Meteors, volcanoes, the Ice Age, even alien invasion have all been postulated as reasons for the disappearance of the dinosaurs. But another theory proposes a less cataclysmic cause: namely that packs of nimble, opportunistic mammals simply outplayed the lumbering beasts at the game of survival. Small and cunning won out over slow and powerful.

It seems this prehistoric piece of game theory also holds water in the IT world. Analyst Giga Information Group claims that when it comes to outsourcing, firms should opt for several smaller players rather than one monster provider.

"The dinosaur approach to outsourcing everything to one provider looks like it's on the way out," says Giga director Mike Dodd.

Speaking at last month's GigaWorld conference, in Interlaken, Switzerland, Dodd said IT directors should choose a portfolio of suppliers rather than one single company, and act more like venture capitalists by 'investing' in a set of different IT suppliers depending on the riskiness of the project.

"IT directors have assumed that they have to grab ownership of IT, but they can no longer manage everything internally," he said. "We have to take a more portfolio approach to our IT assets."

Multiple outsourcing
The announcement that the Bank of Scotland has selected IBM to manage its IT services reflects the way that the industry is moving away from single vendor outsourcing contracts towards a portfolio approach. The link-up with IBM is the third stage of the bank's multiple outsourcing strategy.

Under the 10-year, £700m deal, the bank will transfer mainframe, mid-range, desktop and helpdesk systems across to IBM from September. Around 500 employees from the bank will join IBM, adding to its existing Scottish staff of 700. The Bank of Scotland estimates it will save £150m as a result.

IBM will also create a Scottish Delivery Centre at Sighthill, Edinburgh, which is currently where the Bank of Scotland's main data processing centre is housed. This will provide services to other organisations as well as the bank.

"It will allow us greater flexibility to design new products and target new markets on a more cost-effective basis," says the bank's managing director Gavin Masterton. "As far as customers are concerned, they will be offered improved quality of service, and have access to new products and services more quickly."

Masterton says this provides the organisation with "the opportunity to create a more technically-advanced IT infrastructure than the bank could have achieved within its own resources".

The company began its multiple supplier approach in 1998, when it outsourced its software development to First Banking Systems (FBS), a £150m joint venture between the bank and services company FI Group. Earlier this year the bank added another £190m to the five-year contract. The Bank of Scotland says FBS will deliver savings of £60m through productivity and efficiency improvements.

In addition, last September it signed a five-year, £100m deal with BT Syncordia Solutions to provide it with voice, data and mobile communications services. "To put it simply, this partnership allows us to focus our undivided attention on the lifeblood of our business: our customers," said Masterton at the time.

"Risk and reward is not just an option - it will be fundamental. There must be sharing of risk," says Dodd. "But whatever the benefits of outsourcing you are not outsourcing management responsibility."

A tangled web?
Working with multiple providers has its own drawbacks, however. Giga says the best way to regulate such a scheme is with service level agreements between the suppliers, so that if one service provider is dependent on another it can be agreed contractually. Dodd also believes that companies should create a chief relationship manager who reports to the chief information officer, and whose responsibility it is to monitor this web of relationships.

Deciding on exactly the right outsourcing set-up for your firm will become even more important in the future. In the US, 40 per cent of technology spending is outside the IT department. In a year's time that figure will rise to more than half, according to Giga vice president Julie Giera.

"Outsourcers are making direct calls to the business units by promising cost reduction and quick delivery and by-passing the IT department. You have to respond to this to make it successful," she says.

Ebusiness is also going to accelerate the trend towards outsourcing, and brings with it a different set of demands. While 30 per cent of GigaWorld delegates said they would not describe their outsourcing deal as a success, 88 per cent said outsourcing will play a substantial role in helping to boost ebusiness adoption.

The question is: will the big outsourcing players be able to adapt to this new world? Will they evolve from 'terrible lizards' to birds and fly with their customers, or end up as Pleistocene throwbacks skulking in the swamps?