Global Multisourcing Strategy: The Emergence of a Supplier Portfolio in Services Offshoring

Abstract

In today’s global services outsourcing arena, increasing numbers of companies adopt “multisourcing,” that is, they select and combine information technology (IT) and business services from multiple providers. The literature on IT outsourcing and supply chain management has identified critical tradeoffs involved in increasing the number of suppliers and has strongly recommended focusing on a handful of strategic partners to balance these tradeoffs. Committing to a few strategic partners, however, may prevent a firm from discovering new suppliers, or even supply regions. Such missed opportunities may be particularly limiting in the context of offshoring professional services, which has exhibited rapid changes in supplier markets in the last decade. Thus, firms may want to engage in a more intensive multisourcing in services. If they do so, their success will depend on a global sourcing process that effectively addresses the critical tradeoffs involved. To explore how a global sourcing process can support multisourcing, we conducted a qualitative longitudinal case study of a large financial services institution that developed a varied global supply base to obtain off-shore professional services. Our analysis results in a theory that emphasizes i) advantages of a multiple provider strategy in rapidly changing global supply markets; ii) the critical role of middle managers in enabling continuous innovation in the supplier structure; and iii) the importance of the global sourcing process combining top-down and bottom-up decision making in multisourcing.

Keywords: Outsourcing, Offshoring, Multisourcing, Vendor Selection, Vendor Strategy, Financial Services