In this clamor over multisourcing, most recently typified by the colossal General Motors outsourcing deal, it’s important to realize that not every expert thinks this is a smart approach. Consider a report by Everest Group that contends sole-sourcing can deliver significantly over multivendor sourcing both in terms of cost for managing the process and time required to make a decision. However, the report cautions that: the sole-sourcing approach should be “applied wisely.”
The report cities an Outsourcing Center poll, which shows that an existing relationship and a desire for a speedy process are the two largest factors that influence a company to consider the sole-source approach. Together, these factors account for almost half of the decisions that entail a sole-source approach. While building upon existing relationships can increase the success of a sole-source approach, that by no means ensures success.
Another poll by the Outsourcing Center indicates that BPO is driving a change in how organizations choose their sourcing approaches. While 50% of organizations polled were more likely to consider sole sourcing for BPO rather than ITO, 33% were less likely to consider sole sourcing for BPO. Only 17% of the respondents believed that the difference between BPO and ITO has no impact on their sourcing approach. n
REASONS FOR CUSTOMERS CONSIDERING A SOLE-SOURCING APPROACH (%)
SELECTION OF SOLE-SOURCE APPROACHES FOR BPO (%)
SOURCE: EVEREST GROUP
SOLE SOURCING OR MULTISOURCING?
| SOLE SOURCE |
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Speedy process is critical |
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Reputation of supplier is critical |
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Supplier has unique business capabilities; in some cases offering unique business cases (e.g., drive top-line in addition to efficiencies) or helping transform processes in a manner that delivers business value |
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Complexity of the potential arrangement – typically driven by the size of the deal, interdependencies with other processes, or strategic importance |
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Existing “entangling” alliances (e.g., supplier owns critical software or exclusivity rights) |
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High degree of trust between buyer and supplier in the form of pre existing relationship, either institutional or personal; often based upon proven ability of supplier to deliver results |
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Corporate culture favors collaborative sole-source approach |
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Opportunity for a broader buyer-supplier alliance (e.g., cross-selling of products, managing sales channels, or by providing access to technology or research capabilities)
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| MULTISOURCE |
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| • |
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Service in scope are well-defined within the marketplace |
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Focus on achieving lowest price over broader measures of value |
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Multiple solutions based on differing supplier strengths need to be evaluated due to insufficient ability to perform rigorous internal analysis of options |
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No dominant pre-existing relationship guides the selection |
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Corporate guidelines, governmental policies, or culture dictate multivendor approach |
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Change management and implementation challenges are minor |
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Organization is highly skeptical of any sole-source approach, thereby slowing up decisions and undermining the credibility of the process
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SOURCE: EVEREST GROUP
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