* How do you manage a consortium of providers?
A recent article in “eGov monitor” highlighted a growing trend toward “consortiums of providers” being awarded large-scale public sector outsourcing projects. This is essentially a manifestation of the trend toward multi-sourced deals.
Multi-sourced outsourcing is where an internal IT group is augmented by two or more external providers. This is in contrast to the traditional single-source mega-deal. Effectively managing an outsourcing relationship requires the buyer and provider to align their interests and coordinate their actions. This naturally becomes more difficult as more parties are added to the relationship.
In a single-sourced deal, the provider is likely to have financial incentives tied to performance, and will bring a management discipline to the relationship to ensure mutual success. The management burden is less for the buyer. However, the buyer has made trade-offs in selecting a single provider for all services rather than engaging the best-of-breed provider for each of several services.
Alternatively, a buyer could go down the multi-sourced path and engage several best-of-breed providers. The buyer must then accept a greater role in managing the multiple relationships. The “consortium of providers” approach is really a hybrid of the single-sourced and multi-sourced deals. The lead company in the consortium essentially becomes the prime contractor and takes on many of the management challenges introduced by the multiple sub-contractors, each providing their best of breed service. This is great for the buyer as they get to engage multiple best of breed suppliers while also getting professional assistance in managing the multiple suppliers.
While the consortium is a great structure for mammoth scale public sector outsourcing, many businesses do not have the scale in their outsourcing needs to attract providers in this way. To reap the advantages of multi-sourced outsourcing, you will have to take on the prime contractor role yourself. This will require you to bring specialized knowledge of the problem being solved, IT expertise and internal management skills to the outsourcing relationship. Risks to a multi-sourced arrangement include:
* Duplication of responsibilities within your organization and across the various vendors engaged.
* Complicated or convoluted process and information flows.
* Unknown interdependencies that can add scheduling complications and delays.
* Responsibilities to resolve issues that cross multiple providers.
Be sure to assess your internal capabilities before going down the multi-sourced path. You will need to:
* Put more effort into planning and preparation.
* Bring more management skills.
* Create and use flexible, dynamic processes.
* Become the mediator to manage interactions and interdependencies among the various providers.
* Create monitoring capabilities to measure service performance across and between providers.
You can get better results with a multi-sourced outsourcing structure over the traditional single-sourced structure. You need to prepare to become your own prime contractor to do this effectively. Anyone who has general contracted their own home construction knows that the role of the general contractor is an important, time consuming and sometimes frustrating position. If you do not have the size to attract a consortium of providers to your outsourcing needs, you will need to take on this role to engage multiple providers.
** On another topic, EMA is presenting the second installment in our series of Webinars on Configuration Management Database on Oct. 18. Our first event, “Navigating the CMDB Landscape,” provided an overview of the concepts and tools within the CMDB space. The event on Oct. 18 will discuss a variety of best practices for starting or refining your CMDB initiative. To register, go the EMA Web site.
