Does Multisourcing Really Matter?
GM’s recent decision to initiate a ‘multisourcing’ strategy that will result in it parceling out its IT outsourcing responsibilities to multiple solution providers has gained a lot of attention within the IT industry, as well as among corporate management and business publications.
Maybe I’ve been in the IT industry too long, but I don’t get what all the commotion is about.
‘Multisourcing’ has been a part of the IT industry since the landmark Eastman Kodak outsourcing agreement in 1989. For anyone who doesn’t go back that far, the Eastman Kodak deal was the first mega-outsourcing contract to generate headlines inside and outside the IT industry. The company decided to outsource its data center operations to IBM, its network operations to Digital Equipment Corporation–remember them?–and outsource its desktop operations to BusinessLand–remember them also?
Not only did the Eastman Kodak deal represent a multisourcing arrangement, but nearly every major outsourcing agreement since has included multiple solution providers, albeit they often work under a primary vendor who serves as the prime contractor.
So, multisourcing isn’t a new sourcing strategy. Then why is it getting so much attention?
GM’s new outsourcing approach is considered by many as a bellweather for the outsourcing business, as well as a key component of GM’s turnaround efforts. Industry-wide, outsourcing deals are shrinking in size and scope. And, GM’s new outsourcing strategy has been speculated about since GM decided to spin off EDS a few years back, and more recently as its financial performance has declined.
GM’s new outsourcing approach is also viewed as an endorsement of a recent book authored by two Gartner analysts entitled, “Multisourcing: Moving Beyond Outsourcing to Achieve Growth And Agility.” Gartner’s PR engine has made sure that the correlation between GM’s new outsourcing strategy and its analysts’ book isn’t lost on the business and trade press.
Given the poor track record of most mega-outsourcing agreements (even the Eastman Kodak arrangement was substantially restructured after the first round), it isn’t surprising that major corporations are searching for better methods to offload their IT and business operations.
While I agree that multisourcing makes sense in most cases, it doesn’t guarantee better outsourcing results. Multisourcing makes enterprises less dependent on a single vendor for all their IT or business needs. But, it also eliminates the “one throat to choke” accountability that can come from a ‘sole-source’ arrangement.
Although multisourcing can enable an enterprise to select ‘best-in-class’ providers to address specific IT/business requirements, it also compounds and complicates the coordination necessary between the enterprise and its multiple providers. As a result, multisourcing requires greater vendor management skills and resources to ensure the providers meet their service level objectives (SLOs).
In the end, it doesn’t matter how many outsourcers an enterprise engages to handle its IT/business requirements. Instead, it is the quality of the enterprise’s needs assessment, goal-setting, vendor selection, contracting, reporting and problem resolution processes that will determine the success of its outsourcing strategies.