The Case Against Multisourcing

Posted on Mar 25, 2010 10:38:40 AM

The concept of multisourcing is a derivative of the outsourcing industry. It refers to an arrangement where a company outsources different aspects of a service to different external providers. Unlike single sourcing, multisourcing is based on the use of the ‘best of the breed’ philosophy.

Multisourcing basked in the headlines as a possible solution to the discrepancies in the single sourcing formula. Organizations are engaging in multisourcing activities in order to maximize vendor efficiency, induce competition and enjoy competitive prices. It is believed that by creating a dynamic environment, organizations can reap the best from the outsourcing contracts.

The Flip Side of Multisourcing

Breaking the outsourcing contract among multiple vendors poses several challenges for the organization. In the single source arrangement, the vendor performs a range of tasks that are beyond the scope of outsourced services but are essential for consistent output. With multisourcing, no vendor will be motivated to perform those management tasks. Ultimately, the organization has to employ resources to coordinate between multiple vendors.

Service integration across multiple vendors will also make the system vulnerable to potential errors. This is particularly important as most of the companies lack the necessary skills to manage multiple service providers for the same service segments.

One cannot completely reject multisourcing as a potential alternative to single sourcing. However, organizations have to develop the skills to maximize the benefits from such an arrangement.