Multi-Vendor Outsourcing – Challenges

Most companies these days are adopting multi-vendor approach in outsourcing. Organizations are now looking up to lower their risks in outsourcing deals by not putting “all their eggs in one basket”. A multi vendor outsourcing approach for outsourcing services also enhances the quality of services.

However, having multiple suppliers also brings multiple risks to the organization. Organization has to deal with multiple vendors, each with different service level and service quality. To make sure these vendors deliver value to organization becomes a challenging task. Greater the number of vendors involved greater are the challenges.

The challenges of outsourcing with multi-vendor are not easy to overcome. What are these challenges which need to be faced?

• Inconsistent quality – different vendors have varied service levels, different reporting structure, escalation procedures, different point of view and development style. This leads to inconsistency in the quality of deliverables.
• Management time – managing multiple vendors requires more time, which may increase the overall costs of the engagement.
• Governance related risks – organization is exposed to multiple risks, as it has to deal with multiple vendors which introduce governance related risks. If this engagement are not managed and governed properly, it can be more time consuming and expensive.
• Measuring value – Measuring value across the enterprise becomes a challenging task as each vendor has their distinct service, tool, culture which is different from other vendors.

Best practices to overcome these challenges –

• Check for capability and preparedness of organization – people, process, infrastructure, technology before getting into multi-vendor sourcing engagement
• Set baseline standards for vendors in order to measure performance of each vendor using common baseline
• Evaluate each vendor at regular interval based on agreed metrics and measurement framework
• Establish an effective governance framework which would specify key deliverables for each service and provide mechanisms to measure the achievement of goals. The framework should facilitate communication between stakeholders
• Enter into Operating Level Agreements (OLAs) to state clear roles, responsibilities and expected behavior of each vendor
• Incentivize and penalize to encourage and push service providers to provide quality services

About Author:

Nisha Tolani 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: nisha.t@spluspl.com