Co-sourcing not outsourcing

In the current competitive business environment, effectively expanding your tech team is crucial for achieving success. Whilst traditional outsourcing has been a preferred method for accessing skilled professionals and cutting expenses, a more collaborative and strategic option has surfaced. Co-sourcing provides a partnership framework that aligns with your company's existing culture, promoting innovation and sustainable development. This article will explore the nuances of co-sourcing, contrasting it with conventional outsourcing to assist you in identifying the optimal strategy for your organisation.

What is co-sourcing?

Co-sourcing is a strategic and sustainable type of outsourcing which enables organisations to mitigate risk and reduce costs while maintaining a mutually vested interest in the outcome of the collaboration with their co-sourcing partner. This sustainable, long-term collaboration model is characterised by a high degree of trust, close cooperation, increased strategic alignment, shared risks, shared value and greater knowledge exchange.

In practice, co-sourcing is best described as a partnership, as opposed to vendorship, in which the technology team management and service provider create workgroups that collaborate with internal employees in pods, resulting in an overall improved business performance.

Co-sourcing vs outsourcing

While both approaches involve utilising external talent, their core philosophies regarding partnership, management, and long-term value are notably different. Grasping these differences is essential for selecting the right direction for your business requirements.

Co-sourcing

• Client-side organisations have full control over team structure, from recruitment to daily workload management
• Controlling the quality of tech resources results in improved performance, predictability of work quality, and timelines
• Co-sourced employees adapt to client-side company culture, standards, and methodologies
• Co-sourced employees gain a sense of ownership and accountability for successes as well as failures
• The co-sourced team builds up a unique knowledge base specific to client-side business operations, software tools, products, and services
• Invaluable relationships organically form between both co-sourced employees and internal resources as they both share the same goals and objectives
• Co-sourced employees are an extension of the internal employee base, preserving business confidentiality
• No ramp-up time required for new projects as the co-sourced team retains knowledge and already understands the company’s strategic vision

This collaborative model is ideal for businesses looking to build a dedicated, long-term extension of their team.

Outsourcing

Traditional outsourcing models are typically more transactional, with the vendor taking full control over the outsourced project and team members. 

• Vendor manages and controls team members and their daily workload, with no direct loyalty to the client-side team
• Resource quality is unknown, resulting in unpredictability across project quality and timelines
• Outsourced employees are loyal to the vendor company culture, standards, and methodologies, usually juggling various projects for various clients at a time
• Outsourced employees have no sense of ownership or accountability
• There is no prior knowledge of business operations, and sometimes even the tech stack. Every new project can expect to lag because of the repeated learning curve, which heavily hinders productivity
• The vendor is the main recipient of client-side organisational knowledge. Knowledge transfers are possible via various knowledge-sharing techniques, but tacit knowledge is lost
• Confidential information could potentially be leaked to competitors on subsequent projects
• The company's vision for team alignment must be shared for every single project

Furthermore, a common practice in outsourcing is the use of "the bench," where developers are rotated between projects, leading to a lack of continuity and deep product knowledge, a topic further explored in "Exposing “The Bench” in IT Outsourcing".

When should a company consider co-sourcing?

For many companies, new models of collaboration are becoming essential to fulfil outsourcing goals and expectations, including flexibility and cost savings, innovation, growth, brand protection and access to both talent and new markets. Hiring high-quality tech resources internally is extremely challenging and becoming increasingly expensive, with many companies finding themselves locking horns with much larger organisations, making co-sourcing the most effective solution. 

Companies should consider co-sourcing if:

• You want full control of your software engineering functions
• You want to retain and leverage corporate knowledge within the organisation
• You want a win-win relationship with a competent partner that adds value to your business and shares your business values
• You want real-time and authentic knowledge about performance
• You do not want recurring price negotiations due to scope changes in a rapidly changing business environment
• Your outsourcing needs are continuous, contributing to the long-term success of the company, as opposed to a quick fix
• You want to build a competitive advantage by creating a global-minded, strategic organisation
• You want predictable, fixed costs which you can fully control

These considerations highlight the strategic advantages of this model, with a more in-depth look at “The Benefits of Implementing a Co-sourcing Strategy” available for those considering this path.

To summarise, there are distinctive differences between Co-sourcing and outsourcing methodologies, and those forward-thinking companies that embrace a more modern approach will be the ones who reap the biggest rewards as they gain significant and sustainable competitive advantages within their market.

If you’re interested in learning more about Co-sourcing, and the potential value this approach can add to your business, please contact Benjamin Kane - [email protected]