Services Most Suited for Captive Offshoring to India

H. Narayana Swamy

Partner and Director, CaptiveAide

Believe it or not, technology outsourcing to India began with a captive center back in 1985. When Texas Instruments set up its development center in Bangalore, little did anyone know that it was the first step that would disrupt the way business would be done – forever!

Several countries have followed the model since, and several other models of business have emerged  – but Captive centers have remaineda reliable and stable form of outsourcing in India.

In the three decades since TI India’s debut, practically every industry with technology needs has had a brush with India. Some have established a base stronger than others, making it easier for others to follow.

By far the largest number of captives in India belong to the “chip design” or semiconductor industry. The TI captive center was indeed a trail blazer for others to follow. Every major semiconductor company in the world has a presence here and for new companies, that makes life very easy. Talent is easily available, employees have a long history of working with multinational firms; they are used to a certain work ethic, certain rigor of design requirement, and are comfortable in the well-established ecosystem that has sprung up.

Some other sectors in which the captive center culture is well-entrenched are the following:

  • Analytics: A large number of mathematics graduates have flocked to the IT industry, making sure that the world’s analytics mysteries are easily solved.
  • Biotech: India’s scientific institutions were until recently set up by the government, and they employed huge numbers of talented scientists. Science grads are populating labs by the hundreds, researching and finding biotech solutions in the area of vaccines, clean fuel and anything that can be prefixed with “bio”.
  • R&D: India’s pharma sector is strong in churning out generic drugs, but new research in captive centers is playing catch-up, cutting down costs and time to market for new formulations of global pharma companies.
  • Retail, finance solutions: These two unlikely candidates for captive centers are actually thriving in India. Large retail chains have saturated the market in developed countries and need to spread themselves in emerging markets. The same story holds true for the banking and finance sector. What better place for a captive than one of the largest emerging markets itself?

India is also suitable for companies doing or seeking animation, textile/jewelry design, automobile engineering/design, specialized electronic designs and many more. Write in if you want to know more!

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Retaining Top Talent in Your Offshore Captive

Suma Subramanian

Partner and Director, CaptiveAide

So you have set up your captive center and think all the hard work is done – all the compliance issues, infrastructure, hiring the people you want, vendors are on board, your transitions have begun. But, how do you keep your people?  The crucial factor for the center to do well your team and now is when the hard work begins.

Some ways you can get the best people to work for you are obvious –  pay them handsomely, promise them stock options so they have a long-term stake in the company, give them attractive work designations, ensure they get a decent amount of travel opportunities to other centers and so on.

There are other, less tangible ways in which bright people will want to work with you rather than for the competition.

Challenging Work

Physical proximity to headquarters should not be the criteria for sending across only back-end development work. Understand the team’s skills and engage them in doing challenging project work, give them a sense of being valuable, seek their opinion on issues. In short, forget that they are “offshore” and give them complex tasks.

Trust Them

Your offshore colleagues may not have education qualifications from your country, but the language of technology is universal! By giving them complex tasks and projects, you show them that they have your trust. Believe me, the best employees are those who want to surpass all your expectations and deliver far beyond the challenge you have laid before them.

Cutting Edge Projects

It would be a poor show all around if you hire well-qualified people and expect them to just follow instructions. Trust them to go all out and do a great job with cutting edge technology – and the best in the field will come looking to be part of your team. Experienced hires can jumpstart your captive quicker than you might imagine, bringing with them a work ethic and sense of responsibility that younger, fresh graduates can emulate.

Respect their time

This is a sensitive issue and there was a time when Indian (or any other offshore) employees were available on call at any time of the night for discussions, after working through the day. The best employees have earned their right to a good night’s sleep and undisturbed holiday breaks – and if you respect that, I guarantee you the attrition rate at your captive will be among the lowest in the industry. The best people will attract other good people and your virtuous cycle can continue undisturbed.

Future of global captives in India

H. Narayana Swamy

Partner and Director, CaptiveAide

When the economy hit a low a few years ago in the US, some analysts predicted the demise of the offshore captive centers. The reasons they furbished were: falling salaries in the US because companies were downsizing, availability of talent because companies were downsizing, increasing costs in India because salaries were rising, scarcity of talent because too many companies were hiring.

It’s been a few years since that prediction, and no, it didn’t come true.

On the contrary, the number of captives has gone up and so has the quality of work being done in India.Research firm Everest Group found (in mid 2014) that Global In-house Centres (another name for Captives) deliver 30 to 70% savings. While 70% may be a rare statistic, savings are a reality. And will remain so for at least the next decade.

Fast company

Having been around for over two decades now, the art of setting up an offshore captive center is well documented and the setting up can be done by experts in the shortest possible time. These experts have previously headed captives themselves or set up a series of them. What to do, and what not to do, is now in their DNA. They have a network of people they can tap at short notice, and an ecosystem that will deliver goods and services practically off-the-shelf. Hence, new captive centers will be set up far more quickly in the near future than ever before. I don’t have to tell you this: if you save time, you generally end up saving money.

Multi-location choice

In about five years, we will see the emergence of several smart cities in India and there’s no question that they will all be IT friendly and IT dependent. They will be young and vibrant, attracting talent from all across the country to work and live there. Those with captives already in India will find this a great opportunity to extend their scope and reach by either moving to a new location or setting up one more captive unit. Those looking to arrive for the first time will have far more choices of location than they do today.

Cloud, it’s clear

Companies are relying on cloud technology to store data, whether it is in the form of voice, video, audio, images, making it as dense as data centers once used to be. Since this virtual world can be managed, operated and accessed from anywhere, offshore captive centers in this sector will thrive.

Captive Offshoring Vs OffshoreOutsourcing

Suma Subramanian

Partner and Director, CaptiveAide

After two decades of robust offshore outsourcing, organizations have begun to pause and contemplate whether it really is an ‘all or nothing’ strategy.

Corporations use the services of offshore outsourcing firms because it reduces cost, accelerates the execution of tasks, gives companies a 24X7 presence otherwise not possible – or possible at great expense.

Offshore outsourcing lent itself successfully to processes that were mature, repeatable, standardized (or could be) and matured to levels where partners did more complex work beyond the cost arbitrage model. De-risking, at the time, meant having multiple partners to outsource the work to.

However, as offshore outsourcing models have matured, organizations find that knowledge and skills for those processes have died out in their organization, they have little control over people assigned to their account, they have little or no control over results(A 2012 survey by Deloitte indicated that better controls was one of the top 5 reasons for insourcing). They grapple with issues around IP, working methodology and sensitive processes, paucity of innovation, not exposing their own leaders to a global experience, de-risking from too much exposure to outsourcing.

And yet, the imperatives of offshore outsourcing – access to talent pools, geographical de-risking, follow-the-sun models, cost and intellectual arbitrage – continue to be emphatic lures

The simple answer to “having your cake and eating it too” would be for you to set up your own In-house global center (or Captive as more commonly known). Your entity would be prime for work that is sensitive, where knowledge and IP need to remain within the organization, where controls stay with you. Work that is strategic, work where the contract terms or reputational risk necessitate greater oversight are front runners for your entity to manage while leveraging all the benefits of offshoring

If setting creating a business plan to set up a global entity, ensure the right location, to scale, employ specialized talent, comply with local laws and regulations seem like a deal-breaker, we would be happy to help

This is just the beginning of the journey. More questions and more discussions will follow. If you have any questions, please do ask.