The Advantages of Co-Sourcing vs. Outsourcing

As a long-time  participant in real estate outsourcing, I have frequently heard the whispers  at industry functions that in-house corporate real estate managers view the outsourcing crowd as both competition and a threat. I have often wondered how our outside expertise could be more helpful to the in-house team and have tried to delve into the challenges that the in-house team usually felt when dealing with outsourcing vendors.

What I’ve learned is that while the outside perspective of facilities management firms can be beneficial, it can also be overstated. CoreNet has reported that more than 60% of in-house real estate managers have implemented new real estate programs with limited success and less-than-expected results. Why is that?

First, there’s often too much competition or friction between the outsiders and the insiders. We wonder why things take so long, and the internal team wonders why we suggest such daffy ideas that they have to run up the flagpole.  Often, our ideas come from successes we’ve experienced in other corporate real estate settings, but many companies don’t want to be like anyone else – and therefore, may resist ideas that aren’t new for them.

Second, the outsourced company is still seen as a vendor, as much as we want to be viewed as a partner. Sometimes we’re hired by the “c-suite” to evaluate the performance of the in-house team. While the information we gather may be helpful to the corporation in its efforts to better align its real estate with its business, it can be detrimental to the relationship with our first-line internal client, who may feel spied upon.

These issues concern many of us at NorthMarq. We know there are many difficult decisions that internal real estate managers face every day, but we also know that even the best jack-of-all-trades can’t be good at everything.

In our best and most successful client relationships, we know that we are, in fact, a partner on a team with many others who have different responsibilities. Even when we play the role of the facility manager, we partner closely with accounting and finance, administration and operations. We know we do our jobs better when our internal client doesn’t feel threatened by our presence.

Our response is a new service, called co-sourcing, which we’ve already implemented with a number of clients. Co-sourcing leverages the best attributes of the in-house organization with the capabilities and resources of an external provider. This approach solves a number of issues that are traditionally part of the outsourcing process.

More cost effective and less risky than a traditional outsourcing model
The key advantages between outsourcing and co-sourcing can be summarized as follows:

• More of a team, less friction: Outsourcing is based on transferring the people and the management responsibility for the FM function; co-sourcing does not require human resource transfer and employs a collaborative model that leaves the client in operational control of selecting the cost reduction priorities.
• Faster implementation:  Outsourcing typically is procured via a detailed RFP that describes a detailed scope of work and often takes 6-9 months to implement. Co-sourcing utilizes a more flexible consultative approach to benchmarking and identifying specific opportunities that can be more quickly implemented and competitively sourced, if desired, individually depending on the needs of each location.
• Unique to each company: Co-sourcing and outsourcing both focus on headcount reductions, the creation of service standards, technology efficiencies and strategic sourcing as the four primary methods to generate savings; by design, co-sourcing can be more easily customized to meet the specific needs of each location rather than being limited to a singular approach that is typical of most outsourcing companies.
• Reduced risk for the corporation: Co-sourcing is far less risky due to the fact it is not based on human resource transfer and the associated negative impact on morale, it retains the ability and flexibility to customize cost reductions by site, and often the time to implement.