Multi-sourcing is a great strategy - if done correctly. The first thing to realize is that many organizations have difficulty governing one outsourcing relationship. In those organizations, managing multiple relationships can prove daunting. Thus, it is critical to develop governance expertise within the organization (or to at least contract for it).

Standardized service levels is key to a successful multi-sourced relationship. Without standardized service levels, the governance team will face a confusing array of metrics and credit structures, making their job substantially more difficult.

A legal/contract strategy is also a good idea. Instead of starting with extreme documents which are heavily negotiated by each supplier, a customer may want to consider starting with "middle-of-the-road" documents and being less flexible at the negotiating table. This will provide a more level playing field from which to pull best practices.

Supplier cooperation is another important aspect. Real value can be seen from cooperating suppliers. Imagine, for example, a disaster recovery situation where the backup isn't a hot site, but another vendor in a different geographical location. This can be much more efficient.

Finally, for commoditized services, one can effectively set up a reverse auction for new projects. With the agreements in place, a customer can put projects out for bid, choosing the best value proposition and maximizing the savings, while still getting best-of-breed services.

With the industry moving to smaller, shorter deals, multi-sourcing is here to stay. We just need to be ready for it.

Gary M. Zeiss, Esq.
Los Angeles, CA
gary@zeissesq.com