software development team

Multisourcing — how to manage business relationships when you have more than one software outsourcing partner?

date: 16 June 2020
reading time: 5 min

As opposed to having a single sourcing strategy in the IT industry, there has been a noticeable shift towards multisourcing, which entails having multiple vendors or technology partners instead of cooperating with just one outsourcing company.

This situation has been somehow forced by our modern, competitive world — with its focus on innovation and relatively high levels of specialisation. There are no longer many IT companies on the market that will take care of your technological development holistically, in 360° mode. Instead, companies prefer to focus on one or two fields of expertise, so that they can distinguish themselves from competitors and be able to provide the best possible quality of service.

For many organisations, multisourcing has become not just an option, but a necessity that involves many challenges to be faced. This draws attention to some of the key recurring problems found in working with multiple technology partners, with these three at the helm:

  • estimation of cost & effort – which is difficult enough with just one IT partner, let alone two, three, or more;
  • cross-enterprise communication & collaboration – this includes transferring knowledge, sharing information between vendors, product integration issues, and many other interdependencies, both large and small;
  • coordination and governance of the general eco-system – as everything should behave as if it’s part of one living organism.

Managing a complicated network comprised of one governing organisation cooperating with a varied number of vendors, and having them work together flawlessly as one whole — is a complex and difficult task. Each individual entity involved should be aware of this fact and be ready and willing to align with other parties, in order to achieve a common interest and create value. Let’s see how this goal can be accomplished.


How to implement a multisourcing strategy in your project

You may choose either one main partner and several minor vendors, or a few partners of equal importance. In both cases, it’s crucial to establish functional relationships between all entities involved by creating a flexible and efficient IT multisourcing arrangement.

First of all, your partners shouldn’t work in competition with one another, but in an atmosphere of mutual support and cooperation. They need to share one significant objective on the horizon: to create value for the client. Together, they should be able to deliver an end-to-end service and be willing to work together for the sake of achieving common goals. Whether it will be possible for them to cooperate depends on both their internal corporate cultures, as well as the environment that you create, which can be either encouraging and inviting or… neither.

Here are some of the top things to consider when implementing a multisourcing strategy:

  1. Infrastructure for communication and collaboration
    All parties involved should be encouraged to share knowledge and exchange information that may be vital to the project. There should also be existing infrastructure that allows them to do this seamlessly, such as working tools and collaborative processes that ensure productive levels of automation and the proper management of knowledge and information.
  2. Transparent division of responsibilities
    All of your partners, vendors or suppliers should know their role in the network — along with their specific responsibilities and limitations, in order to prevent overlapping tasks and decreased operational effectiveness. The more clearly defined all the roles and responsibilities are prior to cooperation, the less confusion that will occur later on.
  3. Adequate management methodologies
    Managing a multisourcing network requires a certain approach, for example, the agile methodology, as this forces a greater level of flexibility from all parties involved. All partners must be highly adaptive to changing needs and requirements, and having clearly established mechanisms and procedures will definitely help them provide adequate responses to any situations that may arise.

As you can see, all parties involved should cooperate on the basis of a set of strategic guidelines and shared values that have been established by the client organisation — with a strong focus on flexibility and… continuous learning, as this is necessary for development and progress. It may be helpful to specify all of these details in bilateral contracts, plain as day, especially in terms of the division of responsibilities and boundaries, so as to avoid any potential misunderstandings. This results in less time-consuming ad hoc meetings and improved workflows.


Wrap-up

There are a number of steps, both large and small, that must be taken before you can effectively implement a multisourcing modus operandi in your project. Some of the challenges and difficulties that lie ahead may be hard to face, due to having lots of interdependencies between the main organisation and its vendors — and also among each of the vendors themselves. But in the end, all of the benefits of working with multiple technology partners make going through this complicated process worthwhile.

However, the multisourcing approach has both pros and cons; it’s not a cure-all.

Advantages of multisourcing include:

  • increased operational flexibility, as you have various options to choose from — it’s easier to manage fluctuations;
  • improved security and less business risk, because there are always more partners to fall back on;
  • it is possible to select only the best services or products from each vendor.

Disadvantages, on the other hand, include:

  • a more complex management process, which may cause efficiency issues;
  • more complicated communication and potential for tensions to arise between partners, along with unhealthy competition;
  • it is more time-consuming to create a highly efficient infrastructure to begin with, along with an environment that fosters cooperation.

However, transforming your multisourcing arrangement into a working ecosystem that operates flawlessly is something that can help you deal with any management-related difficulties. And it’s absolutely necessary if you want to avoid steering your network to the point of failure.

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