Multisourcing is a new global trend that involves blending services from internal and external providers to pursue business goals. It leverages multiple specialist teams to improve quality, costs, and time-to-market over traditional outsourcing approaches. Critical success factors include having a clear strategy and governance model, managing relationships rather than transactions, and implementing measurements to manage complexity. Making multisourcing work requires visibility, coordination, and integration across partner boundaries.

1. Changing the Outsourcing Game
Multisourcing: The New Global Trend
Eric Harris
Ram Garg

2. The New Global Trend:
Multisourcing
Multisourcing is the disciplined provisioning and
blending of business and IT services from the
optimal set of internal and external providers in the
pursuit of business goals.
Gartner

3. Strategic Smart
Sourcing Sourcing
Getting Work
Outsourcing Done
In-sourcing
- Local
- Nearshore
- Offshore
Multisourcing

4. In-house vs. Outsource
• Is it a core, revenue-generating function of
the business?
• What does it cost? Fixed vs. Variable cost.
• Do I currently have the capability/expertise to
do it effectively and efficiently in-house?
• Availability of resources ?
• How long to build capability?
• Right-sizing, scalability, flexibility important?

5. • Does Your Company Leverage outsource
partners?
– Yes
– No
• Has it worked well consistently?
– Yes
– No

6. Why Outsource?
• Cut Costs
• Cost Restructuring, Operating Leverage
• Staffing and/or Capacity Issues
• Operational Expertise
• Desire to focus on core Revenue-generating
functions
• Flexibility (Flex and Contract)
• Reduce time to market
• Etc.

7. The Business Context of Outsourcing
• ‘The issue is that if you don’t do it, you won’t survive’ – Daniel Marovitz, COO for
Technology, Deutsche Bank
• ‘Some financial institutions realized that they were becoming technology entities
as well as banks, which is not always desirable.’
• ‘IT can consume 10% to 15% of the revenues across large firms. That's a big
chunk.’
• HSBC decided to outsource mainly because the need to constantly improve
technology was becoming difficult for the bank.
• "We wanted better service quality than what we had, and more agility to respond
quickly to changes in the market," Lars Gustavsson, Group Chief Information
Officer, ABN Amro
• Outsourcing its tech and back-office functions has proved such a successful move
for IndyMac Bancorp that its ranking among the largest U.S. mortgage lenders has
soared from No. 22 to No. 9 in just three years.

8. What was your company’s major
reason for outsourcing?

9. Outsourcing Growth Continues
Unabated

10. Despite a maturing outsource industry
and constant improvements in
infrastructure, every year countless
software projects either outright fail or
experience massive cost and schedule
overruns, costing companies millions
if not billions of dollars.
Why is this happening?

11. Why is this happening?
• Sloppy, ad-hoc, ―Compulsive Outsourcing‖
– Only about ―cutting cost‖. Vendor selection
primarily based on low-cost provider
– Bad processes with a ―take our mess for less
attitude‖
– Do it because competitors are doing it
– Random mandate with no vendor mgmt
strategy
– No ―partnering‖ strategy
– No outsource project management capabilities

12. Challenges in Current
Environments
• Generalists are not good enough …
• Building in-house teams is expensive
• Building infrastructure and process
capability is expensive and time
consuming
• Frequent surprises are common

13. The New Global Trend:
Multisourcing
Multisourcing is the disciplined provisioning and
blending of business and IT services from the
optimal set of internal and external providers in the
pursuit of business goals.
Gartner

14. Multisourcing …
• Leverages multiple best-of-breed specialist teams
• Uses a combination of internal teams and outsource
partners
• Leverages specialized teams that are expert in and
focus on a single function
• Focus on delivering real value by improving business
processes and/or functions
• Is Partner-centric as opposed to vendor-centric
A multisourcing strategy should deliver enhanced
value and an overall competitive advantage through
improved return-on-investment, product quality, and
time-to-market.

15. ―The mega-outsourcing deals of the
past rarely delivered innovation and
significant service improvements.
Smart CIOs today are selecting
world-leading specialist suppliers to
derive the most from their
outsourcing relationships.‖
- Someone

16. Outsourcing vs. Multisourcing
Outsourcing Actions Multisourcing Disciplines
Ad hoc/reactionary Strategic and repeatable
Tactical event Studied, operating model
Problem-focused Outcome-focused
Reactive, compulsive Predictive, monitored, measured
Situational reaction Comprehensive and disciplined
Separated Integrated
Managed metrics Governed outcome
"Supplier" relationship "Partner" relationship
Command and control Trust and control

17. Advantages of Multisourcing
• Ability to leverage industry best practices
• Significant improvements to both quality and cost
• Better diagnosis of problems and more
comprehensive solutions
• Higher quality, better trained, more stable teams.
Specialists
• Better visibility into real project status information
• No conflict of interests between functions and better
visibility into real project status
A strategy for Innovation and Continuous
Process Improvement, as opposed to
focusing strictly on cost and maintaining a
status quo

18. Transition from Vendor to Partner
Customer Outsource Provider
• Efficiency and • Predictable, recurring
Base Predictability revenue
• Optimum value at a • Predictable profitable
competitive price engagements
• Preferential partner
status • Extend relationship
• Continuous optimization • Revenue and profit
Enhancement • Competitive parity enhancement
• Referenceable
or advantage engagement
• Preferred • Repeatable knowledge
partner status • Extend relationship
• Competitive advantage • Brand enhancement
Transformation • Enhanced revenue • Business expansion
• Premier or exclusive and revenue growth
partner status • Profits commensurate
with value delivered

19. Contract vs. Relationship
Transformation Relationship
Management
Dominates
Enhancement The
Contract
Utility The
Business
Contract
Value
The
Contract
Contractual
Management
Dominates
Relationship Impact
Key: = Contractual Management
= Relationship Management
= The Partnership

20. Making It Work …

21. Multisourcing Challenges …
• A new mind-set and frameworks for
– Communicating
– Coordinating
– Integrating
• Managing multiple partner relationships
– both inside and outside the organization.
• Existing Outsourcing framework does not necessarily
support multisourcing requirements
– Contract focused?
• Availability of specialist partners

22. Multisourcing – Critical Success Factors
 You must have a strategy.
 Multisourcing governance is the single most important
factor in determining success.
 Multisourcing is built on a network of relationships — not
transactions.
 Multisourcing requires creating measurements that matter.
 Complexity increases. If you can’t measure it you can’t manage it
 End-to-End process management for communication and
coordination

23. Making Multisourcing Work ..
• A well-defined engagement model that clearly
delineates responsibilities, expectations, and
measures of success.
• Near real-time end-to-end process visibility with
dependencies between upstream and downstream
partners well understood
• A well-defined measurement system that defines Key
Performance Indicators (KPIs) and considers both
output and in-process measures.
• A well-defined management review and feedback
mechanism to assure effective governance

24. Leadership, Senior Managers
Business IS CFO
Communication Results
Business
Coordination
Requirements Integration Value
IS Service
Business Technical Providers
Members, as Required
Multisourcing requires a new mind-set and frameworks for
Communicating with, coordinating, and integrating
deliverables from multiple partner relationships both
inside and outside the organization

25. Value Stream Mapping as a Foundation
Business (VOB) Customer (VOC)
Annual Sales = Peak Demand =
Efficiency Metrics Current Target Efficiency Metrics Current Target
Margin ## ## Metric 1
Metric 2 Metric 2
Metric 3 Metric 3
Metric 4 Metric 4
Effectiveness Metrics Current Target Effectiveness Metrics Current Target
Metric 1 Metric 1
Metric 2 Metric 2
Metric 3 Metric 3
Metric 4 Metric 4
Coordination, Communication, Integration
(VOP)
Discovery Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Post Launch
Process Owner: Smith Process Owner: Smith Process Owner: Smith Process Owner: Smith Process Owner: Smith Process Owner: Smith Process Owner: Smith
Description: High Level Description: Preliminary Description: Build business case Description: Development Description: Testing and Description: Full Production and Description: Post Launch
Investigation / Scoping / detailed investigation Validation Launch Review
Efficiency Current Efficiency Current Efficiency Current Efficiency Current Efficiency Current Efficiency Current Efficiency Current
Metric 1 ## Metric 1 ## Metric 1 ## Metric 1 ## Metric 1 ## Metric 1 ## Metric 1 ##
Metric 2 Metric 2 Metric 2 Metric 2 Metric 2 Metric 2 Metric 2
Metric 3 Metric 3 Metric 3 Metric 3 Metric 3 Metric 3 Metric 3
Effectiveness Current Effectiveness Current Effectiveness Current Effectiveness Current Effectiveness Current Effectiveness Current Effectiveness Current
Metric 1 ### Metric 1 ### Metric 1 ### Metric 1 ### Metric 1 ### Metric 1 ### Metric 1 ###
Metric 2 Metric 2 Metric 2 Metric 2 Metric 2 Metric 2 Metric 2
Metric 3 Metric 3 Metric 3 Metric 3 Metric 3 Metric 3 Metric 3

26. Non-negotiable …
• Clearly defined roles and responsibilities
• Clearly defined interfaces between the Communication
parties
• Clearly defined overall and per service Coordination
provider objectives
• Clear definition of service providers stake Integration
in the process
• Clearly defined metrics and scorecards
that objectively gauge progress and
success
Copyright © 2002

27. What does the future hold?
CIO
Governance and Process Management
Scorecards and Management
Contracts
Core Functions and Activities
Service Level Agreements
Dashboard
Incentives/gain sharing
Integrator / Prime Contractor
Communication Plans
Specialist Service Providers
Process Infrastructure, metrics, measurement systems, etc

28. Software Performance Assurance
(SPA)
An Example Where a Multisourcing Strategy
Pays Dividends

29. Software Projects are Challenging …
• Software product development is complex and
entails many Risks
• Has not caught up with other processes with respect
to process capability and management
– Variation
– Waste and complexity
• Defects are painful and can be very expensive
– Direct Cost
– Revenue Risk
– Market risk
• Quality resources are expensive and in short supply
• Projects routinely suffer from significant schedule and
budget slippage

30. More than half of software projects fail to
meet objectives and suffer significant
schedule and budget slippage because of
defects, the most significant being those
defects discovered late and/or post-
production!
Studies have shown that it can cost 50 times
more to correct a defect discovered post-
release than it does if that defect is
discovered during earlier stages.

31. Clearly, effective software testing and verification
should be a priority.
Why do companies continue to miss delivery
schedules, overrun budgets, and release defect
ridden software that requires countless rework
loops to get even close to acceptable performance?

32. Some Reasons …
In-house
• Testing and verification function not viewed as strategic or core.
Design/development focused
• High cost of onshore resources constrains ability to build QA team
• Lack of specialized personnel, processes, infrastructure, tools, etc
• Takes too long to build team and infrastructure
Outsource
• Lack of reliable status info from single outsource partner
• Generalist partners that do not have sufficient expertise in all aspects
• Status Quo, little or no process improvement or innovation

33. How SPA fills the void ..
Focus on testing only with aligned
personnel, processes, infrastructure, and
experience in place
• Allows clients to keep core design/development
inhouse or leverage other specialist providers
• 100+ certified testing experts. They are specialists in
software testing and verifications
• Complete inventory of best practices
• Infrastructure in place to execute a multitude of
project types
• Proven, repeatable processes
• Patented technology enablers
• Experience in multisourcing environment

34. SPA’s Value Proposition
• Access to highly trained team of specialists
• Can build team very quickly
• Leverage an existing infrastructure and best practices
• Flexibility in team size/composition
• Flexibility in services
• Focus on communication plans
• 30+% savings over traditional outsourcing?
• Focus on long-term partnerships. Build business value
• Focus on innovation and continuous process improvement

35. Conclusion
• Multisourcing is an innovative discipline that takes
organizations beyond "quick-fix" cost cutting to enable
capability building, global expansion, increased agility
and profitability, and competitive advantage.
– Innovation and real business value
– Reduced Risk
– Reduced overall cost
• Multisourcing requires a new mind-set and frameworks
for communicating, interacting with, and overseeing
multiple partner relationships, both inside and outside the
organization
– End-to-End Process and Status visibility
– Partner vs. Vendor
– Strategic vs. Tactical

36. Eric Harris
Software Performance Assurance
Ph: 972-533-4605
Email:
eric.harris@softwareperformanceassurance.com