How to successfully manage a multi-sourced IT environment - treat suppliers like kids

“No matter how angry you are don’t smack your IT suppliers and make sure they don’t play with each others’ toys”

Multi-sourcing is embedded within most IT departments within large companies. Today it seems that the key question to answer for CIOs, rather than what to outsource, is: how do I manage multiple suppliers and ensure I get the best value?

Bringing in multiple suppliers to provide IT services introduces competitive tensions which, might lead to lower costs. The problem is the level of service might drop as suppliers have a smaller share of work.

I was at the Gartner Outsourcing Summit on Monday (08 September) and I went to two interesting presentations about managing multi-sourced IT delivery.

The presentations were from Jonathan Apted, global IS strategic relationship manager at agri-business Syngenta and Richard Boynett, CIO long-term savings at finance firm Old Mutual . These presentations were all about getting the best out of suppliers in a multi-sourced environment.

Read the Old Mutual case study here.

Read the Syngenta case study here.

It reminded me of an article I wrote after the Gartner event last year which was all about how BP manages its service provider ecosystem. BP is big enough to boss its suppliers but the principles are the same.

The recurring theme in both of Monday’s presentations were how suppliers and their business customers should communicate well and how businesses should incentivise suppliers through opportunities rather than the risk of punishment. It’s simple “if you do this job well you will have a good chance of winning a bigger job later on.”

It is also important that suppliers within an ecosystem are not too competitive and stay in their own service tower. It’s a bit like raising kids really.

Here are some of the key tips from people that have successful strategies to manage outsourcers.

-ensure relationships are mutually beneficial
-ensure internal that staff understand why things were changing. They might have relationships with suppliers.
– create separate groups of services and suppliers for them
– give suppliers the opportunity to expand that role in the future
– make it clear that you would rather have the service you paid for than the penalty money for failed delivery
– continuously engage with all the suppliers
– share information with suppliers about what you want from the deal and ask them what they want
– large penalties for missed targets can cripple partners. Make penalties progressive and allow suppliers to earn back penalty money if they have quick sustainable fixes
– work with the suppliers when you create SLAs and reduce there number
– invite suppliers to come forward with ideas for mutually beneficial approaches
-understand that both parties have to profit

Tell me about your multi-sourcing experiences.