Multisourcing is not necessarily a new term, but since it is appearing more and more in the media, I decided to check out the one book I could find on the topic on Amazon; Multisourcing:“ Moving Beyond Outsourcing to Achieve Growth and Agility, which was published already in 2006.
What did I understand from this book about the term, multisourcing? The author’s official definition of when a company is engaged in multisourcing is: An enterprise consciously and proactively acknowledges, plans and manages the interdependency of internal and external service providers. As an example: a company outsources to a service provider benefits and payroll processing (a common item to outsource), this service provider is dependent on IT infrastructure services provided by another provider, and perhaps a custom software application written and maintained by a third service provider (if the benefits and payroll service provider does not use their own software application, but yours). The data needed for use by benefits and payroll is provided via a data warehouse maintained by an internal business intelligence center but managed by internal resources in the finance department.Â Multisourcing is managing of this mix of internal and external service providers.
For more specific examples I also learned that a company is engaged in multisourcing when it:
– Has an office which centrally manages outsourcing engagements; everything from what should be outsourced or done internally, where it can be outsourced (onshore, offshore), what are the expected outcomes for each service, negotiates contracts, manages the vendors and so on., and you do not allow different departments or different persons within your organization to decide what to outsource on their own and how to manage the process on their own.
– Outsources (either internally or externally) more than one service or part of its business (it could be to the same provider).
– Manages outcomes and not how something is done.
– Puts some thought in to the best way to receive each of the services (HR, payroll, data network, customer support, etc.) needed to run your business.
– Manages the relationship between Service consumers, Enterprise, and Service Providers
So what is different about multisourcing? According to the authors it is in how multisourcing is managed. To give an illustration, the authors look at how products are typically outsourced versus how services are typically outsourced. Typically with the sourcing of manufacturing a company will specify the outcome to be achieved. For example, I want x number of this type of part and it must meet these specifications, but the buyer does not say to the sourcer how many persons need to be involved in making the product, how many lathes to use, how much energy needs to be expended, etc. (Well at least they do not do this if the provider is not exclusive to their company.) The buyer will leave the details up to the provider. But in services this does not always happen. I believe part of this is the nature of outsourcing services versus outsourcing products. Also typically the first stage of outsourcing for many companies is just seen as the movement or replacement of people from one location to another, so the buyer wants to say how things will be done exactly, they are not ready to give up that control. The authors are trying to get the readers to realize that giving up that level of control does not mean that you, as the buyer, do not get what you need, nor that you do not have to do any managing. You manage the outcome, i.e. what is the outcome that needs to be achieved when outsourcing customer support; clients need to be satisfied with the support services, client issues have to be closed, etc., but every detail of how that is done does not have to be dictated, and if you do dictate every detail you may be losing out on the enhancements and improvements that you could be achieving.
The author’s also put extra emphasis on outlining how to establish good governance and who should be involved with it. I liked the chart on pg. 125, which defined the competencies needed for managing multisourcing. It can be used for assessing your personnel who may be working in your sourcing management office or for assessing yourself as to what skill sets you need in order to be in sourcing management.
After reading this book, I am not certain that multisourcing is so different from the term strategic sourcing which is also a very common term. Gartner defines strategic sourcing as “the dynamic delivery of internal and external, business or IT oriented resources and services to ensure that business objectives are met.” Perhaps it is true that when talking about strategic sourcing it is most often done so with reference to IT related services. That could be because these service areas have been fast growing in terms of outsourcing, or because these service areas are seen as ones where a buyer can receive enhancements from outsourcing and not just money savings (referred to by the authors as efficiency improvements). A service like payroll has been outsourced by companies for years and years, but it is usually not mentioned in books or articles referring to strategic sourcing because payroll is usually not seen as being a strategic area for a company. I believe what the authors are trying to get at is that multisourcing takes a broader look at all services that a company needs and determines how they should be delivered; whether that is internally or externally.