It wasn’t too long ago
that the term “multi-sourcing” meant that a company elected to assign
responsibility to multiple providers for side-by-side responsibility for
discrete service categories. One
provider for infrastructure operations, another one for applications support services,
a third for customer care, and maybe a fourth for a business process like HR or
F&A.
Commonly, these
strategies were directed by a “vendor management” function that reported into
Supply Chain or, more commonly, into a Shared Services organization.
The prevailing logic
held that this sort of sourcing strategy avoided undue reliance on any one
provider, and promoted a competitive tension that kept the providers on their
toes.
This side-by-side
multi-sourcing still allocated unique responsibility for individual business
support functions to unique providers, it’s just that no one provider had too
much of the spend. This meant that when
a major issue arose, such as severe service breakdowns, performance irregularities,
or the like, a “big event” resolution was required to introduce a course
correction.
Alas, that was one of the
benefits of having a vendor management office – to facilitate the interventions
that called the parties to the table to work through the root causes and haggle
over the right resolution.
The world had order to
it. Right?
Fast-forward to the
emerging trend for “layered multi-sourcing”.
I don’t know whether that term will stick, but it’s the best that I can
come up with to define what I am sensing as the progressive approach that
companies are taking to deal with the frustration of “big event” resolution to
service issues, and to promote true best-in-class performance.
Layered multi-sourcing
moves beyond the side-by-side framework.
It embraces having multiple providers of common services. Moving a piece of work to one provider over
the other will be based on factors that are determined in real-time. Spot-pricing.
Immediate Service Quality measures.
Contextual factors.
Does the processing of
a workload today need to be performed by the same service provider who did that
work last week? Not always. Think about this in the context of shopping
for a hotel room. Most of us select a
hotel “service provider” based on the terms and factors associated with the
immediate need, not based on having signed a 7-year contract for access to
hotel rooms. Pricing, location, past
experience, loyalty rewards, rating of other customers … these all factor into
our decision to choose one over another.
Users of Uber will
recognize the power of ordering up a car service based on time of need,
location, rating of the driver, type of car, etc. Corporate business support processes can be
provisioned similarly.
The implications are
many, but one should be obvious: companies, and their approaches towards vendor
management, will be increasing the number
of providers with which they deal. This
is a reversal of the trend towards having a smaller number of larger service
providers. With layered multi-sourcing,
those providers with best-in-class performance can find a place at the table.
Clients win by reaping
the benefits of acquiring defined services when and where and how they are
needed, avoiding the big bets of committing to providers in times of uncertain
demand profiles or service quality experiences.
The price: companies need to rethink their architecture for engaging
more providers in different ways, and must adopt a more progressive approach to
governing this model.
It’s not vendor management. It’s service management. And, it follows the principles of
category-based strategies for provisioning the right capacity in the right
place, at the right cost, to meet the needs of a dynamic business.
And the Economic Game Planning gets more complex for everyone.
Peter
No comments:
Post a Comment