Co-sourcing: What is it? Is it real? Is it worth doing?

George S Day wrote a Harvard Business Review article about measuring risk of innovation called “Is it real? Can we win? Is it worth doing?” It’s a great article about how companies can measure risk before moving into a new product or venture. I think this type of activity applies really well to most technology projects, including co-sourcing. But before we get started, let’s figure out what the heck it is.

Co-sourcing is a term that that has been around for a while but has gained more recognition and notoriety in recent years. We’ve heard it mentioned in trade journals, but what does it mean? Is it just a different way of putting systems in the cloud? Is it a way to outsource without using that scary term? Is it a way to expand your network and share the risk? Well, it could be all of these. But let’s put a finer point to it.

Co-sourcing is a way of sharing the location, support, and maintenance and most importantly risk of technology and related systems with another party. Most of the time this is a managed services partner or other vendor that provides technology services. How is this different from outsourcing? It differs because some control is maintained in-house. You share the risk, management, and support of the systems involved. The idea is to share the load, lower your risk, and maintain greater control than just outsourcing outright. This is particularly important for regulated industries like banks, credit unions, healthcare providers, insurance companies, and utilities.

Is it real? Absolutely!
Co-sourcing takes the idea of putting systems in the cloud or using a SaaS vendor to the next level. It implies that management and control of data is the responsibility of both the hoster and the hosted. In particular, in this day of increased security needs, an organization can’t just host their data elsewhere and expect it to be safe. Encryption standards need to be maintained and data needs to be validated before being sent off-site. There is also the possibility that not all systems will be hosted, so support responsibilities may need to be shared.
In Ed Acee’s recent blog post, he talked about technologies that organizations can leverage for private, public, and hybrid clouds. These technologies now provide the ability to move workloads back-and-forth between local systems and hosted systems. By definition, both the hoster and the hosted need to be involved to make sure performance and data integrity are maintained. It’s the level of involvement that makes us wonder if it is worth doing.
Is it worth doing? It depends.
Like any technology project or investment, you have to do your due diligence and homework. Over time, co-sourcing could save you money, but not always. Some infrastructures could cost more if they are fully outsourced. That is why you have to look at the intangible benefits while also looking at other processes that need to be put in place like vendor, contract, or service management. For example, if you don’t already have a mature vendor management process in place, one will need to be established. But what are the added benefits or co-sourcing? Here are just a few we have helped our clients recognize:
  •  Improved sharing of physical compute resources across virtual workloads
  • Reduction in facilities management tasks and requirements
  • Improved disaster recovery and business continuity capabilities
  • Better allocation of personnel across the IT support and services organization
  • Easier ability to relocate offices
  • Improved capabilities for merger and acquisition activity
“But what if I’m a bank, credit union, or insurance company?” you ask. “Can I do it too?” The answer is absolutely. There are many co-location and managed services partners that are certified to handle the most critical and sensitive of data. That being said, moving data into these facilities will not automatically improve a company’s audit or compliance standing. The move will just not negatively affect their HIPAA or FDIC compliance level they already have in place. The good news is auditors are used to these configurations and can be leveraged to understand the configurations that should be in place prior to making the move.
All-in-all, co-sourcing can be a good strategy for any organization. But taking the right approach, assessing the business case, performing the financial analysis, and validating all the correct technology and processes are in place are required. Like all technology projects, the risks and rewards need to be assessed and balanced. But is co-sourcing worth looking into? You bet!!

Phone: 312-602-4000
222 W. Adams
Chicago, IL 60606
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