Multisourcing finds favor; analysts question firms' readiness

The pendulum is swinging back to multisourcing deals, but not all companies know how to make it work.

SINGAPORE--More businesses are turning to multiple vendors for their IT outsourcing needs, but many are ill-equipped to effectively manage their service providers, says analyst firm Gartner.

By 2008, 70 percent of organizations will use at least four different IT service providers, but less than 30 percent of these organizations will have the right business processes, resources and soft skills to manage multisourcing contracts, said James Longwood, Gartner's vice president for research, at a briefing on global sourcing trends.

"The question to ask is: 'Can you manage the different service providers?'," Longwood noted.

While Longwood acknowledged that there is no single organizational model for managing multiple service providers, he identified teamwork as a key factor in ensuring success.

Organizations, he said, should focus on coordination, integration and communication. Organizations should also pay attention to the dynamics between internal staff and the vendor, and plan well for new services that they want from each source pool, he added.

A dedicated sourcing team can also help improve multisource management, Longwood noted. This team may comprise a chief sourcing officer, performance manager, contract manager and relationship manager, each of whom has different responsibilities, such as managing service levels and ensuring business goals are met.

Gartner also predicted that between 2008 and 2012, IT spending will be directed at vendors who are able to help organizations better manage their business processes.

Rolf Jester, Gartner's vice president and distinguished analyst, recommended that businesses evaluate and understand their sourcing capabilities well before moving ahead. Businesses should also avoid focusing on cost reduction only, or make sourcing decisions based on short-term plans, Jester added.

Longwood also advised businesses to involve the chief financial officer in the decision-making process and to pick the vendor with care.

"You've got to get service providers that are compatible with you," he said. "Part of that compatibility is (their ability to) understand your business."