Implementing a multi-provider sourcing strategy across multiple countries requires tight coordination between business units, finance, legal and internal contract management. Success depends on an appropriate commercial structure, well-managed multiple-provider service delivery, smooth invoicing and allocation processes, and optimal service levels.
Note these TPI Top 5 questions and their answers, which will be unique to your organization, when considering a multi-provider, multi-country sourcing strategy:
- How do we create a suitable commercial structure? Cross-border taxes and cross-subsidization are key factors in determining a commercial structure that best serves your multi-provider initiative. Whether you use a central agreement that covers all countries or a Master Services Agreement (MSA) with local agreements for each country, your commercial structure should allow for service delivery and legal and finance implications that work in your favor.
- Is the provider capable of delivering services in multiple countries? Service providers need to deliver services under a flexible commercial structure that can handle local, in-country invoicing and billing in local currencies. Be sure your providers have managerial and legal entities to assure appropriate and legally sound agreements with multiple countries.
- What is the optimal multi-provider management approach? The provider management approach for any multi-provider initiative should be based on the culture of your organization, your internal capabilities and your availability of skilled staff. There is no “one size fits all” solution nor a formula that will provide this answer. Whether you manage providers internally, through an outsourced service integrator (SI), or using Governance-as-a-Service from a third party, be sure your management strategy contributes to your sourcing goals.
- How do we invoice in multiple countries? The most favorable invoicing approach will depend on your commercial structure. Invoicing may be centralized, invoiced by country to a single legal entity, invoiced by country to multiple legal entities, or a combination. The main consideration in deciding the best approach is the cost of local invoicing and allocations versus the financial impact of cross- border taxes and cross subsidization. Depending on the amount of the invoice and the scope of services delivered within a country it may be more beneficial to invoice centrally and not by country.
- What is the best way to ensure service levels? Whether service levels are equivalent across varying countries or each country has independent service levels, the best strategy will define service levels as end-to-end across multiple providers. In-country service levels can be managed locally, while service levels that are comparable across multiple countries may be managed globally, keeping in mind the particulars of in-country service defaults and service credits. A combination of global and local service levels may provide the most flexibility.
For more information on multi-provider in multi-country sourcing initiatives, e-mail James Lofton or call +1 775 250 2933.About the author
Mr. Lofton is a Director with more than 40 years of professional experience. Mr. Lofton has advised on more than 35 separate engagements at ISG, helping clients assess their sourcing needs and implement successful solutions. Mr. Lofton has advised clients include technology, manufacturing, consumer products, banks, financial services and insurance companies on engagements in the US, Canada, Asia-Pacific, South and Central America and Europe.