In-Sourcing, Out-Sourcing & Multi-Sourcing

In-Sourcing, Out-Sourcing & Multi-Sourcing

If the last 100 years have brought to us (internet, WWW, Mobile etc…) what the last few centuries prior to them haven’t in general, the last 20 years have embraced every channel available to explore new territories, people, cultures and have succeeded in establishing trend-setting partnerships across the globe.

Getting into sourcing what was just ‘In-Sourcing’ for many years until few decades ago has been experimentally expanded by deploying team(s) in different location(s) within the country, outside of it, outside the company’s framework and so on, the need drove companies to be creative and so eventually sourcing evolved to what it is today

We will in this post get introduced to In-Sourcing, Out-Sourcing and Multi-Sourcing

In-Sourcing

Assigning the responsibility of a project to a team which is internal and which has been either set up specifically to deliver the task or has been in the system for some time and has been trained to deliver the task.

There are multiple aspects to be noticed in this mechanism like for example the team need not be Full Time Employees, they can be either part time or be contractors hired just for the task. Also the team need not be based in the same location as the (IT) Head Quarters or the location where the solution needs to be deployed. With an effective Programme and Project Management the task can be executed from any location that has decent network connectivity.

The most critical of all aspects in this model is Profit and Loss (P&L) ownership which is vested in the team which is given the responsibility of the deliverable. Many a cases this becomes the Achilles Heel, in very few a boon.

This model has been and is favoured by many organizations and there are few very big labels which pursue this route to this day like Tesco, Vodafone, Boeing etc…Yes, these companies also do some Out-Sourcing

Out-Sourcing

Out-Sourcing wont be a lot onerous because of a fair bit of commonality it has to In-Sourcing; let us see how and why. In Out-Sourcing too drawing the requirements together and weaving a scope happens very similar to as it does in In-Sourcing but because of the work being sent outside the legal walls of the outsourcer due diligence becomes de rigueur (Essential). The inquiry happens two ways, by the Outsourcer and by the Outsourcee

It would be hard to itemize all the aspects that are vital in Outsourcing; I have attempted summing up few.

The most crucial factor for success of an engagement or a partnership is the relation between the parties involved. Success and failure coexist in an outsourcing relation, quite a few companies fail not because having botched delivering the project but because of not having established a sincere affiliation with the client. There certainly are companies even today on the supplier’s side of the business which do not maintain a ‘open book’ policy with the clients specially around highlighting any hiccups as they come up, sharing the impact the hitches would have on the delivery of the task. In most of the times it is usually in the eleventh hour the client gets to know about the damage; not in all the cases but surely in few the setback is irreparable.

Cost, is not everything, but definitely plays a big role in clinching a relation. Costing differs a lot based on the experience both the organization has in delivering similar projects in the past and the individuals involved in estimation have experience in delivering that too. With many clients having learnt the hard way that cheapest option is not always the best they do wish to see both quality and quantity but just not money in a relation especially when someone envisages a long term one. Also because of the economy crisis if any suppliers can do their bit in offering cost effective solutions by lowering margins clients would absolutely be ready to consider such proposals

It is an endless debate to have whether a project lost is a relation lost, I would agree that the supplier who wins the deal has demonstrated that extra care in a relationship perspective which goes a long way beyond that assignment but the other suppliers involved in the process would undoubtedly stand a chance in the future provided they have showcased strong commitment throughout. Relationship, a lot is about understanding the priorities of the client, accepting or sharing the inability as a supplier on any of the aspects with the client upfront. We have seen in many occasions client setting out to procure a service/solution on a specific technology and with the rapport the supplier establishes with the client they make the client change their mind/approach by suggesting that some other technolog(ies)y would best suit their needs.

Because of the variety market/Supplier today has got to offer clients are expecting suppliers to be proactive than reactive. Proactive here means supplier engaging with client in a series of discussions which will give the supplier a fine understanding of the client’s the then existing business, technology scenario and needs and will help to get back to the client with a winning proposition of what new and unique benefit can the client get from them if given an opportunity. Here sometimes a supplier might have to demonstrate the technical and operational deliverability and knowledge by offering a portion of the target deliverable as Proof of Concept at their expense, history has many examples which have proven that client does get into a relation with that supplier further to that

An aspect worth citing would be that no definitive scope of work is required as highlighted in most of the forums, yes it would aid in accelerating the whole development but it surely is not the ‘show-stopper’ ingredient. It infact has been demonstrated many a times that without a strict scope of work projects were delivered to mutual satisfaction of the vendor and the client solely because of a worthy exchange of expectations.

Multi-Sourcing

This is still evolving conceptually but indubitably offers best of both (Insourcing and Outsourcing) worlds. By parts the concept was and is being practised and serviced across various geographies. In this model the client goes an extra mile backward to invite a supplier (of course after due diligence) to assess their current set up/investment and map out the benefits the client can get out of it with minimal or some changes and define what would they need in addition. Further to this another partner selection programme is conducted by the client to identify the right supplier who can deliver what they want, here comes the benefit and inimitability of Multi-Sourcing. The client should from the earlier exercise have got an output that offers the clarity on what’s missing and what needs improvement; that report when appropriately synchronized with the potential supplier’s capabilities client will realize that each of the potential supplier has something distinct to offer and they have proven expertise within that space.

Yes, it would be challenging to coordinate with multiple suppliers on a single assignment as the task would be broken into multiple modules and outsourced amongst few but if we look at the precision each of the suppliers would offer, the amalgamation would result profits.

For example: if we consider a company wanting to start offering their business online or enhance their existing online portfolio depending on the business if it is a retailer they can fragment the target chore into multiple tasks like building an appealing User Interface which can be outsourced to a supplier who has demonstrable expertise in that space, then look at the layout, design and architecture and partner with a supplier who specializes in those, then partner with a testing services provider to gauge and ensure that the solution in hand is robust and scalable enough, then a good hosting partner and so on. Also there are suppliers who are good in support and maintenance of this kind of solutions who can offer quality service economically once the solution has gone live.

Not to forget Multi-Sourcing can be applied to a project or to multiple projects based on a technology stream.

If we consider the above example in a typical ‘In-Sourcing’ or ‘Out-Sourcing’ angle the client will be able to find very few suppliers who can offer everything (specially when the project is of very large scale) which indeed does reduce the cost of having to evaluate suppliers and coordinate with quite few of them to achieve desired results but as we are all aware the investment would be so significant compared to the ‘Multi-Sourcing’ mechanism.

I am sure you would appreciate that there is a lot to In-Sourcing, Out-Sourcing and Multi-Sourcing; we will try digging Multi-Sourcing more as that’s going to dominate the Sourcing arena in the coming years.