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Captive Centre or Vendor Partner Model: Which One Suits Your Business?

Captive Centre or Vendor Partner Model: Which One Suits Your Business?

In today’s competitive world, businesses want to be careful when deciding whether a large software development project should be done in-house or done by outsourcing the work.

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Some companies have an in-house software development setup (captive centre subsidiary), but they are so flexible that they outsource work to reliable vendor partners.

Other organisations no longer outsource major software development work, because of their captive centre setup which has long-term goals.

You can select the best one that suits your business’s purpose in the short-term and in the long-term, by comparing the two setups.

So let’s take a look at a comparison of the key drivers and challenges for a captive centre set up with those for a vendor partner set up.

Key Drivers for the Captive Centre Setup

  • Does your business have a captive centre in a low-cost area? Do you want to benefit from the cost-savings of offshore resources? Then this model is the one for you.

You can choose to set up your own captive centre to make the most out of its large-scale offshore plans.

  • Does your business deal with sensitive information? Do you want to prevent the potential risk of data leaks to third parties? Then you may prefer this model.

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For example, if your business is based on banking, insurance or the stock market, you deal with a lot of monetary transactions and sensitive customer data.

  • Do you want complete control over your sensitive operational activities, like product costing and new product launches? Then this setup is suitable for you.
  • Does your business handle a complex software development project? Then the knowledge gained by the resources working on such projects will be invaluable. It will stay in the organisation with this model.

Challenges for the Captive Centre Setup

  • It is usually rapidly set up to scale up your business and you may start with lenient service level agreements (SLAs). But, when you need to make the SLAs stricter and better, you might have to spend more than you thought.
  • Some internal employees might be resistant of this setup. They may fear new projects being assigned to the captive centre which will lead to a lack of work for them with potential job cuts in the future.
  • Your company’s top management may start to focus less on the captive centre, due to it being viewed as a cost centre (instead of a profit centre). This is because it takes a long time to show decent returns on investment and results, despite it being costly to set up.

Key Drivers for the Vendor Partner Model

Most drivers for this outsourcing model stem from the shortcomings of the captive centre model.

  • Unlike the captive centre model, this model does not require a lot of time to start and the operations can be ramped up quickly. This is because the vendor generally has an established setup. For example, if you are a big retail company and wish to build an enterprise app, it makes more sense to start off using this model.
  • You do not need to invest a lot of money or time to enter a vendor partner relationship.

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  • Your company can opt for a pilot project execution, before getting into large scale operations. This allows you to first gain valuable experience in setting up a low-cost centre. You can then decide to continue to scale with the vendor partner or you can start your own captive centre.
  • You can smoothly close out offshore operations without hassles or high costs. This is possible with a clear contract with the vendor partner with a transparent exit clause. However, you may find it too tedious and expensive to close down offshore operations with the captive centre model, since labour laws in several low-cost countries are quite strict.

Challenges for Vendor Partner Model

  • You may find it challenging to maintain the security of confidential data for banks, insurance companies, etc.
  • Your business may have to spend a lot to ramp up your vendor partner setup with those who have expertise in the niche skills. This may also be difficult, because you may be unsure how long the resources and knowledge will be kept.

Verdict

Many companies may want to balance the two models based on the nature of their business.

However, Fortune 500 companies, such as Citigroup, Dell, Unilever and Deutsche Bank, have recently shut down their captive centres and opted for the cost effective and efficient vendor partner setup. This is due to the increased competition and the need to save costs and deliver instant results within strict deadlines.

So, which model will you opt for? Do you have any points to share?

 

Choosing A Mobile Development Company– Best Things to Do

Smartphones have changed our world. A decade or two ago, mobiles were just portable landlines – used primarily for calls and the occasional text. Today, it is an unforgettable part of our lives, something that helps us do everything from waking up in the morning to remembering appointments to playing games to burning calories to listening to music to keeping a track of pregnancy cycles. All of this is made possible by mobile applications.

What does your organization do to leverage ahead? Statistics suggest that 32% of UK customers make a purchase on their phone. Add to that the fact that  you can find an application for almost any task you might want to do – from learning a foreign language to waking up a stranger across the world with a song. Mobile users are expected to reach more than 43 million in the UK by 2017 and people are increasingly using their phones to access everything from search engines to shopping websites. Mobile solutions are needed for everything.

Developing App For Your Business

You need have an app for your business. Whether it be to improve organizational productivity or market your own app, you need a good app strategy.  You have two options – you either hire a freelancer or a company.

The best decision would be outsourcing to a company. Why? A freelancer may be great in a specific area but won’t have as much experience as a gamut of experts that a company has. A good company will also have acquired its reputation and grown by working for different kinds of businesses.

The Steps Involved

So once you have decided to outsource your app building to a company, which one do you choose? It is extremely important to choose the right company. The basic rule for investing in something is that your investment should get a return, and not everyone can do that. Do your basic research on the company.

  • Ask them for a portfolio. More importantly, ask for the links of published apps.
  • If a company has developed hundreds of apps but none of them have been published in the app store/playstore, what use is that?
  • You can also ask for a customer portfolio to get an idea of the past and present projects and clients.
  • Finding similar projects and clients who were given successful results by the company can provide you some confidence.

You should also discuss about their process development update – how well do they communicate while in the process of building an app? It is important for them to listen to you carefully so that the end product you get is in line with your expectations. Keeping you in the loop achieves this. And of course, in the midst of all this, do not forget to ask about the charges that will be levied. A good company will be forthright about what it will cost, and will not levy hidden charges or confuse you in fine print.

Finalizing the Company

So now that you know what to ask the company that you outsource to, how do you finalize the company itself? There are a number of important tips that can help you choose the right company.

First of all, the company you choose should have a vast and diverse experience. This is important because this shows that they have already encountered developmental problems that may occur in the process of developing your app; and overcome them. Vast experience also means they have learned from beginners’ mistakes, and will build a good product. Finally, a vast experience also shows that they have got good feedback and word of mouth for clients to keep coming to them. If so many clients have liked them, they must be doing something right.

Now once you have looked over the entire experience, narrow down to experience with the kind of app you are looking to get designed. Now don’t be too narrow here. Let’s say you are from a fashion house and looking to get an app designed that is based on dressing models in your new collection and having them sashay down the runway. You should not look for experience with ‘fashion apps’ in the company’s portfolio, rather you should look at their quality of gameplay. If they have done that well in the past, chances are they will do it well for you too. Of course, this also depends on what kind of app you are getting – if it is a general one or a highly specific one.

Cost is an important consideration, yes, but we wary of prices that are low. If an offer seems too good to be true, it probably is. Sometimes companies with lower prices have inexperienced or junior engineers working for them. The price should be just right, neither exorbitant nor cheap.

You must make sure that the company that you pick has specific experience in mobile app  development and specialises in everything mobile. Just any software developer can’t do your job. Developing for mobiles and developing for, say, the PC, are different ball game altogether.

The company you choose should not only offer development but also innovation. Once you convey your idea and expectations from the app, the company should be able to build on that framework and communicate with you. Simply developing on what you said without putting in their own experience and ideas into it shows an uninspired approach.

Why India continues to be the preferred destination to outsource

Outsourcing was considered a taboo in its early days, but slowly it is proven as one of the most significant business models.

The rosy days of the global economy are gone and so, while, lowering financial liabilities, organisations have to sustain the quality of service and employ a workforce that is economically affordable and efficiently skilled.

Many countries like China, Malaysia, Philippines, Mexico, Indonesia, and Thailand are rapidly growing as preferred destinations for global outsourcing, but India leads the race by a wide margin since the inception of outsourcing.

So, let’s see why and how India managed to remain in the spotlight.

Cost Effectiveness

Every business strives to be as cost effective as possible, and one of the best ways to cut down on operational costs is to reduce manpower expenses. India qualifies well on this metric and hence attracts foreign companies to invest here, as resource wages are comparatively lower as compared to other countries.

With low labour costs, immense human resources and excellent infrastructure, offshore companies can invest and expect their projects to be completed with high quality and minimum expenses within strict deadlines.

Skilled, Professional Manpower

Currently, India has about 2.75 million software developers in the national workforce. By 2018, this count will reach 5.2 million, a whopping 90% increase.

India’s software development growth-rate is attributed to half the population being under 25 years of age and current economic policies. India is a budding hub of developers and coders, promising to provide world-class services to outsourcing companies.

Apple Inc., the leading technology giant, is looking into setting up a company-owned, technology development centre in India. If this happens, Indian software development prowess will get a huge endorsement. It will be an inspiration for more companies to enter Indian shores for business.

Lack of Language Barriers

In India, English is a compulsory language at school and college levels. A large number of Indians can understand and communicate in English easily.

IT firms have recognised that communication skills of individuals and organisations should comply with international standards. The BPO industry is training its employees to improve interaction skills with offshore customers for business success with special, communications and language training.

Innovating the Business Model Itself

Traditional strategies to maintain profit margins in businesses are losing effectiveness due to soaring competition. A well-designed business model can circumvent the shortcomings of those strategies.

Development based on any traditional business model can fail to protect your margins because of globalisation and price transparency. Indian companies have realised that time spent putting together a solid business model is time well spent.

According to a report by KPMG, the Indian IT services industry is expected to rise from £5 billion in 2000, to  £56 billion in 2010. After contributing significantly to India’s economy over a decade, it has been speculated that new business models will emerge to deal with a rapidly changing marketplace and customer needs.

Innovative Tools for Managing Innovative Teams

Companies are hiring highly qualified and competent people across the globe. Members of geographically diverse offshore teams are working in tandem by using online project management tools, video conferencing, and other media for real-time communication and collaboration.

 A Stable Government and Attractive IT Policy

The Indian IT market currently focuses on providing low-cost solutions to the global IT sector. India’s reputation, as both a source and a destination for IT and ITES workforce, has helped it improve its relations with a number of global economies.

The stable Indian government is offering safe harbour (SH) provisions for various software development services, ITES and knowledge process outsourcing services . The government is initiating several programmes to fulfil India’s vision of good e-governance and digitalisation.

The Indian government’s call “Make in India” is already attracting lots of interest among foreign companies to invest here. It’s been predicted by aircraft manufacturer Airbus  that the Indian outsourcing industry will reach £1 billion with the recent positive impetus.

Conclusion

Mr. R. Chandrashekhar, President, NASSCOM says, “The future looks positive as the Indian IT-BPM industry is evolving dramatically in terms of scale, complexity, and innovation. Going forward, enabling a radical transformation of key sectors in India using ICT to increase access, enhance efficiency, and enable innovation in the sector are going to be some of our priority focus areas. The rapidly accelerating trend of innovation and entrepreneurship in the ICT sector impacts several domains and provides clear indicators that the journey has begun.” [image]

Some places in India where talent is being reared, are a striking contrast to the mediocrity of their surroundings. With the astounding growth of Indian IT and ITES industry, rapidly changing economic scenario, development of SEZs, and availability of the skilled human resource, the global offshore business will grow significantly in the years to come.

Have you outsourced to India yet or plan to do so? Let us know in the comments below, and thanks for reading!

Outsourcing Agile Development – Make it work!

The web has changed over the past few years – the amount of things we can now do online, as well as the way we construct our day-to-day lives around the web and communication, has meant that different software development techniques in the digital sphere have risen to prominence in recent years.

Let’s explore a blend of two different types of development techniques – Outsourcing along with Agile Development

Where does outsourcing agile development fit in for me?

A distributed environment, one where not all work is completed in the same space, has become commonplace within today’s businesses, and for agile development as a process to work efficiently has to be able to work well in this environment.

Fortunately, with the right lines of communication in place, distributed agile development adds a huge amount of value when outsourcing work, no matter where you are. The collaboration and relationship of a distributed team adds up a great deal – and it can fit right in to your team as long as you follow some essential guidelines on how to make distributed agile development work for you.

  • Created ‘rich’ lines of communication to counteract the relatively small amount of quality face-to-face time with distributed work
  • Create frequent deliverables within a distributed agile environment
  • Get clear, well-written guidelines and objectives so everyone knows what to expect.

Faster and more flexible delivery

There are many key features of agile development that mean many major companies in the software development and IT industries are adopting this way of thinking.

The table below indicates some features and benefits of agile development – as well as some of the challenges that you may across in the process of making outsourcing work for your business.

Why agile development outsourcing is popular

Outsourcing any software development gives a business a wealth of options – it opens up the market to be able to choose from a wide range of amazing talent from all sectors of society in almost any part of the world.

Outsourcing also gives you the ability to monitor the quality of your development, plan and give certain tasks to others, and manage your costs by choosing from a wider workforce pool. With online working and the popularity of remote working, outsourcing agile development and finding creative working solutions to tasks means there is a lot more time for you and your business to concentrate on the bottom line.

Outsourcing Agile Development – Weighing up the Options

In order to be able to make the most of your outsourcing options, there will inevitably be a certain amount of advantages and disadvantages. Here are a few things you or your business may want to think about.

Your motives for outsourcing

You need to be clear at all stages of the process why you want to outsource work and what benefit is for you or your business. It may be a cost implication, it may be a time saving or it may be a specific person you’d like to work with who may be based remotely. You need to be sure agile development is for you and judge your outsourcing needs within this context.

The evaluation of your potential team

Agile Development is all about building trust, good working relationships and maintaiinng excellent communication throughout. It should be fairly evident from a relatively early stage if this relationship isn’t going to sustain, and it’s important to use thorough evaluation processes within your team when it comes to choosing the right outsourcing partner. For example, discuss delivery projections, costs, time differences, differences in working practises – the more information you can get the better.

Is this the best option for my business?

One excellent by-product of outsourcing agile development is that it gives you a fantastic amount of choice – choice in who you work with, flexibility with times and budgets and flexibility in the work that’s ultimately delivered. Bear in mind however that there is more than one way around a problem, and make sure you are ready for outsourcing before you commit. There are many other training, in-house development or self-learning options that could help your busines too.

Tips to Overcome Challenges

Agile product management company Version One has an excellent guide to making the most out of agile outsourcing, but here are some tips to point you in the right direction.

Manage proactively

It makes sense within an agile environment to keep a close eye on how your outsourcing partners are working. There are many ways of doing this – from sharing Google Spreadsheets to using pieces of task management software such as Trello or DropTask.

Keep good communication

It may be difficult, but keeping good communication really is key. Using Skype and task management software is the best way to do this, but avoid overusing and micro-managing. Keep a routine and schedule, so catch up once a week, for example.

Account for delay and time differences

We all want things to be done yesterday, but accounting for the unexpected, and the difficulties that come with time differences, is really important for a successful working relationship. Schedule proper phone conversations – as context can easily be lost through email.

Conclusion

There may be certain precautions you need to take, but despite this, if you are willing to commit to an agile process and retain excellent communication throughout you will find outsourcing as one of the best working model and reap substantial benefits out of it.

We’ve seen through the course of this post that there are a certain amount of relationship, development and communication challenges to overcome, but making sure you use trusted project managers from a respected outsourcing agile development firm is one excellent way of making sure everything runs smoothly.