Typical Outsourcing Model vs. Co-Sourcing Model: What’s Better?
Outsourcing and co-sourcing both help businesses reduce costs and access specialized talent, but they differ significantly in control, flexibility, and long-term fit. Here’s how to choose the right model for your organization.
What is outsourcing?
Outsourcing refers to the process of contracting standard business functions to be handled by a party outside of the company. The most popular functions include Finance, Human Resources, and Information Technology, largely due to their transactional nature and the specialized skill sets they require.
Businesses outsource primarily to increase efficiency (24%) and receive assistance from an expert (18%). (Clutch)
Sample standard roles you can outsource are the following:
Senior CPAs, CPAs, Staff Accountants, and Accounting Techs
Real Estate Title and Escrow Specialists
Information Technology/Web Developers and Administrators
Nurses and Healthcare Claims Processors
QA and Data Analytics SpecialistsGraphic Designers and System Engineers
HR and Payroll Service Professionals
Technical Support
UnderwritersData Entry Specialists
Customer Service Representatives
and More
To determine the most suitable outsourcing solution, an organization must first determine its business needs. It is critical to define the scope of the project, objectives, terms and requirements which, when finalized, will be agreed upon between them and the service provider.
Other questions that may provide key insights before outsourcing and deciding the outsourcing model are these key questions:
What is the scope of the project?
What is the timeline of the project?
How will the project be measured?
Do we need a partner or a provider?
In answering these questions the business and the provider can now choose the best outsourcing model. An effective outsourcing model is one that is properly aligned and structured to fit the business and unlock business growth.
Let ‘s take a look at the difference between the typical outsourcing model and the co-sourcing model.
Typical Outsourcing Model
The typical outsourcing model is one such model to unlock client growth. In this model, a business partners with a third-party provider to handle business functions, usually transactional and back-office functions, with the primary goal of cutting down the cost of inhouse labor.
Aside from cutting labor costs, organizations outsource to increase productivity, streamline processes, reduce cost structure, and increase capability through digital transformation, make way for agile operations and solve staffing challenges.
Since you are only outsourcing services in a typical outsourcing model, you cannot define or customize roles apart from the standard outsourcing roles and functions. You also have little or no control over the business processes, metrics and the project timeline.
The outsourced team is directly under the management of the provider, and therefore is not fully committed to you. New projects related to your company may be delegated to another team which will mean another round and opportunity cost of onboarding, endorsing, and training.
Co-Sourcing Model
On the other hand, we also have a Co-sourcing model. Co-sourcing is a business practice where a service is done by inhouse staff and by an external service provider.
This is an updated version of the outsourcing model. Taking into account the pain points of the traditional outsourcing model, the co-sourcing model allows for more convenience, flexibility, scalability, visibility and control.
According to Gross (2006), “Co-sourcing combines the advantages of outsourcing and insourcing as it provides access to external expertise without having to completely give up internal control over processes.”
The co-sourcing model is suitable for rapidly growing and digital-first companies. Co-sourcing is also essential if your company is in need of quick access to a huge talent pool of skilled specialists and for a specified timeline, usually as needed by the project.
Co-sourcing is having a partner who will work with you to improve the bottomline and unlock business growth. With Co-sourcing you have dedicated team you can utilize. You have 100% visibility and control and supervision of the structure, training, activities, and deliverables of the dedicated team. This follows for customizing productivity metrics to fit your preferences or requirements.
Having a dedicated team in place lessens the need to onboard and train additional team members since tenured team members can relay the training process to the newer members.
With the co-sourcing model there is reduced overhead costs.
At Connext Global Solutions, you lessen overhead since we handle the people, facilities, rent, utilities, compliance and most of the systems while allowing the client to own what is most important and unique to their business, their specific systems and business processes.
The perfect outsourcing model will depend on what suits best for your organizational needs. The key here is partnering with an experienced provider that can guide and walk you through in identifying the pain points and determining what outsourcing model can help unlock your growth.
Partner with Connext Global Solutions and Unlock Growth
Connext Global Solutions helps expand your business offshore by hiring, training, and managing custom remote teams.
Connext is uniquely positioned to take on new projects, regardless of size and scope.
Clients get the excellent custom outsourcing or co-sourcing staffing and process solution at a much lower cost. There is a 60% reduction in the client’s average cost through outsourcing services via Connext.
Connext is committed to providing the best client experience and fully understands the level of responsibility of being entrusted data, information security, availability, processing integrity, confidentiality, and privacy of data. The company is HIPAA compliant, and SOC-2 certified.
Delegating services to Connext enables client growth with a 100% tailored solution where the client can personally select the remote staff based on the clients’ preferences and needs. At Connext, we understand the clients’ need to rapidly scale operations in today’s dynamic business landscape. Clients start their own offshore (captive) teams with the scalable options to start we allow clients to start at any size and scale as they see fit.
The company provides 24/7 support to clients and their dedicated offshore teams. The Connext-to-Client window, a two-way configuration, uses digital cameras and closed-circuit television (CCTV), Connext clients use to maintain real-time audio and visual connection and monitoring with their offshore team members, enhancing communication and working culture. In fact, Connext prides itself on its world class work retention rate. The monthly average of employee retention during the first quarter of 2021 was 98.4%.
Connext Global Solutions helps companies build custom, dedicated support teams in the Philippines.
Partner with Connext Global Solutions today.
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Elevate your understanding of the typical outsourcing model versus co-sourcing. Explore our blog post to discover which model best suits your business needs.
Frequently Asked Questions
- What is the difference between outsourcing and co-sourcing?
Outsourcing transfers a business function entirely to a third-party provider, giving you limited control over the team and processes. Co-sourcing maintains a partnership where the client retains full visibility, control, and a dedicated team, while still benefiting from the provider’s infrastructure and talent.
2. When should a company choose co-sourcing over outsourcing?
Co-sourcing is the better choice when you need a dedicated, long-term team; when you want to customize roles and metrics; when your company is scaling rapidly and needs quick access to skilled talent; or when you want to retain control over business processes while still reducing overhead costs.
3. Is co-sourcing more expensive than traditional outsourcing?
Not necessarily. While co-sourcing offers more control and flexibility, providers like Connext Global Solutions can still deliver significant cost savings up to 60% compared to in-house hiring, because the provider handles overhead such as facilities, utilities, and compliance.
4. What business functions are best suited for outsourcing?
The most commonly outsourced functions are Finance and Accounting, Human Resources, and Information Technology due to their transactional nature and the specialized skill sets required. Other popular areas include customer service, data entry, healthcare claims processing, and technical support.
5. How does co-sourcing reduce employee turnover and onboarding costs?
With a dedicated co-sourced team, tenured employees accumulate knowledge about your specific processes and systems. When new members join, the experienced team handles training internally, reducing the time, cost, and disruption typically associated with onboarding in a traditional outsourcing setup.
6. What should I look for in a co-sourcing provider?
Look for a provider that offers a dedicated team model, full client visibility and control, customizable roles and metrics, strong compliance credentials (such as HIPAA and SOC-2), and proven employee retention. The ability to scale at your own pace, starting small and growing as needed, is also a critical factor.
