Using more than one provider

There has been a steadily increasing trend amongst major client organizations to split the overall IT function into sub-functions that can be operated and managed separately by outsourcing service providers. The stated objective of some of these organizations is to obtain the best specialist suppliers for each sub-function. Others have taken this route for defensive reasons, which include not committing everything to one external supplier and the belief that outsourcing in this way makes it easier to take the service back in house should it become necessary. From a contractual point of view it is certainly possible to get just as good an exit strategy built into an arrangement with one provider as it is with many. Nevertheless, for most executives, it still ’feels’ easier to consider exiting if the IT outsourcing arrangement has been split up.

I know of no hard evidence in terms of service benefits or cost savings, in favour of using either a single provider or multiples of providers. The evidence probably already exists but it’s certainly not surfaced for reasoned examination so far. As yet, the single versus several providers question has been mainly confined to IT outsourcing and will probably be confined to that function. It will probably also be confined to the very large clients because the service providers will not go to the trouble of co-operating with other providers if the deal and prestige factors are less than top drawer.

Logically, clients outsourcing only a portion of the IT infrastructure, e.g. desktops, will only use a single provider. If the outsourcing arrangement includes a range of components that are capable of being managed and operated separately, e.g. desktop, helpdesk and data-centre, then the multiple provider approach has more credibility.

Those in favour of multiple supplier deals will often point to the increased chance of getting real specialists working in each key area. Those against argue that splitting the function into two or more parts is bound to reduce the service level and savings obtained because each individual contract is that much less attractive to the providers.