Multisourcing Decision in Application Services Outsourcing: Do the Smart Get Smarter?

Abstract

Multisourcing—the delegation of interdependent tasks to multiple vendors—is receiving increasing attention in practice and in research. Yet, we know little about the circumstances under which organizations decide for multisourcing. In this paper, we develop and test a theoretical framework to explain multisourcing decisions in application services projects. Results from a multi-level analysis of 921 decisions made by 175 public organizations suggest that multisourcing decisions can be explained to a significant extent by knowledge-related benefits and challenges associated with multisourcing. Specifically, we find empirical support for the assertion that clients choose multisourcing when they seek best-of-breed generic vendor knowledge. However, clients refrain from multisourcing when they lack strong capabilities in managing outsourcing projects and when projects require vendors to acquire high amounts of client-specific knowledge. The access to superior capabilities through multisourcing seems thus to be contingent on the existing knowledge of client and vendor.