Why Co-sourcing is better than Contracting Out?
IT leaders often blur the lines between different sourcing models, especially as the difference between varied models can sometimes be very subtle. It is good to know that each sourcing model is distinct and has a unique set of advantages and disadvantages. Moreover, every sourcing model is governed by very specific rules and regulations. This article explores the differences between co-sourcing and contracting out. In addition, it elaborates on why co-sourcing is better than contracting out.
What is contracting out?
Contracting out, in very simple terms, is to have an agreement with an external resource to receive IT services for a payment, and it continues to be a major component of the IT workforce of many enterprises (irrespective of their size). However, there are many hidden costs and service uncertainties associated with contracting out that cannot be ignored when one is looking at flexible, professional and reliable services.
Similarities and dissimilarities between contracting out and co-sourcing Both contracting out and co-sourcing are methods of complying with hiring freezes while trying to expand projects and programs that need professional skills and expertise. Both these sourcing models provide access to specialist expertise and services; however, the primary difference between co-sourcing and contracting out is that co-sourcing provides organisations with a lot more control over the project or work process. Moreover, co-sourcing implies a partnership between the two parties.
Disadvantages of contracting out
When contracting out, there is the risk of selecting an incompetent contractor who cannot fulfill the conditions of the contract. Contracting out is not very highly recommended by industry experts as contractors are often not as loyal to an organization and its users as in-house employees and may have insufficient understanding of the organization’s core competencies. In a nut shell, when an organisation is contracting out, it is exchanging one set of management issues for another, especially as contracting out leads to loss of in-house knowledge, capability and experience.
Contrary to the popular belief, contracting out may not always prove to be cost-effective. Moreover, organisations cannot afford to ignore the time involved in tendering and setting up contracts as these aspects can have a huge impact on the business deliverables and profits. Last but not the least; contractors may not possess the same values and ethics as the organisation that is contracting out.
Co-sourcing and its benefits
Co-sourcing is an innovative outsourcing model that facilitates next generation IT Managers to embrace novel ways to streamline, modernize and grow. It is a sourcing model that not only focuses on cutting costs, but also on creating a scalable solution, improving risk management and increasing compliance. Since co-sourcing implies sharing of responsibilities amongst the involved parties that break the traditional provider-client barrier, it is a very practical solution to the many problems faced by large enterprises. It helps split workload and fill any skills gap in the in-house team. It is a viable and cost-effective sourcing model that optimizes results without increasing overheads, losing control or exposing the organisation to outsourcing risks.