CANNES, FRANCE -- Outsourcing has become such an integral part of successful business practice that many organisations are embarking on outsourcing programmes almost without thinking. Research firm Gartner today warned against such compulsive outsourcing and advised organisations to begin a more disciplined approach to multisourcing in order to achieve business growth and agility.


Building a successful sourcing operation requires a new approach that goes beyond the traditional view of outsourcing. "Companies really need to adopt a new approach, something Gartner calls multisourcing, if they are to continue to realise the benefits of outsourcing in the future," says Linda Cohen, vice president and distinguished analyst. Cohen and Gartner sourcing expert Allie Young coauthored the recently published book, Multisourcing: Moving Beyond Outsourcing to Achieve Growth and Agility.

Multisourcing is an innovative discipline that takes organisations beyond "quick-fix" cost cutting to enable capability building, global expansion, increased agility and profitability, and competitive advantage. As such, multisourcing requires a new mind-set and frameworks for communicating, interacting with, and overseeing service relationships both inside and outside the organisation.

However, before companies are ready to adopt this approach, they need to put an end to compulsive outsourcing. "Chaotic and compulsive outsourcing creates as many challenges as it solves. Furthermore, in many cases, the problems are caused by the immaturity of the organisation's sourcing practices rather than being the fault of the service provider," says Cohen. "Organisations learn too late that managing external services requires vastly different competencies than managing the same, internally provided services."

Gartner research reveals eight pervasive myths about outsourcing that the firm says are undermining outsourcing success:

1. The myth of sourcing independence: This is the idea that sourcing decisions can be made entirely independent of business strategy. As a result, organisations create outsourcing relationships that are incompatible with the business results expected.
2. The myth of service autonomy: A similar myth is that services are autonomous-and one sourcing relationship has nothing to do with another. Ms. Cohen says that in today's world, "all of a company's business processes and services are interrelated. We've created an operating environment where autonomous services simply don't exist."
3. The myth of economies of scale: This myth takes the form of service recipients demanding cut-rate prices for highly customised services. "Service providers can only pass along cost savings from economies of scale if they can achieve scale through standardised offerings," said Ms Young.
4. The myth of self-management: Buyers believe that once they sign a contract the outsourcer and the contract itself will manage the service. Most organisations do not budget and plan adequately for the ongoing management of the relationship and the services that are provided.
5. The myth of the enemy: This is the idea that service providers are out to fleece service recipients. Many organisations view contract negotiations as a war in which there will only be one winner rather than an attempt to create a mutually profitable relationship.
6. The myth of procurement: A related myth is that the sourcing of services is primarily a procurement exercise where best price wins. In reality, many services outsourced today are vital to corporate strategy, and therefore issues of capability, culture, relationship, and other factors are often more important to long-term success than price.
7. The myth of the steady state: This myth supposes that, once signed, the outsourcing contract remains set for its term length. In reality, outsourcing contracts and relationship management must be developed to anticipate and accommodate change.
8. The myth of sourcing competencyi Finally, and perhaps most painfully, many organisations believe that they have the requisite expertise to manage complex sourcing environments even when they have never done it before.

Central to a successful multisourcing approach is the creation of a sourcing strategy that is tightly linked to the overall business strategy and constantly monitored by an effective enterprise-wide governance system.

"Companies need new approaches to sourcing strategy, sourcing governance, sourcing management, service provider selection and service measurement," says Cohen.

Cohen says that to move beyond outsourcing to multisourcing companies need to:

1. Have an integrated, holistic sourcing strategy across all services.
2. Focus efforts on creating sourcing governance appropriate to the organisation and service needs.
3. Remember that it's about building a network of relationships, not just signing contracts.
4. Make sure that in evaluating a providers' performance, to measure and track the things that directly relate to business outcomes.