The Pros and Cons of Single and Multiple IT Providers: Competitive Tension versus Accountability | Article

Pros and Cons puzzleWhen considering sourcing alternatives for IT services, buyers must make a fundamental decision on structure. Do you want a single provider or multiple providers?

Both have their pros and cons. Neither of the approaches is wrong. But each presents unique challenges, both in operations and in provider management.

When IT outsourcing initially evolved, very few buyers gave any thought to splitting the provision of services and using multiple providers. The big focus was on handing all of internal IT to a provider because that decision came with end-to-end accountability. The biggest concern was to ensure that the client did not interject itself into the workflow processes to the extent that it abrogated provider accountability.

Benefits of multiple providers
Recently, splitting the service provision among two or more providers has gained popularity – it’s a way to provide “competitive tension” between two or more providers. Buyers can compete any addition or change to their services so they can receive the best pricing. It also permits the movement of scope between providers who have current knowledge of the client environment and have contracts in place, should there be service issues.

Today, buyers use a multi-provider solution to gain “best-of-breed” providers for specific portions of the overall scope. Perhaps one provider is better at applications support than infrastructure or another has a specific strength in a particular area such as SAP services.

Benefits of a single provider
Awarding all IT service provisions to a single provider means the provider has full accountability. The provider is responsible if a service fails, regardless if the failure is caused by problems with an application or the infrastructure. Buyers can require the provider to commit to an “end-to-end” SLA for application availability, and that accountability will be most closely aligned with the user experience.

In this model, hand-offs within the support process are all within the control of a single provider, so delays in response and resolution should be minimized. A single provider monitors the management tools that evaluate both the application and infrastructure performance, so trouble shooting and fault isolation are more effective and quicker.

From an operational perspective, all the operational hand-offs between applications and infrastructure are internal to a single provider. So there is no vested interest in finding another party responsible for a failure. The provider just has to remediate the problem and restore the service.

Challenges of a multi-provider approach

Using a multi-provider service environment means the providers are only accountable for the scope of services they provide. If there is a service failure, the service desk must do a more thorough level of triage to determine which provider should get the initial incident ticket. That initial diagnosis may or may not be correct, and there may be subsequent hand-offs between providers until all parties work together to determine the actual cause of the failure.

This activity can present issues in actually getting incidents resolved in expected time frames. For example, if the restoration of service SLA is within two hours, the clock starts ticking only when the final owner of the incident gets the ticket from the resolution queue. Any time spent triaging where to assign the incident ticket does not count against the provider resolution time.

Importance of provider management
Because of the characteristics of each approach, provider management will be significantly different. With a single provider, there is a one-to-one relationship between the client and the provider with very clear lines of accountability.

In a multi-provider environment, there is a need for someone to own overall accountability. That responsibility generally falls to the client unless leadership contracts an additional party to be an integrator that will have operating level agreements with each provider and be held accountable.

With multiple providers there is also a need for a multi-provider council that meets frequently to provide proactive oversight of operational issues that transcend providers. This ensures there are no breakdowns in workflow and assures operational continuity. This oversight is not trivial and will take significant effort on an ongoing basis. It is not always easy to make sure there are no issues between providers that can affect the end-user experience.

Buyers need to give the structure of their IT sourcing serious consideration before embarking on the sourcing journey. Left unplanned and unprepared, you can face  continuing operational and user satisfaction issues.

1 Comment on "The Pros and Cons of Single and Multiple IT Providers: Competitive Tension versus Accountability | Article"

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  1. Yugal says:

    Frank, insightful piece. What is your perspective on the seemingly contradictory trend, where buyers are leveraging “best of breed” providers whereas providers are more and more creating and trying to sell “integrated services”. Moreover, how does best of breed provider strategy fits with vendor consolidation, where one increases the number of providers and the other reduces?

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