#virtual captive

When it comes to choosing the optimum offshore delivery model for your company, there is a lot to consider. Yet we find that most companies opt for the high-turnover, “black box” offshore model that has been proliferated by legacy outsourcing companies. This doesn’t have to be the case. It’s time to break out of the ‘black box’ and adopt a proven model of IT outsourcing that gives you all the strategic benefits of a Global In-House Center (GIC), without the risk or hassle of having to own the platform. We call this a Managed GIC or ‘Virtual Captive’ model. It is the opposite of a black-box model and has been used by many businesses to meet their long-term strategic objectives.

Let’s take a look at some of the distinct advantages a Virtual Captive model offers over a traditional IT outsourcing model. While cost is a great advantage, allow me to keep it for the last as I consider it as table-stakes.

Transparent pricing

The offshore center conventionally operates as an ‘opaque’ cost center. Whereas the Virtual Captive model is based on complete transparency over salary, operational expenses, and profit margins.

Total control over operations and outcomes

The Virtual Captive model is a collaborative model where the vendor acts as a proxy for the client, but the client gets to maintain full operational control. What this means is that client calls the shots in terms of deliverables, personnel decisions, and execution methodology.

Access to a high-skill talent pool

Legacy offshoring firms often struggle to provide experienced resources that have the skills to add long-term value. The Virtual Captive model solves this problem by taking a strategic approach to talent management and builds client teams of experienced resources instead of the typical fresh out of college graduates. Virtual Captives work as the client’s offshore arm that delivers superior outcomes.

Faster time to market

A Virtual Captive is quick to set-up and offers the flexibility to scale as per the businesses’ evolving needs. An experienced service provider typically brings along existing infrastructure and a facilities management team which makes it easier for the business to get started quickly without worrying about infrastructure, talent, or any other needs.

Now, the cost arbitrage or quick realization of ROI

In today’s bimodal IT environment, clients not only want more cost savings but are also looking to minimize their cost of entry. This is where the Virtual Captive model fits perfectly. It has a much lower cost of entry thanks to the already established infrastructure and facilities the service provider brings to the table. Plus, in the Virtual Captive model, the right team size and structure are designed to specifically meet the clients’ needs. This astute talent and budget management help create at least 30%+ cost savings as compared to a legacy offshoring setup.

Resiliency doesn’t mean having a good DR strategy during these uncertain times. In fact, its much broader than that. It’s about an organization’s ability to withstand a major shock and come out of it with core capabilities intact. Typically the ability to continue operations, maintain baseline and maintain talent are the keys for organizations to emerge from any major disruption. Furthermore, when a shock occurs, financial survival instincts take over and all 3 points discussed above become afterthoughts, especially talent. People and therefore salaries for most organizations are usually the highest cost thus easiest to part with and hence naturally during shocks you usually see massive layoffs. But with that, what companies often forget is that headcount reductions often lead to loss of key capabilities. Furthermore, due to leaner teams trade-offs are made to SLA’s, security, response times etc. As people walk out the door, so does knowledge and during shocks, doing proper KT/ building good documentation is never even considered. All of this eventually leads to chaos and often companies are never able to recover and get back to the glory days. But its not all doom and gloom. Since talent, or in such a situation, the loss of talent is usually the main reason organizations are not able to recover, the managed GIC or the Virtual Captive as its often called comes to mind to mitigate a lot of this risk.

A Virtual Captive model is a “people first” outsourcing model which applies the best talent to generate the very best results for its users. Virtual Captive teams have more experienced resources and is a lower turnover model that offers better knowledge retention and intellectual property protection than with legacy providers. Finally, Virtual Captives are built and sourced from scratch and belong exclusively to a client therefore the risk of dependency on the legacy provider is greatly reduced.

The Virtual Captive model operates with a speed and agility that can adapt to an organization’s changing business needs and typically costs 70% less than onshore talent and often 40% less than traditional legacy outsourcing. It has been observed that even highly specialized and experienced teams can be built within the Virtual Captive model at rates as low as $20 per hour.

But how does a Virtual Captive aid in absorbing shocks? Well its quite simple really. Even as some onshore talent may need to be reduced, given that the offshore talent is already supporting a major part of the organization at a very low-cost structure, the disruptions due to onshore exits are negligible. Key knowledge is not lost, neither are capabilities. While Virtual Captive teams can easily support new initiatives/ digital transformations, usually these teams support the core services. When you reduce disruptions to an organization’s core services, it reduces disruptions to ongoing operations and baseline support, thus making it more resilient.

Talent is the largest component of most IT budgets and you need to be able to find the best balance of cost and capabilities with your pool of talent BEFORE times get tough.

This is where Strategic Talent Management comes in. Strategic Talent Management simply means separating your talent into three layers:

A low cost layer in a Virtual Captive or an Managed GIC which typically costs between $15-20/hour and is the best place for all baseline support costs.

The second layer is your internal team, which is the next most expensive source of talent.

The third layer is the flex consultant and contractor layer. This is usually the most expensive source of talent.

The point is to use a Virtual Captive for as much as you can. Don’t get caught in a situation where you have all your talent in the most expensive layers (which is internal talent, and consulting talent) because when times get tough, you are going to have to cut staff and reduce capabilities, experience and knowledge.

The fact is a Virtual Captive is the lowest total cost of external talent available anywhere. And that matters because talent is such a big part of IT costs.

Captive Information Technology (IT) Centers of global corporations, also known as GICs (Global In-house Centers) have risen out of this very principle of outsourcing enabling a company to gain the standard benefits of traditional outsourcing along with handling its own operations and create a privately owned strategic center enabling data security, transparency of costs, risk reduction and simplification of work. Captive centers work on this very principle of reducing business anxiety by enabling companies to reduce risks and simplify their work at minimal costs. It helps in gaining cost benefits alongside giving the best possible assurance over the persistent concerns of intellectual property and security of data

The role of the Chief Information Officer (CIO) is one that has seen continuous change over the years, yet we are only just beginning. Next up is the digital revolution, already a train which we all have to jump onto. It is providing our companies with an opportunity to add amazing new capability, and new business opportunities in ways we never planned or could have predicted.

Helsinki and London, May 10, 2018: ScrumStart; a two-year-old technology services & consulting venture funded by SRKay Consulting Group, is showing exemplary promise with its unique "Trust Business Model". Becoming profitable within the first year of its operations, with customers spread over four continents and office locations in the U.S.A., the UK, the Nordics and India, ScrumStart will be the template for success for all upcoming ventures of SRKay. SRKay Consulting Group is the investment venture of the billion-dollar Indian diamond conglomerate SRK Exports, that invests & accelerates in technology ventures that solve business problems using cutting-edge technology.