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How can you use multi-sourcing or hybrid-sourcing models for IT outsourcing?

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IT outsourcing is the practice of hiring external service providers to perform some or all of the IT functions of an organization. It can help reduce costs, improve quality, access specialized skills, and focus on core competencies. However, it also comes with some challenges, such as managing multiple vendors, ensuring alignment with business goals, and mitigating risks. That's why choosing the right outsourcing model is crucial for the success of your IT outsourcing strategy.

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Subhendu Mukherjee

Associate Director - IT Services at EY

1 What are multi-sourcing and hybrid-sourcing models?

Multi-sourcing is the outsourcing model that involves using more than one service provider for different IT functions or projects. For example, you might hire one vendor for cloud services, another for application development, and a third for cybersecurity. Hybrid-sourcing is the outsourcing model that combines multi-sourcing with in-house IT capabilities. For example, you might retain some IT staff for strategic planning and governance, while outsourcing the operational and technical aspects to multiple vendors.

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Subhendu Mukherjee

Associate Director - IT Services at EY
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Multi-Vendor Sourcing: Model in which company contracts with multiple vendors with varying competencies. Best of Breed Sourcing: Best vendors tied in for different services based on competencies and specialized expertise. Muti Tower Sourcing: Model divides services or products into different "towers" or categories, such as IT infrastructure, application development, customer service, etc. Captive Service Center: In-house low-cost service model to perform specific actions. Hybrid Sourcing: Combination of various different sourcing model like in-house teams, outsourcing to specialized vendors, captive model. Insourcing and Outsourcing Mix: This model involves keeping certain critical functions in-house while outsourcing non-core functions.

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2 What are the benefits of multi-sourcing and hybrid-sourcing models?

Multi-sourcing and hybrid-sourcing models can offer several benefits for your IT outsourcing strategy, such as increased flexibility and scalability to adjust resources according to changing business needs and market conditions. By leveraging the expertise and experience of multiple vendors, you can also enhance innovation and performance, as well as reduce dependency and risk. This way, you can avoid relying on a single vendor that might fail to deliver, increase prices, or compromise quality. Moreover, diversifying your IT portfolio can help mitigate the impact of any vendor-related issues.

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Subhendu Mukherjee

Associate Director - IT Services at EY
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Cost Efficiency: Hybrid sourcing allows different tasks and functions allocated to the most cost-effective sourcing options. Example: A cloud provider is a better option for businesses having no security concerns whereas on prem model would be good in that case Flexibility and Scalability: Different tasks or projects may have varying requirements for resources, expertise, and timing. A hybrid model allows to scale up or down as needed by tapping into different sourcing options, such as in-house teams, specialized service providers Risk Management: Better risk management due to no reliance on one service provider Geographical Advantage: Hybrid models can incorporate global sourcing options useful for round the clock operations

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3 What are the challenges of multi-sourcing and hybrid-sourcing models?

Multi-sourcing and hybrid-sourcing models can also present some difficulties for your IT outsourcing strategy, such as increased complexity and cost. You may have to manage multiple contracts, relationships, and interfaces with different vendors, which can take more time, effort, and resources. It is also important to monitor and coordinate the performance of multiple vendors, who might have different standards, processes, and cultures. Additionally, you must protect your data and systems from unauthorized access or misuse by multiple vendors, who may have different security policies and practices. Moreover, you must comply with various legal and regulatory requirements across different jurisdictions and domains. All of these factors can reduce visibility and control while increasing security and compliance.

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Subhendu Mukherjee

Associate Director - IT Services at EY
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Complexity and Management: Could become complex when dealing with multiple vendors. Communication, coordination management. Managing SLAs for variety of Vendors could raise complexities. Risk Management: Risk exposure could become high due to reliance on multiple vendors Performance Measurement: Performance management can become complicated as consistent KPIs has to be established. Integration Challenge: Dealing with multiple contracts, SLAs, and legal agreements can become overwhelming. Efficient contract management needed. Loss of control: Perceived loss of control over outsourced services Knowledge Transfer: Transferring knowledge and expertise from in-house teams to external vendors or between different vendors can be challenging.

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4 How can you use multi-sourcing and hybrid-sourcing models effectively?

To use multi-sourcing and hybrid-sourcing models effectively, you need to adopt some best practices. Firstly, you should define your IT outsourcing objectives and requirements clearly. This means identifying your business needs, priorities, and expectations for each IT function or project, and communicating them to the potential vendors. Additionally, you should create criteria and metrics for evaluating and selecting vendors. Secondly, it's important to choose your IT outsourcing partners carefully. You must conduct a thorough due diligence and assessment of the vendors' capabilities, track records, and reputations. You should also negotiate and finalize the contracts, terms, and conditions with the vendors to ensure fairness, transparency, and flexibility. Lastly, you must implement a robust IT outsourcing governance framework. This includes assigning roles and responsibilities for managing and overseeing the multiple vendors, establishing processes and procedures for communication, coordination, and collaboration. You should also monitor and measure the performance of the vendors and provide feedback, recognition, and improvement.

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5 How can you learn more about multi-sourcing and hybrid-sourcing models?

If you want to learn more about multi-sourcing and hybrid-sourcing models, you can explore some online resources, such as:

- IT Outsourcing Governance: A Guide for Managers . This is a comprehensive and practical guide that covers the key aspects and best practices of IT outsourcing governance, including multi-sourcing and hybrid-sourcing models.

- Multi-Sourcing and Hybrid-Sourcing: A Comparison of IT Outsourcing Models . This is an informative and concise article that compares the advantages and disadvantages of multi-sourcing and hybrid-sourcing models, and provides some tips and examples for using them.

- IT Outsourcing: How to Choose the Right Model for Your Business . This is an interactive and engaging course that teaches you how to assess your IT outsourcing needs, evaluate different outsourcing models, and select the best one for your business.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How can you use multi-sourcing or hybrid-sourcing models for IT outsourcing?

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1 What are multi-sourcing and hybrid-sourcing models?

2 What are the benefits of multi-sourcing and hybrid-sourcing models?

3 What are the challenges of multi-sourcing and hybrid-sourcing models?

4 How can you use multi-sourcing and hybrid-sourcing models effectively?

5 How can you learn more about multi-sourcing and hybrid-sourcing models?

6 Here’s what else to consider

IT Outsourcing

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How can you use multi-sourcing or hybrid-sourcing models for IT outsourcing?

1

2

3

4

5

6

1 What are multi-sourcing and hybrid-sourcing models?

2 What are the benefits of multi-sourcing and hybrid-sourcing models?

3 What are the challenges of multi-sourcing and hybrid-sourcing models?

4 How can you use multi-sourcing and hybrid-sourcing models effectively?

5 How can you learn more about multi-sourcing and hybrid-sourcing models?

6 Here’s what else to consider

IT Outsourcing

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