As outsourcing continues to become more common in the business environment the top question that business executives are asking is now if they should outsource or not, but instead if they outsource with one or several vendors. Upfront it may seem as if one outsourcer is a an easier option for managerial purposes and for cost reasons, however, more and more business professionals are finding that working with several vendors -or multi-sourcing as the practice is now being referred to as- is actually the best choice for overall success when it comes to finding viable outsourcing solutions.

Shared ground between outsourcing and multi-sourcing

Regardless of whether you choose to work with one or several vendors the decision to outsource fundamentally stays the same. Before a decision can be made cost analysis should be performed that shows the actual costs of outsourcing, evaluation of departments must be concluded, contracts must be negotiated, and providers must be interviewed. On average, it can take anywhere from six to 12 months to properly appraise whether outsourcing is appropriate for an organization or not which is a cost unto itself.

After the decision is made to outsource, several other factors must be resolved such as knowledge transfer costs, training and start up costs, internal resource management of the chance, and software licensing fees. Therefore, if the concern of a company is focused on if one or several vendors is necessary it should be instead focused on if outsourcing is necessary. This is due to the fact that once the decision to outsource is closely evaluated it will become evident which areas demand outsourcing and which ones do not. A large part of the decision to multi-source or outsource is dependent on how related the departments that are facing off shore development are.

Growth of multi-sourcing

In a global survey completed in 2006, 45% out of 100 COIs that were questioned responded that they favored the practice of multi-sourcing with multiple vendors over working with just one vendor to fulfill their company requirements. Out of those surveyed, a small percentage of just 17% responded that one vendor outsourcing was their primary choice. With these factors in mind, four years down the line the trend has only increased to the point where many organizations now multi-source without a second thought.

A large reason why businesses decide to use multi-sourcing instead of one vendor outsourcing is because they have multiple needs from several different departments. Once a company decides that it will outsource several components it needs to seek out a professional outsourcing team that can meet their demands. However, as outsourcing services tend to fall into two separate groups: business process outsourcing and technology services outsourcing, one outsourcing team often is not the perfect team to meet all of a business's needs. Instead an organization is forced to look into multi-sourcing so that all of their outsourced departments are handled by experts and industry leaders and innovators.

Additionally, multi-sourcing has continued to grow in popularity due to the fact that it is one method that provides for flexibility and several different business approaches at the same time. While the conflicted approaches can be confusing, they can also be productive for an organization and lead to innovation within the organization. There is also a greater level of responsiveness when it comes to multi-sourcing given the fact that when duties are delegated and sectioned off greater attention can be paid to each matter and detailed analysis and job tasks can be performed on frequent basis. In other words, multi-sourcing is the best way to focus on strengths and weaknesses in a cost effective manner and turn these departments into successful performers.

Risks of multi-sourcing

There are of course several risks that come with multi-sourcing, the first of course being cost. As pertains to the above mentioned list of costs that are associated with choosing an outsourcing group such as software fees, training, startup costs, etc, an organization will have to multiply by the number of vendors it chooses to work with if it chooses to multi-source. In short, for every additional vendor that it works with it will need to multiply the initial costs versus working with one outsourcer where the startup costs only apply once.

Additionally, multi-sourcing requires a higher level of mature managerial expertise within the organization due to the fact that the company now has to manage two or more vendors at the same time. Thus, oversight expenses increase as it can take two to three times more people to manage multi-source vendors and make sure their efforts are complimentary versus working with one vendor. This can raise general costs within the organization thus reducing the final amount that is saved by outsourcing in the first place possibly making the move offshore a more expensive move in the long run.

Final thoughts on one vendor outsourcing vs. multi-sourcing

When approaching the decision of outsourcing vs. multi-sourcing an organization should neither run from the decision or approach it pre-conclusively. Instead, the organization should carefully complete an evaluation of its needs and departments and then decide which process will best align with their needs.

While making this decision careful cost assessments need to be taken into consideration to discern if multi-sourcing will truly save money in the long run. The different needs of each outsourced department need to be taken into account as well to see if one vendor truly can meet every need with a high level of responsiveness and expertise.