Is there difference between co-sourcing
and contracting?
In today’s environment of buzzwords and jargon it’s hard to keep track of the new terms that come and go in our business vocabulary.
While contracting continues to be major component of the workforce, there is an important distinction between contracting and co-sourcing. Contracting means to pay “specialist” – an external resource – on project basis. It comes in various forms: from temporary secretarial services to high-level consultants.
You could argue that co-sourcing is much the same. It occurs when an organisation purchases specialist expertise for specified period of time, typically for an internal audit function.
But co-sourcing offers more
It’s partnership. You could liken it to being the support crew for Formula One motor racing team. In Formula One, the driver has the ultimate control, and is responsible for exacting the maximum performance from the vehicle. To do this, he enlists the skills and teamwork of support crew. By utilising the strengths this crew brings to the team as whole, the driver is able to do what he does best, relying on each member of the crew to do the same.
The fundamental difference between contracting and co-sourcing is not the level of expertise the external resource may bring to the arrangement, but the ability to back it up. It also relies heavily on more involvement from the external resource than can be expected from traditional contracting arrangement.
The success of Formula One team rests on cooperation and trust between the driver and his support crew; similarly the success of co-sourcing arrangements rests on the level of team work, communication, trust and loyalty that exists between the external resource and the client.
It’s important to take long-term view of co-sourcing engagements, allowing the external person or people to invest the necessary time and resources required to gain thorough understanding of the way client’s firm operates and the anomalies of the particular business.
It is only by adopting this kind of truly collaborative approach that clients and external resources can reach win-win co-sourcing situation.
While co-sourcing sometimes involves outsourcing the entire function, utmost care is taken to build solid relationship between the two organisations.
In typical internal auditing co-sourcing arrangement, responsibility for the audit function remains within an organisation, but the responsible internal audit team is strengthened by expertise they may not be able to afford on full-time basis. They also get guarantee of commitment that the external resource will be an integral part of the team, not just an ancillary adviser.
Types of co-sourcing
The more common types of outsourcing involve combination of both internal and external resources, such as:
? Management Role: The external party provides the audit manager role and the unit is staffed by either internal people or mix of internal and external people.
? Staffing: An internal manager has staff of external people, either on full-time basis, or on an ?as required’ basis.
? Supplementing: An internal audit team is supplemented by specialist skills on an ?as required’ basis. These skills may include the likes of IT or technical staff, treasury, operational, project expertise or quality assurance.
Benefits of co-sourcing
It’s also important to examine the reasons why co-sourcing arrangement may be more suitable than other types of outsourcing.
? The organisation has access to specialist skills that can supplement the team’s existing skill base while still retaining control of the internal audit function. The internal audit manager has access to expert tools, methodologies and pool of international expertise.
? While different staff may be used to provide specific specialist skills, continuity is also important and retained where possible to ensure that the co-sourcing partner has an increasing understanding of the organisation’s business, problems, systems, processes and staff.
? Co-sourcing staff assume the role of an internal staff member, rather than an ?external consultant’. They report to the internal audit manager and, if required, will use internal tools and methodologies. This helps provide seamless audit team and enables better relationships with internal staff and management.
? The arrangement allows the organisation to have better control over the internal audit costs – rather than having permanent specialist staff being under-utilised, specialist staff are brought in on an assignment-by-assignment basis.
? The organisation retains control of the audits and valuable institutional knowledge.
The key objective of co-sourcing is to improve the performance and operating efficiency of your organisation by using expert specialist staff as and when you need them.
Co-sourcing ensures your external resource has an “insider’s perspective”; consultant, on the other hand, will generally approach the engagement as an outsider consulting to an organisation, rather than being part of it. Co-sourcing also ensures that the valuable knowledge and relationship that’s built up with the external resource over time doesn’t walk out of the door when the special engagement is complete.
Because co-sourcing arrangements are typically long-term, you can be assured that knowledge about the organisation gained from being business partner – including understanding of the organisation’s objectives, processes, culture and the role expected of internal audit – are put to good use, and that your investment is not just in “an extra pair of hands” but in partner who develops stakeholding in the objectives as if they were their own.
Utilising co-sourcing arrangement also allows in-house internal audit staff to concentrate their efforts on those areas where they have the most knowledge and experience and can add most value to the organisation. This helps ensure that the internal audit resources are used in the most efficient and effective manner possible.
And, what’s more, you get the choice on the type of involvement you want, whether it’s someone to lead specialist engagements or take more supporting role.
