Co-Sourcing with Multiple Buyers and Suppliers : Operational and Agency Models

Co-sourcing is a new type of inter-organizational relationship, that is broader, both in operational scope and in risk sharing, than traditional outsourcing relationships. Based on a number of case studies, we develop analytical models of co-sourcing which evaluate when it is optimal, and what form it should take in a particular business environment. Our models simultaneously incorporate operational, economic and information technology factors. We find that the intensity of transactions and the level of intrinsic incentive alignment are crucial to the business partner who is more risk-averse and may sometimes find it optimal to bear the larger portion of operational and market risk in the co-sourcing relationship