Mention multi-vendor relationships these days, and the J.P. Morgan/Pinnacle alliance bubbles up in every conversation. That alliance, said Alan Gonchar, president, COMPASS America, Inc., has become the model for a growing movement toward teaming.
“Organizations are going to start looking for the best of the best in each area,” he said. “They’re going to want the best in data centers, in applications development, in telecommunications. We’re going to see a very strong trend toward multi-vendor solutions.”
What’s Driving the Trend?
That quest for the best, however, is not the only driver of the move toward multi-vendors, according to Gonchar. Business process outsourcing plays a role. “If you’re looking to outsource an entire value stream, it’s very possible that to outsource that end-to-end will require a multi-vendor solution. That wasn’t a driver in the case of Pinnacle, but it is going to be more the case in the future.”
Cost also is a factor, he said, as customers opt to go directly to AT&T for the network portions of their solutions, rather than accept pass-through network costs from other vendors. “If a company outsources everything to one of the Tier 1 outsourcers, those folks don’t own their own networks, so they don’t add any value to the network portion of the deal. The customer can strike a better deal with AT&T.”
The market also is driving the multi-vendor approach, Gonchar said. “If there were a couple of companies out there that really could deliver an end-to-end solution, then maybe multi-vendor wouldn’t make as much sense,” he said, “but the fact is that no one can — at least, today.”
Know Your Objectives
Gonchar offers three specific suggestions to companies considering multi-vendor solutions. The first is to have very clear objectives. Knowing those objectives, he said, can help customers make good decisions on everything from how many vendors to include to how to manage those vendors. “Everything is driven out of those objectives,” he said. “If your objective is strictly infrastructure, you just need to be concerned about that. If your objective is to have someone handle your global wide area network needs, you need someone very strong in global wide area networks.”
Concerning the number of vendors, he offers another bit of advice: “Be reasonable about the number of vendors, because you’re going to have to manage them all. On the other hand, don’t be shy about adding one more in order to get the best of the best.”
Having clear objectives also helps a customer manage the relationship. “Later on,” said Gonchar, “you can go back and say here were our original objectives. They haven’t changed.”
Identify Measurements and Rewards
His second recommendation is to have service levels, penalties and incentives in place for providers. That helps the customer be able to manage the relationship aggressively and well. “You need to have very good measurements and rewards in place, because you can’t micromanage these folks. There are too many of them to manage,” said Gonchar.
“One of the things that is different in a multi-vendor environment,” he noted, “is that you need to have one of the parties have overall ownership and responsibility. That stops the fingerpointing that might occur between parties.”
Set Realistic Expectations
Gonchar’s third recommendation may be more difficult to implement. He warns that internal expectations need to be set properly.
“A lot of times, people’s expectations go way up when things are outsourced,” he said. “They sometimes have expectations that all their problems will go away. Organizations need to understand that it’s still whatever it was before — it’s still IT, it’s still human resources, it’s still check processing.”
Gonchar said multi-vendor relationships modeled after Pinnacle “really are the land of the Fortune 500. These are companies with sophisticated demands and deep pockets, as well.” While he acknowledged the possibility that vendors might leverage their experience into multi-vendor solutions for medium to large companies, he doesn’t see that happening soon.
“In the foreseeable future, it’s going to take some big dollars to make this work,” he said. “Many companies out there can’t manage one outsourcing vendor. The issues with multi-vendor solutions are magnified.”
Lessons from the Outsourcing Primer
- BPO can create a need for multi-vendors.
- Multi-vendor solutions offer some cost advantages.
- Establish your objectives for outsourcing in the beginning.
- Have measurements and rewards in place.
- Set realistic internal expectations for outsourcing.