Outsourcing to multi sourcing in Indian scenario

Abstract

Previously, IT companies used to enter into single outsourcing contracts thereby delegating the project to a single vendor. But as years passed, a new form of company-vendor relationship model developed whereby the projects were no longer given to single contractor. The projects were divided into its composite functions and the functions into activities. These functions or activities were then contracted to multiple vendors based on the most optimal skill set and requirement match. In modern times, the business cycles are getting shorter. In such cases, it is essential to match the duration of the business cycles with the expected technology with specific focus towards OpEx models. The demands of the buyers are in pace with the technological changes whereas the suppliers are finding it difficult to gain expertise needed by the buyer. Outsourcing and offshoring are no longer choices between a few service providers in a few low cost countries. The emergence of huge quantity of new service providers with variety of capabilities along with plenty of potential offshore, near shore and even home shore locations has created a new complex global delivery paradigm known as multi sourcing. Multi sourcing allows companies to pick and choose thereby offering superior flexibility to the companies. In recent times, there has been an emergence of companies specializing in niche areas. Since, such companies are focused on their area of expertise; they are able to provide the best possible service. The inherent competition between the service providers because of the large resource pool leads to companies quoting the most competitive prices. It is quite possible that both the vendor and the organization may under-invest in the assets necessary for the outsourcing strategy to work. This is particularly true because neither the client nor the vendors are completely dependent on each other. Usage of multiple vendors can limit their capacity to achieve economies of scale to achieve significant cost reduction for the organization. There is a huge management overhead cost associated with managing & monitoring many vendors. There has to be individuals dedicated to manage different vendors and contracts. With such amount of diversification, the amount of paperwork and due-diligence also increases, thus increasing the management overheads. It is critical that customer associations don't take Multi-sourcing as a parkway to pit suppliers into rivalry, however all the more as a more extended term vital bearing to influence worldwide skills through captivating the "best-in-breed", while simultaneously being adaptable with evaluation of supplier capabilities. In particular, compelling administration of multi-sourcing connections does result being developed of associations with suppliers where dangers and prizes are imparted. Fitness accordingly turns into the key driver behind sustenance of such connections