The End of Single Supplier Outsourcing?

According to Equaterra’s 2010 survey of IT service providers serving UK companies, more companies are choosing to multi-source IT projects as opposed to signing large IT contracts with a single supplier - with most respondents using three or four suppliers compared to an average of 2.4 the previous year. This coincides with the UK Government demanding smaller contracts from a wider range of suppliers and trying to open up business to suppliers that have typically remained outside public sector IT. The Government has announced it will increase SME procurement to 25 per cent of public sector contracts, which in itself will lead to more multi-sourcing contracts.

The industry has seen a standardisation of various service offerings, meaning lower costs, together with a maturing market, which has effectively resulted in better client understanding and awareness of what is available from other suppliers in the market. Is this having an effect on the way in which companies routinely source their IT services?

Over the last five years there has been an increase in the amalgamation of multi-sourcing and single supplier contracts within the private sector, (e.g. – where one supplier has been awarded the contract but clients can influence which suppliers are used for the different services within that contract). This is not a new model within the industry but does it now represent the ‘best deal’ commercially? It allows the ownership of the contract to be coherently managed by one supplier, but at the same time maximizes the client’s potential for flexibility and value for money as it allows the services within the contract to be sub-contracted and outsourced to different suppliers.

Could the Government’s willingness to gradually move away from large contracts with single suppliers and the increased industry-wide awareness in both the public and private sector of what smaller suppliers are capable of signal the not too distant end of single supplier outsourcing?