'Multisourcing': the new outsourcing

Multisourcing is the new trend, but there are risks, says lawyer Stuart van Rij

Wellington lawyer Stuart van Rij says there is a growing trend towards managing outsourcing contracts directly, even where multiple vendors are involved. He is concerned that this approach brings with it additional risks.

Speaking at a recent Computer Society seminar, van Rij says there have been changes in the landscape of outsourcing.

The era of big deals, involving a single prime contractor — “one throat to choke” in the event of mistakes — and a number of subcontractors, has come to an end, he says. Nowadays, multisourcing, as it is called, is more usual, with the client dealing directly with several providers.

Most of these must also deal with one another, at least to some degree. For a three-vendor contract this implies six interfaces.

There are, nevertheless, advantages to this approach. The buyer’s eggs are no longer all in one basket. The contract can aim for “best of breed” performance and there is the stimulus of competition.

The dangers include finger-pointing, overlaps in responsibility or, conversely, gaps in the project which turn out to have been no-one’s responsibility. Legal safeguards can only do so much, says van Rij. The rest must be achieved through tight governance and scheduling.

Transparency in relationships is a key here, but, equally, the sharing of information and resources between parties has to be governed by some formal controls, particularly where licences are concerned.

The risk of non-performance, he says, is mitigated against not so much by up-front terms and conditions in the contract as by carefully thought-out service level and operational-level agreements (OLAs) between providers.