Future of Multi-Sourcing: Will it Change the Outsourcing Outlook?

With giant firms like ABN Amro, General Motors, Nissan, Procter & Gamble (P&G), etc., from banking, automobile and other major industries opting to outsource their IT functions to multiple vendors, multi-sourcing is slowly gaining traction as a mainstream outsourcing model. Despite several challenges involved, businesses will seek to go with multi-vendor strategy due to the increasing pressures from shareholders to improve bottom line performance. As ‘sole-sourcing’ doesn’t look promising for speedy growth, multi-sourcing strategy is the alternate option to pursue. Though firms would be reluctant initially due to complexity involved in integrating and managing multiple vendors, best practices such as operational level agreements (OLAs), Responsible-Accountable-Consulted-Informed (RACI) matrix, guardian vendor, etc., and the availability of more sophisticated technology with good ROI, are expected to build confidence to pursue this model.

Multi-sourcing will be predominantly adopted in outsourcing projects whose contracts are set to expire in next few years. New outsourcing projects will also opt for multiple vendors as the early adopters become successful. But the corporate world will not give up viewing ‘multi-sourcing’ as an alternate model and would keep watching it while exploring new avenues. As it emerges successful, the practice will be spread to other functions such as HR, Marketing, etc., instead confining to IT outsourcing. The chances to go the multi-sourcing way are very high in case of high-end, mission-critical outsourcing tasks, like knowledge and transformation services. However, ‘access to multiple specialists or expertise’ will be the key reason for opting multi-sourcing in transformation services.

Ultimately, ‘multi-sourcing’ is expected to transform the outlook of global outsourcing as subscribing to multi-vendor creates several ‘mini markets’ or ‘internal markets’ for firms across the world. This would rather make the situation more complex and intimidating for the service providers to manage multiple clients and sustain across those ‘mini markets.’ Service providers will focus on building their competitiveness and may even tend to provide value-added services to their clients. Eventually, it may result in acquisition of small service providers by the big players in order to retain their businesses. In essence, multi-sourcing would result in streamlining and consolidating the global outsourcing industry where only the giant players may remain offering multiple services.