Australia: So You Think You Can...(Manage A Multi-Sourced Environment)?

Key Points

  • Effective management of multi-sourced environments requires:
  • an early and ongoing assessment of your governance requirements;
  • clear communication about your multi-vendor governance requirements; and
  • involvement of the right people (both internally and from within each vendor organisation) at operational and escalation levels.

Multi-sourced arrangements are becoming common in ICT transactions. Such arrangements enable agencies to leverage the skills and value propositions of a number of vendors to enhance the efficiency of ICT transactions. However, co-ordinating and governing multiple vendors needs to be factored into contract and risk management and the cost of your sourcing arrangements. This article examines what legal and governance tools might be employed to maximise vendor co-operation, co-ordination and integration in a multi-sourced environment.

Assess your requirements early

Sourcing governance addresses capabilities needed to regulate and support multiple vendors, including management methods and processes, organisational roles and responsibilities and service delivery rules and agreements. Establishing effective sourcing governance is critical to the success of any sourcing strategy.

In a multi-sourced environment, the agency generally bears the service integration risk. Effective multi-vendor governance arrangements help to manage this risk and ensure end-to-end service delivery.

Agencies procuring outsourced services need to develop appropriate governance arrangements that will apply to those services, including carefully defining the bundles and boundaries of those services. In developing these arrangements, considerations include:

  • what governance arrangements are presently in place and whether or not they are effective;
  • the scope of the services to be outsourced;
  • vendor interdependencies (that is, what (if any) areas of those services will directly intersect (or interface) with other services being provided to the agency (whether those services are provided in-house or externally)); and
  • how the agency will manage the relationships between vendors and between the agency and vendors, including whether the agency will require vendors to comply with any rules governing the arrangement, and whether such rules will be binding (see below).

It is important that internal stakeholders and vendors commit to the governance regime. To achieve the latter, the governance requirements should be stated clearly in the procurement documentation. This will enable vendors to have regard to your multi-vendor requirements when structuring their proposals to provide the services.

Depending on the size and complexity of the multi-sourced services, and the associated importance of a vendor's capacity and willingness to work with other vendors, you may also consider requesting vendors to provide information in their tenders detailing their:

  • experience in working in multi-sourced environments;
  • approach to working in multi-sourced environments, including internal decision-making and accountability processes; and
  • willingness to comply with your requirements in relation to the multi-sourced environment. This will also involve whether they agree that service levels and service credits apply to compliance with these requirements.

Rules governing the multi-vendor arrangement

To ensure accountability among vendors in a multi-sourced environment, agencies should document the rules that describe the interaction between vendors. Such documents have been called Operational Level Agreements, Service Provider Integration Charters or Multi-Vendor Agreements (for the purposes of this article: Multi-Vendor Agreements). They set out the responsibilities of each vendor and the customer and define the means of delivery services where vendors interact in the service delivery.

It is important that these agreements put all of the agency concerns "on the table" to ensure transparency and to enable a firm commitment from vendors. We recommend that Multi-Vendor Agreements be binding legal agreements to ensure that vendors acknowledge the importance of the agreements and abide by their representations of cooperation.

You also need to consider how you will measure vendors' performance of their obligations under the Multi-Vendor Agreements. Options in this regard include implementing service levels and service credit regimes, as well as customer satisfaction surveys.

Multi-Vendor Agreements must be consistent with the agency's contract with each vendor, and can be tailored to incorporate, at least to some extent, the internal processes and procedures of each vendor. They should (amongst other things):

  • require an overarching commitment by the vendor to ensure the agency receives seamless, end-to-end services and continuity of services (including an obligation to fix problems first and assign fault later);
  • contain a clear issue resolution process between all of the parties, including escalation procedures;
  • define spheres of responsibility of each vendor and the agency;
  • include ongoing accountability and reporting requirements;
  • provide sufficient forums for agency and vendor representatives to consult in relation to the services provided to the agency as a whole, which are fundamental to ensure effective changes and transformations of the agency's processes; and
  • specify remedies for failures of a vendor to comply with the Multi-Vendor Agreement.


Transition arrangements will be the first test of the strength of your vendor's commitment to the Multi-Vendor Agreement.

In addition to transitioning services, you may be transitioning between governance regimes. This is particularly likely where the transition is from in-house service provision, or to multiple vendors from one existing outsourced vendor. In this case, the governance regime will need to transition to the multi-vendor governance regime as well as to address capabilities needed to regulate and support multiple vendors, including management methods and processes, organisational roles and responsibilities, and service delivery rules and agreements. The new governance model will be required to cross traditional enterprise boundaries and become not only an integrated part of the business, but also part of the internal ICT function and the external providers themselves (including subcontractors and the vendor's partners).

Involve the right people

After execution of the contract, the roles of the vendor and agency negotiation teams are largely complete, leaving an often entirely new team to implement and manage the contract. This poses a number of risks, including a lack of understanding of the operation and overall intention of the contract.

So, make sure that the negotiation teams include personnel from both sides that understand the business processes and requirements. Then, make sure that the same or similar personnel are involved in the ongoing management of the contract, and that they have appropriate authority to represent the agency or the vendor, as the case may be. This is particularly important for personnel attending multi-vendor forums, as it can be ineffective to have personnel with no authority to represent or bind the agency or vendor, or any understanding of the business processes and requirements, attend these sessions.

Revisit governance arrangements as required

Once you have effective governance processes in place, revisit them regularly. As with all relationships, they are not static: people come and go; processes and procedures change and business requirements and technology evolve.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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