Rise of Virtual Captive or Global in-house Centres in India

With the advent of digitization and technological disruptions, Global In-house centres (GIC) or virtual captive centres (VCC) are redefining the way global companies leverage talent pool across the globe. Earlier, VCCs were setup exclusively with the aim of achieving cost arbitrage over the traditional outsourcing model, however; over the years, this has gradually evolved and today VCCs are an integral part of the organization, leading mission critical deliveries and innovation.

From merely being a delivery centre for businesses to becoming a strategic hub providing value added services and research & development, VCCs today are an important pillar of the organization’s overall growth and success. The Indian government policies have also been conducive to the growth of VCCs through simplification of erstwhile bureaucratic processes for company set-up & compliance on one hand while introducing various incentives such as GST refunds, export promotion schemes and reduction in corporate tax rates on the other hand.

In the past decade, many global companies have established VCC in India as the country is seen as a land of opportunities with a highly skilled talent pool that guarantees the best return on the information technology investment. This helps the companies in serving the dynamic global and regional markets more efficiently.

This transformation has also resulted in the VCCs competing with traditional Indian IT services companies for hiring the best talent. The VCCs have so far being ahead in this competition for two major reasons (a) the VCCs can pay premium for top talent by leveraging cost arbitrage versus third party outsourcing (b) VCCs provide an opportunity for top talent to work alongside global teams as colleagues rather than supplier, thereby allowing a direct and meaningful contribution at a global scale.

Today an ideal VCC is closely aligned with the company’s other global offices in terms of the look and feel, policies, training and development frameworks, organisational structures and most importantly a joint sense of responsibility to help the company achieve it’s short term goals and long term vision. This further validates the fact that these centres are no more low-cost resource centre but a self-sustaining centre of excellence delivering innovation, quality and strategic value.

However, it goes without saying that VCCs also face some challenges;

Governance:

The traditional onsite-offsite governance models are designed around a client-supplier relationship, with the supplier taking the ownership of delivery, while the client’s role is to own the requirements, measure and ratify delivery quality and moderate the working relationship. The VCC model requires a rethink of the traditional governance model, to align with the central philosophy of ‘One Team’ and to be able to jointly own the successes and failures.

Personal disposition:

A large proportion of the non-managerial IT talent in India has primarily worked in the traditional third party outsourcing engagements. This is plagued by some inherent limitations such as (a) well-defined boundaries of what they are ‘allowed’ to say and do (b) designated roles such as delivery manager, business analyst and onsite coordinator who manage all communication with the clients (c) an approach that promotes safety (from what you can be blamed for) over innovation.

For the VCC model to deliver its full potential it is essential that all VCC team members think of themselves as equals and thereby deal with onsite counterparts as colleagues rather than clients. Also, they need to graduate from the mindset of ‘who is wrong’ to ‘how can we improve it’.

Culture:

With the ‘One Team’ approach being critical for the success of a VCC, it is extremely important that the teams become welcoming (and not just accepting) of different cultures. The cross border teams need to have the openness and a global outlook to celebrate diversity and deal with colleagues as an individual rather than being pre-disposed. The traditional third party outsourcing model creates a sensitivity for the Indian team to understand and adapt to the client team culture, but not enough is being done for the two-way (or more) cultural sensitivity exchanges.

Macro Factors:

The future of the VCC depends on the stability and success of the parent company, whereas the third-party IT services companies can balance the downturn in one industry or client, with increasing business with other clients. It is therefore essential for VCC to continue delivering value and wisely invest in future to endure such a slowdown.

In summary, VCCs have come a long way in the last years and today they offer a very compelling alternative to the traditional third party outsourcing for the global organisations. At the same time, the VCCs have become a very exciting avenue for IT talent pool to build careers and stand-out at a global level.

As is true with any other sectors, VCC model is evolving continuously in form and shape to overcome the existing challenges and build the immunity for the future challenges, but it definitely is here to stay and grow over the coming years!

By Saurabh Limaye, Managing Director, Jet2 Travel Technologies