To be successful, organizations need to have the right sourcing strategy in place. In addition, while the importance of a well-planned sourcing strategy cannot be discounted, one must consider gaining a thorough understanding of your organisation’s internal communications and hierarchies before determining your business and sourcing maxims. This is quintessential as there can be instances when one exclusive sourcing model might not fit your requirements or company policies perfectly.
Once you gain an insight into your business goals, you can determine the right sourcing strategy for your organisation, which in all probability could be a combination of two or more sourcing models. To help you, given below is the difference between two very popular sourcing models:
In brief, outsourcing is the process of transferring some of the activities or processes of an organisation to a third party. With the rise of globalization, many companies worldwide have leveraged outsourcing to cut costs and to focus on their core competencies. However, more often than not, outsourcing contracts are not very flexible and the business that outsources loses control over its functions and processes to a great extent.
Co-sourcing, on the other hand, is a more balanced approach that allows shared services from an external vendor. It is a partnership in which both the parties collaborate to form workgroups that support and sustain various business functions. These workgroups often work remotely or at the client’s site, depending on the type of support required by the client. Typically, co-sourcing contracts are signed for a period of at least 3-5 years.
Benefits of Co-sourcing
Co-sourcing is preferred by firms who attach great importance to quality, as this sourcing model ensures that the clients receive skilled resources and quality infrastructure at all times. Unlike outsourcing, where cost-cutting takes the front seat, co-sourcing is more focused on providing quality and stability to clients. Co-sourcing partners keep the long-term interests of clients in mind and tackle issues in a holistic manner, which is certainly not the case with conventional outsourcing or consulting partners.
Co-sourcing is certainly the best option for managers who like to be in complete control over their projects, be it selecting resources or quality of infrastructure. It is a unique sourcing model that facilitates managers to control co-sourced business functions as extensions of their in-house processes. Not only that, it is one of the very few operating models that enable managers to leverage increase in assets through economies of scale.
Co-sourcing is increasingly being recognized as a sourcing model that has an edge and that provides sustainable competitive advantage. However, to consider co-sourcing to be a blanket panacea for every challenge could be a mistake, especially for large outsourcing businesses as co-sourcing requires to be closely adapted to a business’ established sourcing model.