In spite of continued growth, an analysis of the outsourcing business in recent years reveals growing discontent with their sourcing relationships amongst clients. Increasingly, outsourcing agreements are being cancelled, not renewed or renegotiated due to dissatisfaction with price, service or quality. What is behind this trend and how can you and service providers alike take action to address it?



New Business Agendas Require a New Sourcing Approach

The failure of outsourcing deals to deliver satisfactory results can largely be attributed to the fact that traditional sourcing strategies have not kept up with the changing business environment or evolving you needs and expectations.

The primary objective of outsourcing as we know it today was to assist organizations to achieve operational efficiency. A decade ago, this made perfect sense - offload IT to a specialist provider that would apply economies of scale, scope and expertise to provide services at a lower cost and better quality, and free up internal resources to concentrate on the core business issues.

Today, however, priorities have changed. Business faces increasing expectations and competitive pressures in today's global environment. Technology has grown increasingly complex and you are under pressure to understand rapidly evolving technologies, and find ways to harness them to deliver competitive advantage.

In this new business landscape, whilst operational efficiency is still important, it is surpassed by the requirement for IT to enhance strategic effectiveness. The traditional IT outsourcing model falls short in meeting the expectations of companies seeking the creation of business value beyond the boundaries of the services contract.

When faced with a contract that is not meeting expectations, you may consider renegotiating the contract or switching vendors. This can be hugely expensive and may involve significant costs and disruption to the business.

A popular new approach to outsourcing involves certain functions being retained in-house, while others are outsourced to 'best-of-breed' Service Providers with perceived strengths which in turn, leads to better overall service quality. With the model, needs may be better defined and controlled, and explicit value per service provider can be defined and extracted. The 'Multisourcing' has been coined to describe new approach.

The Multisourcing approach allows you to 'pick and choose' between service providers and select the 'right' sources for IT services, in order to obtain the best business outcomes. The task of determining which IT services to invest in and focus on and which ones can be off-loaded to a specialist IT Service Provider, is not an easy one.

It is crucial that organizations make careful and informed sourcing decisions and that you ascertain that the service providers you select have the relevant skills and proven experience to deliver the desired results. Equally important is the provider's ability to offer a broad and flexible services portfolio and willingness to accommodate the different ways.