Multi-Vendor Outsourcing Basics

Segregating IT portfolio and distributing its working and management among multiple vendors is a norm today. This approach has various advantages like:

• Cost effectiveness as vendors offer competitive pricing
• Reduces dependency on single vendor and also encourages the vendor to perform better due to competition
• Increases flexibility offered by vendors
• Outsourcer gains advantages of the best practices followed by both vendors

However, different vendors working together and trying to establish their own style and process creates lots of problem which are not always predicted by the outsourcer. Some major challenges of the multi-vendor outsourcing are:

• Outsourcer has to educate and implement company processes and policies in various vendor locations
• Different delivery models used by the vendors may sometime pose as challenge for outsourcer
• Increase data security risk as outsourcer’s internal information is shared with multiple vendor
• Managing vendor contracts may be tedious
• As number of vendors increase, outsourcer has to employ more vendor  managers to ensure seamless working on IT operations

While optioning for multi-vendor outsourcing, following points should be considered by the outsourcer:

• Ensure that there is a clause on how vendor will communicate with each other (i.e. Governance meetings, frequency of meeting, what will be the topics of discussions etc.)
• During contract negotiations every vendor focuses on how they will manage and optimize their tower. Outsourcer needs to ensure that there is a clause which states how and who will address problems that arise at touch points in various towers

About Author:

Tina Nebhnani is consultant and part of Systems Plus Pvt. Ltd. She is a part of consulting team that delivers Sourcing and Vendor Management Office projects. She can be contacted at: tina.n@spluspl.com