Single Vendor  vs. Multi-Vendor Sourcing: Which is the best choice for your business?

In today’s business world, outsourcing has become a critical component of a business’ success. There have never been so many businesses providing outsourcing services. 

Considering this, it is normal that businesses might feel overwhelmed when choosing their contractors. Companies looking to outsource any technical jobs often have two options:

1-Select a single vendor and assign them to all project implementation-related tasks.

2-Locate numerous suppliers with specialized knowledge in one or more project areas and deal with each one independently.

Any company's choice to work with one vendor instead of several providers will have a significant impact on its operations. As a result, both options require careful examination because each has its advantages and disadvantages.

Single Vendor vs. Multi-Vendor Outsourcing: Which option is the best?

When deciding whether to outsource to a single vendor or several, there is no single solution that works best in all situations. It depends on your particular business and other project-related factors. A single-vendor outsourcing strategy may seem like the simplest way to reach your goals. After all, it is convenient to simply delegate all of the processes to a single third party. However, in some cases, outsourcing different types of tasks to various vendors will be a more reasonable solution.

We advise you to consider a few crucial aspects of single-vendor and multi-vendor outsourcing before moving on to the next choice. You could have a better understanding of how your business would operate if you compared the two possibilities.

Here is a list of factors you should consider about before selecting the best option for your company.

Single-vendor vs Multi-vendor Outsourcing: Advantages & Disadvantages

 Cost                    

1. Using just one vendor will often result in more affordable prices, maybe with bundle or volume discounts, as it is easier to negotiate with just one vendor.  Additionally, it is simpler to scale in accordance with a company's expanding or contracting operational space needs.

2.  Multi-vendor outsourcing will probably cost more and have less flexibility in scaling. The costs of the services must be discussed separately with each contractor. Considering this, it will be difficult to agree on potential discounts with each of them.        

Getting closer to the perfect outcome!

Time and Convenience

  A single-vendor outsourcing provider is the most time-efficient option because you won't need to find  numerous specialists, distribute tasks, etc. It can be easier to manage, giving the business more time to  focus on other core tasks.
  1- When it comes to multi-vendor sourcing, there is an increase in administrative and managerial duties.

Management

 1- The first characteristic that seems the most appealing to business owners is streamlining all the  communication with one vendor. When you decide to invest in just one provider, managing project  stages and elements becomes easier, because you won’t have to involve additional resources.
  2-  Working with several providers will result in increased costs for project management and more  human resources. Additionally, greater resources need to be allocated to QA and compatibility  assurance.

Deployment and Staff Training

1-  With single-vendor sourcing, you and your staff will likely need less training overall, but you will  probably get more training sessions from the vendor.
2-  Multi-vendor sourcing will likely require more training and deployment. However, you will get less training from your vendors, because your purchase will represent a smaller order for the vendor.

Compatibility

 1-  A business is much less likely to experience compatibility problems when working with a single  outsourcing provider. Even when it might be necessary to change or update something, these  changes will be more thorough.
 2-  With a multi-vendor approach, there is always a risk that separate components or solutions may   prove   to be incompatible with each other. Unfortunately, compatibility problems always arise when  processes are split up across several vendors and even any updates or upgrades might be    fragmented and problematic. 

Distribution Risk

1-    A larger company, which you select as a single vendor, might seem more secure in the long run  because it is  less likely to go out of business. Although big vendors are more reliable in some cases, the  pandemic showed  that none is immune to unexpected risks.
 2-      Regarding these risks, with a multi-vendor outsourcing strategy, you are protecting your business. By  splitting up tasks across many organizations, you are controlling risks.   However, you should also keep  in mind that working with multiple vendors might occasionally result in  challenges with quality control.

Long-Term Partnership

1-    A single supplier is more likely to remain in operation for a long period, especially if they are a bi service   provider company. A single vendor is in a better position to fully understand a customer's needs and address  them.
 2-   On the other hand, a long-term with numerous vendors may be more difficult because they will have  less  touch  with the organization and, consequently, fewer business-related insights.

Workflow Optimization

1-  If deciding on a single-vendor outsourcing process, you can build communication processes with the  vendor  just once and expect everything to flow smoothly. In addition, you do not have to hire a  specialist to  manage the  project.
2-  When choosing to contract multiple vendors, the business operations will require more time and effort  to  coordinate, and there   may be a few communication problems.

Entering the market

1-  Single-vendor outsourcing is the logical solution if you want to enter the market more quickly. One team  can be  faster than several teams for a variety of reasons.

2-  In the meanwhile, having more teams means extra communication and coordination time. Sometimes   one   team  must wait for another team to finish the work before they can begin. Such factors can affect the  speed  of  the  release.

Finding the right contractor(s)

1-  Finding a single company that has the ideal competence in your field while also being able to meet all  your  needs can   be pretty difficult.
 2- The more complex the project is, the higher the probability that you will need multiple vendors to execute  all  the project goals. All-inclusive organizations frequently are unable to deliver excessively complex  projects or   provide in-depth domain expertise.

Dependence Risk

1-  If a company only works with one vendor, any issues with the contractor could easily affect you, the consumer. The vendor's lack of personnel or knowledge may prove to be a more significant barrier than if  you   were working with multiple contractors.

 2-  In the case of multiple-vendor outsourcing, if a vendor is unexpectedly unable to perform their duties, another vendor may be able to take over some extra project components. You do not have to rely on a single 

 Integration

1-  The single vendor only has to worry about integrating its own product with the current systems. This might  not  be easy, but at least there are only a limited number of specifics to worry about.

 2-  When multiple teams develop different components of a product, it is more likely that there will be problems  when it comes to integrating those components. Such problems may require more effort and money

Implementation

1-  Single-vendor solutions will typically be easier to implement because there will be only one set of programs or  protocols to integrate into your current systems.
2-  Implementing multi-vendor solutions usually takes extra work because you'll need to coordinate the  integration  of many (and potentially incompatible) systems.

Product Upgrades

1-  Significant upgrades to single-vendor systems are likely to occur significantly less frequently.
2-  When choosing multi-vendor outsourcing, you should be receiving updates more frequently because you use  and view smaller packages from each source. However, this might result in some integration issues.

 A simple guide: What to choose?!

Working with a single company makes more sense for projects of low to medium complexity, but it may be wise to explore teaming up with numerous service providers for more complicated projects or projects needing a high degree   of  competence in several different fields.

This simple and short guide, when combining with all the information above, might help you out:

1- Long-term commitment? Single vendor
2- Niche industry? Multi vendors

3- Compatibility? Single vendor

4- Complex project? Multi vendors
5- Risk Management? Multi vendors

So, in conclusion?

Depending on the specific project at hand, its quirks, and your abilities as a customer, you should decide between multi-vendor or single-vendor cooperation tactics. We Are Fiber is happy to assist you in this decision. We encourage business executives to thoroughly study any potential vendor before making such a significant decision, obtain references, and ask all questions.

We hope you found this material to be useful. If you want to learn more about which is the best solution for your project and/or company when outsourcing for business process automation, don’t hesitate to contact us here.  We Are Fiber is looking forward to hearing from you!