New methods of outsourcing are today redefining the way of working. Co-sourcing is a situation of partial outsourcing, in which a business function or process is performed by both internal staff and by an external party or external resources, such as consultants or outsourcing vendors, with specialized knowledge of the business function. Compared to full outsourcing, for the traditional owner of the processes, co-sourcing has advantages of staying in control, a non-transactional partnership and the ability to grow the own knowledge level of the co-sourced process.
One such way is co-sourcing which is an investment relationship marked by shared objectives, shared risks and shared rewards between two companies, one of which is a service provider. Specifically, the service provider would have to help restructure the company and be willing to make new investments, while driving out costs from the co-sourcing company’s existing ways working.
Although it may seem similar to consulting, co-sourcing is different because the company’s personnel play an ongoing role in the project. In a typical consulting project, a consultant comes into a company, plans and performs a specific task and then presents a report, working independently most of the time. In a co-sourcing arrangement, the company staff takes an active part in project planning and decision making and may participate in preparing the final report. Instead of relinquishing control over an activity, as is the case with outsourcing and hired consultants, company managers involved in co-sourcing actively manage and work alongside the specially skilled outsiders.
Co-sourcing has distinctive advantages over the traditional outsourcing approach and will reward forward thinking enterprises with sustained competitive advantages. Large corporations have adopted the co-sourcing model and are taking the benefits. Small and medium enterprises now have the opportunity to do the same. Having said that, it is important to point out that project based outsourcing does have merit under certain circumstances and it is not our intention to discount it entirely. For instance, if you have a need to develop a custom software application for your internal company use and you don’t envision the need to develop more than a single software application, then project based outsourcing should indeed be considered. However, if the software application is large and complex and requires ongoing maintenance along with occasional enhancements, then it might be better to co-source the resources to both, develop as well as to subsequently maintain the application. In this case, your co-sourced resources will retain the knowledge gained during the software development process and will be better able to maintain the application once it has been developed.
Short Case Study About Co-Sourcing:
According to a joint case study by Accenture and Thomas Cook, the co-sourcing agreement between Accenture and Thomas Cook, UK and Ireland has helped Thomas Cook to improve operations and reduce costs. The study notes that due to the alliance, Thomas Cook has been able to save £140 million ($243.72 million) in 16 months. The more recent expansion of services at Accenture’s delivery centre capabilities has resulted in an additional 30% savings. The study notes that under a 10-year arrangement, Accenture transitioned approximately 60% of the shared services workload, including functional areas such as application management, accounting operations, payroll help desk and training administration, to its delivery centre in Bangalore. The remaining shared services resources focused on more strategic activities, including IT operations, reporting and payroll processing. The term was able to migrate the majority of the work in six months, and completed the transition in 11 months with all transition goals met on time and on budget.
Accenture had initially collaborated with Thomas Cook UK and Ireland to share a 10-year co-sourcing arrangement. The main component of this agreement was a cost-effective shared services centre co-located in Peterborough, United Kingdom. Accenture and Thomas Cook designed the shared services centre to be a multi-process centre covering all the services under one roof. According to Carl Dawson, Thomas Cook UK and Ireland’s IT director, “We knew that co-sourcing would enable us to create a single administrative focus, with a single set of information systems under the management of experts. In addition, the arrangement would free Thomas Cook UK from non-strategic functions, allowing it to propel its business forward.” To support the shared services model, Accenture transferred nearly 400 Thomas Cook employees to Accenture.
Accenture also collaborated with Thomas Cook to develop a single, integrated SAP platform for the entire business. Given the cost savings and other benefits, co-sourcing can well be the new model for outsourcing allowing both parties to retain stake.