Co-sourcing is the practice of collaborating with dedicated staff from a service provider to subsidize the firm's front and middle office responsibilities. The model blurs the line between partnering and outsourcing, and it's gaining traction in the financial service space.
People are embracing co-sourcing a lot more than they ever have, says Jayesh Punater, CEO of Gravitas, a provider of cloud, collaborative outsourcing, risk analytics and research support to hedge funds and private equity firms. Their employees work onsite or remotely, and all parties are responsible for the success of the projects.
Punater says large firms are looking at co-sourcing as a quick way to leverage technology and professional resources without up-front costs of in-house solutions. "It makes them more efficient as they scale the business."
The biggest challenge to the adoption has been the idea of ceding control of traditional in-house and value-added functions to an external party, but Punater says early adopters are coming in a big way.
Following 2008 bottom line P&L and downturn risk is a concern, and firms want to be agile and able to scale. "We have been innovating in that space. We're taking proprietary technology and packaging it into a customizable service called co-sourcing, where clients have control when they need, but get the benefits of outsourcing."
For larger firms, co-sourcing of market intelligence is particularly popular, especially if they are a hedge fund equity firm. For example, if a private equity firm is looking to explore multiple sectors such as credit, global equities, M&A and capital markets, they may rely on a co-sourcing provider to provide research analysts with knowledge that span across multiple sectors simultaneously when and how the firm needs it.
"I think research support is growing now more and more as clients realize that they need eyes on data 7 by 24. No matter how many people they hire it is hard to keep analyst talent on staff. So, for example, having a team in Mumbai, using their eyeballs, it's very valuable. I can get the competent resources and I can use a co-sourced team to support analysts in New York."