Govt CIOs: Vendors must play nice in multisourcing

Australian Tax Office CIO Bill Gibson believes that with the days of one-vendor-fits-all type outsourcing now over, long-running rivals will be forced to enter marriages of convenience if they are to get a share of the government dollar.

"If you look at where the whole outsourcing community is going, we are going away from large corporates and from whole-of type bundles to splitting it," said Gibson in an interview with ZDNet.com.au.

"That means some vendors who didn't like to work together in the past will now have to work together, because they will be providing complementary services," he said.

"I think there's a whole lot of change required on both sides of this particular customer supplier continuum," Gibson noted.

Phillip Allen, vertical market analyst at research firm IDC, believes that this latest incarnation of outsourcing arrangements grew out of the gradual breakdown of the single-vendor model which dominated the market at the start of the decade.

"There were these really large scale outsourcing deals with the government going to one or two vendors around 2001 and 2002, and the life cycles of those are all coming to a close," he said.

The IDC analyst said that despite the increasing adoption of additional vendors in that time, the trend towards multi-sourcing has become far more apparent recently as these old contracts expire, and government departments emerge with a number of vendors for each services deal.

"Many of the Federal government's deals started off with a single vendor not that long ago, but the straw that really breaks the camel's back now is when you see an agency emerge with four or five different providers," said Jim Longwood, research VP at analyst group Gartner.

Longwood described a similar evolution towards multi-sourcing trends, but believes the government market in particular is moving to a more sophisticated model for the practice. Contrary to the global trend, it is the public sector leading the way in the adoption and management of multiple vendors in Australia.

The Gartner analyst highlighted the Department of Immigration, Australian Customs, and the state government of South Australia as the most prominent branches of government to adopt large scale multi-sourcing strategies.

IDC's Allen noted that while ATO CIO Bill Gibson believes that the fate of a successful multi-sourcing venture rests more heavily on the side of the vendors and their willingness to collaborate, it is also the responsibility of the client -- or, in this case, government department -- to manage the relationship between its various providers effectively.

"The onus is much more on the government than the vendor community in these deals. None of the vendors themselves are running a charity," said Allen.

"If governments want to make the multi-sourcing trend more sophisticated they have to think about how to manage vendor relationships effectively," he added.

Centrelink CIO John Wadeson explained the reasoning behind his choice to adopt a multi-sourcing strategy in video interview with ZDNet.com.au this month, saying: "These days you've really got to be able to move work around and you don't want to be stuck with a single way of doing things, so I think the multisourcing strategy that I've noticed a lot of other organisations try to move towards is the way to go. I haven't been convinced there's another clear path."

While government CIOs are content to move towards multi-sourcing arrangements, vendors themselves are not yet wholly comfortable with the idea, according to Gartner's Longwood.

"I'd say they're growing more comfortable in working in a multi-sourced environment, but historically EDS, IBM and HP have preferred a modus operandi as a sole source provider, so they're having more difficulty getting used to it than some others," he said.

IDC's Allen also believes government department offices may not have the management skills on board or behind them to negotiate such potentially volatile business arrangements -- in itself is a funding risk that may discourage further steps into multi-sourcing.

"The thing is that a lot of these government agencies just don't have the management experience. We've got to remember that the skills shortage is more acute in the government sector than elsewhere," he said.

Lack of skills or not, the public sector is still under pressure to perform as well as private enterprise. "Agencies are going to need to up their game in this area, as people are starting to expect services to be available that really are comparable to those offered by the private sector," said the IDC analyst.