Co-sourcing: The new model for great business collaborations

An increasing number of organizations are becoming interested in pursuing new business relationship models with a higher degree of collaboration. Co-sourcing is one of them. In this blog post we explain its key concepts.

For many companies, new models of collaboration are becoming essential to fulfill outsourcing goals and expectations, including flexibility and cost savings, innovation, growth, brand protection and access to both talent and new markets.

These business collaboration models are characterized by a high degree of trust, close cooperation, increased strategic alignment, shared risks, shared value and greater knowledge exchange.

What defines co-sourcing?

Co-sourcing is such an approach through which organizations seek to mitigate risks and generate new value that can be converted to sustainable competitive advantages.

It can best be characterized as a long-term, one-to-one business collaboration where business functions are maintained through the combined efforts of internal and external partners where both have a mutually vested interest in the outcome of the collaboration.

In practice, co-sourcing refers to a partnership in which the asset manager and the service provider create workgroups and processes providing customized support across various business functions. This is delivered over at least a three to five-year timespan.

Through this business collaboration, co-sourcing partners form an interdependent relationship.

Even though all projects are different, co-sourcing is founded on the assumption that business interests are aligned between both parties, and that there is a substantial level of operational and managerial integration.

Creating competitive advantage through relationships

When pursuing such a collaborative arrangement the ultimate goal is to create competitive advantage through the relationship. By investing in the partnership, the service provider is investing in the client organization - and this builds trust in the partnership over time.

Because of the partnership, the service provider is continuously motivated to create value for the client organization. Ultimately, both parties will experience greater value (e.g. financial) and retain less risk.

One of the world’s largest multinational pharmaceutical companies, Novartis, is a great example of an organization which managed to leverage greater value through co-sourcing with ISS.

Novartis: Trust and Vested Outcomes

Back in 2012 the company sought to leverage more innovative capabilities and ideas from its partners and to consolidate non-core activities on a global scale.

As Novartis was undergoing a restructuring of real estate and service operations, the partnership progressively moved towards giving ISS decision-making privileges regarding budgets, service levels as well as how to perform the services.

This created a collaborative platform which entailed a move away from a complex service KPI structure (more than 26 monthly KPIs were set on ISS as a service provider) towards an outcome-oriented approach. ISS was now set to provide:

  • non-business interruption compliance
  • increasing customer satisfaction
  • continuous savings

Hence, rather than specifying how and what to achieve (input- and output-oriented), ISS were to make sure that these three overarching indicators were achieved at all times.

All in all, the above illustrates a collaboration that was based on a high degree of trust between the parties. The capabilities to deliver equal standards of quality across all sites, regardless of site differences and the global context, were key. Contrary to input-based models, and highly inspired by the co-sourcing approach, the partnership formulation and collaboration was more focused on the outputs and taking advantage of strategic and value-driven integration.

Learn more about Co-sourcing and new models for great business collaboration towards 2020 and beyond. Download our Vision 2020 White Book: Future of Outsourcing and Perspectives for Facility Management by clicking the button below.