor bidding only for the larger projects or where expertise may not have been established. If at all possible commit a certain value of business to each vendor.
  4. Identify a contract manager who owns all contracts and thus ensures consistency across vendors. Identify a relationship manager / sponsor for each vendor. The sponsor / relationship manager should in addition to managing vendor also internally sell the vendor. The sponsor should help vendors reach out the project managers in the organization both to sell and to resolve issues.
  5. Create a knowledge sharing portal / forum. Vendor employees should be able to post questions / best-practices and other employees can perhaps respond or learn or reuse. This will only work if Vendor IPR's are respected and vendors get some compensation where components created by them are reused.
  6. Plan annual summits / workshops where all vendors participate and discuss roadmaps , budgets, skills & best practices.
  7. Involve a third-party compliance / auditor / bench-marking firm to monitor the vendors. Be transparent about the process and results.
  8. If you run large programs which involve multiple vendors - ensure you have Program Managers who understand the implications of managing work-packet dependencies and can ensure effective communication. They will need to be supported by Project Management Office to keep a tab on everything that is happening

Come to think of it, most of this will apply to most organizations who outsource - given that, unfortunately, there are very few organizations who have actually been able to consolidate all their requirements with a single partner provider.

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