When does it make sense to outsource

CIOs Are Moving towards a Multi-Provider Model of Outsourcing

Outsourcing is a popular business practice, and it often makes sense to outsource business functions. Information technology functions are no exception. CIOs can outsource many IT services to providers.

In the past, CIOs relied on a single provider for their outsourcing needs. These days, that’s changing. More CIOs now plan to move towards a multi-provider model of outsourcing. The same decision may make sense for your company’s projects or IT functions. Here are some reasons why CIOs are moving towards a multi-provider model of outsourcing.

Competitive Pricing

A major benefit of relying on multiple providers is access to competitive pricing. If you rely on a single vendor, the provider may need to subcontract some of the tasks. Since the vendor will charge a margin on the subcontracted work, you could end up paying more. By working with multiple vendors yourself, you could save money.

Using a multi-provider model also means you can shop around and find vendors that provide the best value. You can look for a provider that gives you the best value for your money in cybersecurity and another provider that does the same for data centre operations. When each provider has been carefully considered, costs can be reduced and value increased.

Using multiple providers can also encourage companies to compete for your business. If you’re known to only use a sole provider, there’s not much incentive for other companies to compete. If you’re known to rely on many smaller providers, there’s incentive for a new provider to approach you with a good deal.

Increased Flexibility

Using multiple providers also increases flexibility at the company. If a project ends, or if you want to start handling a certain function in-house, it’s easy to cut ties with a vendor. When one vendor is managing everything, it could be harder to adjust the functions it is handling.

Multi-sourcing can also go alongside shorter contracts, so you’re not locked in with a single vendor for a long period of time. Short-term contracts make it easy to replace a supplier you’re not happy with.

Access to Specialized Skills

It’s hard for one provider to excel at everything. While you may be able to find a provider that can meet most of your needs, that vendor may not perform well in other areas. This is a problem because you need all of your outsourced functions to be performed well, not just some of them.

When you use multiple providers, you can work with best-of-breed vendors. These providers are at the top of their fields and have employees with the specialized skills you need. You could hire one provider to manage your help desk and another to manage data centre operations. Another provider could work on application development, while another could work on disaster recovery. Since each provider is the best at what it does, you can ensure every function is performed optimally.

Risk Mitigation

Relying on just one provider for outsourced functions can be risky. If the vendor is not able to meet your deadlines, or doesn’t have the right skills, the damage to your projects can be significant. Your projects could have to be put on hold until the vendor solves the problem or until you can find a new provider.

Moving to a multi-provider model of outsourcing can help mitigate risks to the company. If a provider is only responsible for one function and doesn’t meet your needs, it’s less serious than it would be if the firm were in charge of everything. If one of your many vendors doesn’t meet your needs, the other providers you’re using for outsourcing can keep their own functions on track. This helps ensure there’s less damage to the company’s functions.

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