Harnessing the Benefits of a Multisourcing Strategy in Software Outsourcing

Sometimes, working with one service provider simply isn’t enough.

Multisourcing involves working with multiple providers to complete a development project. Traditional software outsourcing models mean relying on one vendor, whereas multisourcing allows companies to distribute tasks amongst vendors to work as efficiently as possible and even create a bit of competition in the workplace.

This practice allows hiring companies to access an even more diverse pool of experts and niche skills, mitigating risks and optimizing resources. It also means greater flexibility and collaboration, for your next outsourced software development project.

Advantages of a Multisourcing Strategy

Implementing multisourcing gives companies many advantages, including increased flexibility, access to specialized skill sets, improved cost efficiency, optimized resource allocation, and a stronger supply chain and pipeline.

Increased Flexibility

Although providers work hard to build teams to support hiring companies, sometimes, they lack the resources to remain flexible as projects change. With a multisourcing strategy, software outsourcing providers give companies access to more resources, leading to greater flexibility.

For example, while one vendor may specialize in front-end development, another may excel in back-end infrastructure. The flexibility of working with different partners means you can choose the provider most suitable for one part of your project while leveraging diverse, specialized skills.

Multisourcing also allows companies to optimize resource allocation based on project requirements. During development, organizations sometimes work with multiple partners to help speed up the time-to-market. Then, during maintenance and support, the company may reduce the number of partners to help streamline business operations.

Multisourcing gives companies the power to tailor their outsourcing approach to meet the evolving needs of a project while effectively leveraging the strengths of each provider.

Enhanced Risk Management

Sometimes hiring companies don’t realize that engaging in multisourcing in software development outsourcing actually enhances risk management. However, if one vendor fails to deliver or faces some sort of issue, the in-progress project still moves forward with the support of the other vendors. Organizations also benefit from diversifying their providers in different geographical locations or sizes to reduce the impact of vendor-specific or regional risks.

To effectively manage risks when multisourcing, companies must establish clear communication and coordination efforts among their suppliers. They should establish clear service level agreements for each provider with performance metrics. This helps hold providers accountable for their parts of the project and provides a basis for issue resolution.

Implementing project management processes and governance is crucial in any outsourcing relationship but especially in multisourcing. Sometimes a centralized project management office is helpful for coordinating the multiple vendors to ensure everyone remains aligned. These strategies help companies leverage a multisourcing relationship to ensure project success.

Access to Diverse Expertise

By engaging with multiple service providers through multisourcing, businesses access niche talent and specialized skills. Each vendor involved also brings their own unique perspectives, experience, and knowledge domain expertise to the project.

This outsourced diversity helps create better outcomes for projects and business processes, allowing companies to leverage advice from various vendors which results in more innovative solutions. Multisourcing also helps companies address complex challenges and assists them in working with the most cutting-edge technologies that aren’t always available from one outsourcing provider. Additionally, this fosters a collaborative working environment.

Improved Cost Efficiency

Multisourcing boosts cost savings by promoting healthy competition among providers. In this sourcing strategy, organizations can negotiate for better pricing and terms with multiple vendors bidding for various project components.

Also, by distributing tasks based on cost-effectiveness and skills, businesses optimize resource allocation while reducing overall costs. To further optimize their savings, companies should establish clear performance metrics, periodically evaluate vendor contracts to ensure alignment with budget constraints and monitor vendor performance.

Implementing a Successful Outsourcing Strategy From Multiple Suppliers Simultaneously

Implementing a successful strategy with multiple vendors requires several steps. The company should define project goals and requirements, before selecting the right candidates. Then, the company should work with the providers to establish governance and collaboration frameworks to monitor and evaluate performance.

Defining Clear Goals and Objectives

Successful multisource outsourcing requires the definition of clear goals and objectives for all parties involved. This helps give everyone clear direction while aligning stakeholders and guiding vendor selection. The best goals are specific, time-bound, and aligned with overall business objectives. Key stakeholders across all companies and providers involved help ensure clarity and commitment as well.

Vendor Selection and Evaluation

Choosing the right vendors for a multisourcing project is essential. Companies should define their own metrics for evaluation, but they should always include the provider’s expertise, experience, and references. The hiring company needs to ensure the provider aligns with their culture and project requirements. By conducting thorough evaluations, companies can help ensure they’re setting themselves up for a successful supplier relationship.

Establishing Governance and Collaboration Frameworks

Supplier management involves working with providers to establish IT governance and collaboration methods, helping ensure cross-team coordination, accountability, and effective communication, as well as solidifying better supplier relationships. Governance includes pinpointing responsibilities and roles, reporting mechanisms, meeting schedules, and collaboration tools.

Monitoring and Evaluating Performance

Companies should regularly monitor and evaluate the performance of their multisourcing providers to ensure their project’s success. This involves using metrics and KPIs aligned with their project goals to track progress. KPIs to consider include quality of deliverables (code quality), customer satisfaction, and timeline adherence.

Ensuring Contract Compliance and Intellectual Property Protection

When implementing a multisourcing strategy, businesses should address outsourced development contract compliance and intellectual property protection in-depth. This includes outlining responsibilities, intellectual property ownership, and deliverables in every contract. The contracts should also include other factors, like confidentiality requirements and data security measures.

Defining Ownership of Intellectual Property

The best way to protect each provider and hiring company’s rights and interests by establishing clear intellectual property ownership terms. This includes aspects like explicitly defining property ownership in the contracts, addressing ownership transfers, confidentiality provisions, and law and regulation compliance.

Monitoring Contract Compliance

Monitoring contract compliance is vital in ensuring vendors meet their contractual obligations. Hiring companies should establish mechanisms to monitor this, such as performance reviews, progress reports, and milestone tracking. If any issues occur, leadership should address them through open communication and corrective actions.

Balancing In-House and Outsourced Resources

Finding the balance between in-house resources and outsourced teams is crucial. The in-house team must be able to focus on their core business while working with the outsourced teams, and the outsourced teams require balance in their workloads.

Assessing Internal Capabilities

Before adopting a multisourcing strategy, companies should assess their capabilities to identify areas where internal resources are most effective. This process should include evaluating in-house expertise, capacity, core competencies, and cost-effectiveness.

Building a Collaborative Ecosystem

Leaders should build a collaborative ecosystem between in-house teams and external providers. This helps enable knowledge-sharing, improves communication, and fosters innovation. Ideas to help with this include promoting open communication channels, organizing joint training sessions, and establishing informal communication channels.

Conclusion

Multisourcing can benefit any business. However, leaders must set providers up for success by establishing clear roles, communication methods, ownership, and so on. By doing their due diligence, multisourcing gives companies the chance to multiply their resources with a variety of advantages.

If you enjoyed this article, be sure to check out some more outsourcing articles.

FAQ

How can organizations ensure data security in a multisourcing strategy?

Organizations ensure data security in a multisourcing strategy by implementing robust measures like data encryption, clear intellectual property contracts, regular security audits, vendor compliance assessments, and established protocols for handling data.

What factors should organizations consider when selecting vendors for a multisourcing strategy?

When selecting vendors for a multisourcing strategy, companies should consider factors like technical expertise, experience, communication capabilities, cultural alignment, and any available references.

Can a multisourcing strategy work for startups and smaller organizations?

Multisourcing strategies work for smaller organizations and startups. Teams should search for providers who understand their specific needs and carefully evaluate their options. Check out our guide on “Outsourcing Software Development Services” for more information.