How captive IT offshore centers drive IT innovation

New launches of captive centers offshore continued to increase in the first half of 2015

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New launches of captive centers offshore continued to increase in the first half of 2015, according to research from outsourcing consultancy Everest Group. Companies in the manufacturing, telecommunications and technology industries, in particular, expanded their in-house presence offshore in the first and second quarters compared to last year. Manufacturers, for example, set up 18 new in-house centers in the first half of this year, compared to just six during the same period in 2014, according to Everest Group.

[ Related: Offshore captive centers are again a thriving outsourcing model ]

And these wholly owned service centers, which traditionally served as back-office delivery centers, are beginning to play a key role in IT transformation efforts. “In the past, global in-house centers (GICs) were playing service delivery roles for the enterprise,” says Salil Dani, vice president of global sourcing for Everest Group. “While most of the GICs continue to play this role even now, there are some GICs that are taking ownership for digital transformation for the enterprise.”

There are a number of drivers behind this new shift in responsibility. More mature captive centers have established their credibility as reliable service delivery organizations, in some cases having implemented successful pilot projects in the digital transformation space, says Dani. In addition, some companies are finding the skills for these initiatives offshore.

Tesco, for example, operates its Hindustan Service Centre (HSC) in Bangalore. While it began as a back-office service center for the multinational grocery giant’s operations, the unit now develops mission-critical projects for global transformation, according to the company. Ecommerce powerhouse Amazon and conglomerate Honeywell are also looking for similar contributions to the business from their captive centers offshore, says Dani.

Companies looking for more strategic contributions from their offshore centers do face some challenges, however. Finding a large base of digitally savvy talent can be difficult outside of India and a few locations in Eastern Europe, according to Dani.

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