An analysis of last year's outsourcing activity reveals the continuation of a decade-long decline in deal size. While the numbers of mega-deals and mid-range contracts awarded each year has remained relatively stable since 2002, those valued at $100 million or less have more than tripled, according quarterly data from outsourcing consultancy Information Services Group (formerly TPI).\nThe shift toward smaller IT services deals has been happening for the past several years, with sub-$100 million deals holding steady at around 70 percent of contracting activity since 2009, according to ISG. While IT contracting activity in 2011 increased by 8 percent over last year and is up 86 percent since 2005, total contract values declined slightly year-over-year in the fourth quarter, and the full-year total of $66 billion represented a 6 percent decline over 2010.\nIn the less mature business process outsourcing (BPO) space, the preference for littler deals has been more pronounced. "Organizations have been more cautious to adopt emerging BPO strategies as they wait to see if provider capability and quality is really there as promised," says John Keppel, partner and president of research and managed services for ISG.\nIt's not just new or smaller outsourcing customers inking deals of a lesser size. While the percentage of Global 2000 clients signing IT contracts is down from 69 percent (by contract volume) in 2004 to 44 percent today, an increasing number of big, experienced outsourcing buyers are signing smaller contracts. \n"Especially in the Americas, we see many companies awarding ITO deals on their second and third generations, and they have become much more sophisticated," Keppel says. "A decade ago, a client may have awarded an ITO contract to one service provider with instructions to 'take care of everything'. These days, clients are separating out asset purchases from services and splitting the service stream by scope to many different service providers."\nThe data underscores the widespread adoption of the multisourcing approach as the outsourcing market has matured and IT service providers specializing in specific industry or technology capabilities have emerged, Keppel adds. Such a best-of-breed approach can afford several advantages, including allowing IT organizations to establish competitive internal markets for new work, enabling the gradual introduction of new providers, and eliminating the reliance on a sole vendor. "Competitive dynamics keep providers earning the right to do business& a vendor can be tried out on smaller less-critical functions before being handed a bigger slice of business& [and] businesses can spread risk by utilizing a basket of expert suppliers," says Keppel.\nBut the model continues to prove problematic for IT organizations to manage.\nSeveral dominant issues plague multisourcing arrangements, says Keppel, including the following:\n Unclear Delineation of Responsibilities\nWith little clarity around end-to-and responsibility, providers point the finger at each other or the client when service levels sink, and the customer spends an inordinate amount of time resolving disputes.\n Lack of Supplier Collaboration\nReal or perceived barriers to cooperation among outsourcing providers, such as concerns over intellectual property, thwart innovation and business change efforts.\n Contracting Issues\nWith best practices for multisourcing contracts still in flux, the legal language of many deals leave customers wanting\u2014such as poorly defined transition or transformation terms or ineffective service level agreements\n Impotent Governance\nFrom the client failing to take responsibility for the outsourcing portfolio to multiple governance organizations managing different contracts to inconsistent service management processes, multisourcing customers are flailing when it comes to day-to-day management.\n\nSuch management challenges have given rise to the latest outsourcing buzzword: service integration. In the most basic terms, it means coordinating and consolidating discrete services from multiple outsourcers to provide an end-to-end service to the business that meets performance, quality and cost objectives. \n\n\nBoth IT consultancies and, interestingly enough, IT outsourcers themselves may offer service integration. But mature outsourcing customers can also develop internal capabilities for managing multiple IT service providers. The key elements of multisourcing governance include clear delineation of roles and responsibilities, enterprise-to-enterprise processes, common metrics and reporting, shared management tools, risk management planning, and collaboration incentives. Whether such discipline is provided in-house or by a third-party, it's a necessity, says Keppel, as all signs point to multisourcing as the dominant ITO and BPO model for the foreseeable future . "The development of centers of excellence for sourcing and service management, as well as the outsourcing of some of the core elements of provider control, are now key components of best-of-breed approaches to enterprise-wide sourcing," Keppel says.\n\nStephanie Overby is regular contributor to CIO.com's IT Outsourcing section.