The Outsourcing Dilemma - The Search for Competitiveness.pdf

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the outsourcing dilemma
Using more than one provider
There has been a steadily increasing trend amongst major client organizations to split the
overall IT function into sub-functions that can be operated and managed separately by
outsourcing service providers. The stated objective of some of these organizations is to
obtain the best specialist suppliers for each sub-function. Others have taken this route for
defensive reasons, which include not committing everything to one external supplier and
the belief that outsourcing in this way makes it easier to take the service back in house
should it become necessary. From a contractual point of view it is certainly possible to get
just as good an exit strategy built into an arrangement with one provider as it is with
many. Nevertheless, for most executives, it still ‘feels’ easier to consider exiting if the IT
outsourcing arrangement has been split up.
I know of no hard evidence in terms of service benefits or cost savings, in favour of
using either a single provider or multiples of providers. The evidence probably already
exists but it’s certainly not surfaced for reasoned examination so far. As yet, the single
versus several providers question has been mainly confined to IT outsourcing and will
probably be confined to that function. It will probably also be confined to the very large
clients because the service providers will not go to the trouble of co-operating with other
providers if the deal and prestige factors are less than top drawer.
Logically, clients outsourcing only a portion of the IT infrastructure, e.g. desktops,
will only use a single provider. If the outsourcing arrangement includes a range of components
that are capable of being managed and operated separately, e.g. desktop, helpdesk
and data-centre, then the multiple provider approach has more credibility.
Those in favour of multiple supplier deals will often point to the increased chance of
getting real specialists working in each key area. Those against argue that splitting the
function into two or more parts is bound to reduce the service level and savings obtained
because each individual contract is that much less attractive to the providers.
Managing more than one provider
There is also the key question of how you manage the arrangement. In its much publicised
mid 1990s IT outsourcing, BP Exploration claimed to have solved this problem by
appointing three specialists on a worldwide basis, with each provider looking after the
same specialist area all over the globe. In addition, however, the BP Exploration world of
operations was split into three groups: North America, Europe and the rest of the world
and each of the three providers was given control of the operation in one group. In that
area the provider was made totally responsible to BP Exploration for the performance of