In IT and business process outsourcing, the practice of using multiple suppliers – or multi-sourcing – is becoming increasingly popular, as organisations seek to leverage best-of-breed capabilities and match specialist service providers to specific business requirements.
But managing multiple providers in a complex organisation is easier said than done.
The key challenge is ensuring cooperation and collaboration among a diverse team of providers with a wide range of capabilities, skill sets and areas of responsibility. A common pitfall of multi-sourcing is a lack of accountability and ownership across provider teams. Given how agreements are typically structured, it is in the provider’s best interest to divert problem ownership to other providers, leading to unconstructive finger-pointing.
This puts the client in the position of arbitrating disputes, putting out fires and, ultimately, assuming responsibility for overall problem resolution. Unless specific measures are put into place, multi-sourcing will create an environment of degrading operational effectiveness that will erode the intended business benefits.
So, what are these specific measures?
Contract development
It is vitally important to start building a culture of collaboration from the very outset of the outsourcing engagement, starting with the contracting process.
But when negotiations are centered on individual towers and providers, contractual terms designed to promote collaboration typically receive little attention. And while parties may agree to the spirit of collaboration with the client and their provider peers, good intentions are rarely sustainable.
During the contracting process, it is essential to incorporate specific obligations in each provider’s contract. These should include the obligation to participate in cross-provider governance forums and the responsibility to interaction other external providers when necessary.
Buying organisations should discuss in detail the activities and mechanisms that will be used to integrate the services between providers, emphasising collaborative expectations.
A fairly new method is to introduce “pain sharing” end-to-end service level agreements (SLAs). This means that if a given service relies on multiple providers, all of the providers share in the penalty when the SLA is breached.
Transitioning and transforming
Once the contract has been signed, the most effective way to refine the details of collaboration and integration is to include all providers in a workshop exercise that examines each key process and interaction point.
By breaking down activities at this granular level, providers can collectively agree on how each shared process will work and how they will engage with each other, clarifying their accountability. In these workshops, providers are taken through business scenarios to confirm details like method, data content and timescales for each cross-provider interaction.
The outputs of these workshops are operational level agreements (OLAs) – contracts that outline the ways in which different IT groups within an organisation and service providers plan to deliver a service or set of services, in order to maximise performance – signed and agreed by all providers.
Yet, due to their operational nature, specific OLAs cannot be defined as part of the contract. Instead, the requirement to create, agree and adhere to OLAs should be included within every service provider’s agreement.
The evolution of the client environment through transition and transformation is challenging at best, and if multiple service providers are involved, the challenge is exponential.
It is critical that changes introduced within an environment are coordinated across all providers to ensure integration of planning, design, testing and implementation. Plans must be aligned and tracked by interdependencies, addressing delays in an integrated fashion. Additionally, solution deployments must be orchestrated and tested across all providers prior to release.
Ongoing operations
Even with the existence of multi-provider integration commercial requirements, the continued focus on collaboration must also be nurtured through positive behaviour reinforcements and opportunities for communication and joint problem solving.
In terms of evaluation, providers need to take responsibility to ensure that all team members understand and adhere to the agreed processes and responsibilities. The service integration management function – which can be part of the client team or an independent third party – needs to measure adherence to the OLAs continually, and reinforce collaborative behavior.
Over time, suppliers will recognise their individual success is tied to the success of the group, and a culture where employees from different providers “keep their badges at the door” can emerge.
Tips for success
- Use the contracting process to build an understanding of what the post-contract environment will look like. By setting expectations for collaboration, clients can allow providers to build that understanding into best and final offers.
- Use contractual language and shared service levels to require service-based interactions between providers and participation in collaborative activities and mechanisms.
- Initiate cross-provider process integration workshops to detail operational interactions and define OLAs.
- From contract signature, institute ongoing cross-provider governance forums to manage performance, issues and decisions.
- Include OLA and process performance evaluation within each provider’s performance scorecard, and address operational performance jointly across providers.
Luke Mansell is head of public sector for outsourcing advisory ISG, where his responsibilities include service integration and management (SIAM). Prior to joining ISG, Luke worked as a member of the senior management team of Xchanging, where he was responsible for the delivery of major infrastructure projects.
