April 23, 2014

Is Micro-Sourcing Working?

Traditional outsourcing was initially very successful as outsourcers learned to deliver IT solutions with the appropriate Service Level Agreements (SLAs) using attractive pricing models. It was all about negotiating intricate, multi-party agreements which were very time consuming. Following the ignominious collapse of several major outsourcing deals, IT services providers and customers alike have had to revise their approach to the entire outsourcing business.

As organizations desired more niche and project oriented outsourcing, micro-sourcing came about as a natural step. Micro-sourcing was not about SLAs or multi-party agreements, but transactional sourcing which often required taking the initiative and delivering very successful but non-repeatable results. Smaller engagements were often outsourced through marketplaces. Micro-sourcing was heralded as the panacea to organizations, or for that matter, individuals who sought technical help for very small tasks. However, for micro-sourcing to work, there is the need for structure often missing in pure market places. The dilemma is clear: micro-sourcing does not have the skilled brokers who engineer the engagement. An evidence of this drawback is the reluctance of Small to Mid-Sized Businesses (SMBs) to outsource their IT functions.

The new trend is project-based outsourcing using a blended model of on-site program managers and off-shore development resources. This approach retains the metrics and structured processes of traditional outsourcing combined with the identification of specific pre-credentialed service providers who can collaborate and provide true value to the outsourcing organization. The three ingredients required for project-based sourcing to succeed are: 1) a sophisticated sourcing process to link project needs to the appropriate outsourcer; 2) a highly collaborative workflow to ensure that the engagement process provides best value to the parties involved; and; 3) a knowledgeable network of brokers who understand information technology and outsourcing.

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