To be successful, organizations must have the right sourcing strategy in place. Additionally, while the importance of a well-planned sourcing strategy cannot be discounted, consideration should be given to gaining a deep understanding of your organization’s internal communications and hierarchies before determining your sourcing and business maxims. This is critical, as there may be cases where a unique 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 out, below is the difference between two very popular sourcing models:

Outsourcing

In short, outsourcing is the process of transferring some of the activities or processes of an organization 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, more often than not, outsourcing contracts are not very flexible and the outsourcing company loses control over its functions and processes to a great extent.

Co-sourcing

Joint contracting, on the other hand, is a more balanced approach that allows for shared services from an external provider. It is a partnership in which both parties collaborate to form working groups that support and sustain various business functions. These task forces often work remotely or at the customer site, depending on the type of support required by the customer. Usually, co-supply contracts are signed for a period of at least 3 to 5 years.

Benefits of joint contracting

Companies that place great importance on quality prefer joint contracting, since this contracting model ensures that clients receive qualified resources and quality infrastructure at all times. Unlike outsourcing, where cost reduction comes first, joint sourcing is more focused on providing quality and stability to customers. Co-contracting partners take into account the long-term interests of clients and approach problems holistically, which is certainly not the case with conventional consulting or outsourcing partners.

Joint contracting is undoubtedly the best option for managers who like to be in full control of their projects, be it selecting the resources or the quality of the infrastructure. It’s a unique sourcing model that makes it easy for managers to control shared-sourced business functions as extensions of their internal processes. Not only that, it is one of the few operating models that allows managers to take advantage of increased assets through economies of scale.

Co-sourcing is increasingly recognized as an advantageous sourcing model that provides a sustainable competitive advantage. However, viewing joint contracting as a blanket panacea for every challenge could be a mistake, especially for large outsourcing companies, as joint contracting requires a close fit to a company’s established contracting model.