To be successful, organizations must have the right sourcing strategy in place. Also, while the importance of a well-planned sourcing strategy cannot be discounted, you should consider gaining a thorough understanding of your organization’s internal communications and hierarchies before determining your business and sourcing maxims. This is essential, as there may be cases where a dedicated sourcing model does not perfectly fit your requirements or company policies.
Once you get an idea of your business goals, you can determine the right sourcing strategy for your organization, which in all likelihood could be a combination of two or more sourcing models. To help you, here is the difference between two very popular sourcing models:
Outsourcing
In short, outsourcing is the process of transferring some of an organization’s activities or processes to a third party. With the rise of globalization, many companies around the world have taken advantage of outsourcing to cut costs and focus on their core competencies. However, most of the time, outsourcing contracts are not very flexible and the outsourcing company loses control over its functions and processes to a great extent.
Co-sourcing
Co-sourcing, on the other hand, is a more balanced approach that allows shared services from an external provider. It is a partnership in which both parties collaborate to form working groups that support and maintain various business functions. These workgroups often work remotely or at the customer’s site, depending on the type of support required by the customer. Typically, co-sourcing contracts are signed for a period of at least 3-5 years.
Co-sourcing benefits
Co-sourcing is preferred by companies that attach great importance to quality, as this sourcing model ensures that customers receive qualified resources and quality infrastructure at all times. Unlike outsourcing, where cost reduction comes first, outsourcing is more focused on delivering quality and stability to customers. Outsourcing partners take into account the long-term interests of clients and address issues holistically, which is certainly not the case with conventional outsourcing or consulting partners.
Co-sourcing is undoubtedly the best option for managers who like to have full control over their projects, be it selecting resources or infrastructure quality. It’s a unique sourcing model that makes it easy for managers to control co-sourced business functions as extensions of their internal processes. Not only that, it is one of the few operating models that allow managers to take advantage of increased assets through economies of scale.
Co-sourcing is increasingly recognized as a sourcing model that has an advantage and that provides a sustainable competitive advantage. However, viewing co-sourcing as a blanket panacea for all challenges could be a mistake, especially for large outsourcing companies, as co-sourcing requires closely adapting to a company’s established sourcing model.