Multi-vendor sourcing is dead, says report

Multi-vendor sourcing is dead, says report

IT contract sizes are shrinking and there is a rise in single key vendors, according to an Ovum study.

In the light of the current global economic climate, IT contract sizes are shrinking and power is being redistributed to single key vendors, according to IT and telecommunications analyst firm Ovum. In a report taken from interviews with over 400,000 business and technology decision makers around the world, Ovum found contract values have fallen to an average of US$65 million in the first nine months of 2011.

The report says that defence research company Science Applications International Corporation’s potential US$2.5 billion defense contract with the US Department of State and Aegis's US$2 billion deal with Saudi Telecom were the only $2 billion+ deals in 2011, compared with 13 similar-sized deals by the same time in 2007.

Jens Butler, principal analyst at Ovum and the author of the report, says there is an increasing prevalence of single vendors who control larger proportions of contracts, with an average of 60 percent of total contract values allocated to the single lead supplier in multiple supplier deals signed since 2009.

“The mix of major providers in outsourcing contracts has shifted from the much heralded multi-sourcing approach to a more contained portfolio of suppliers and services in recent contracts,” says Butler.

Butler says in emerging markets cost management and control is less of a key factor in decision making, and enterprises focus on speed of delivery when investing in IT.

Butler recommends enterprises be prepared to engage with multiple suppliers by offering incentives for additional services.

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