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Navigating Cost Efficiency in IT: The Strategic Role of Digital Transformation and Cloud Services

In the fast-evolving landscape of technology, Chief Information Officers (CIOs) are not merely stewards of IT infrastructure but strategic leaders driving digital transformation and innovation. Understanding the pivotal role of cloud providers in delivering cost-efficient services has become imperative for organizations aiming to stay competitive and agile.

Embracing Digital Transformation

Digital transformation is more than just a buzzword; it’s a strategic imperative for organizations looking to thrive in the digital age. CIOs recognize that embracing innovation is not an option but a necessity to stay relevant. This paradigm shift involves leveraging technology to streamline processes, enhance customer experiences, and drive overall business growth.

One key enabler of digital transformation is the adoption of cloud services. Cloud providers offer scalable, flexible, and cost-effective solutions that empower businesses to adapt to changing market demands swiftly.

The Cost-Efficiency Paradigm

Traditionally, maintaining on-premises infrastructure demanded significant capital investment and ongoing operational costs. The associated skills required for managing these systems added another layer of complexity and expense. Here, the strategic role of cloud services becomes evident.

Cloud providers offer a pay-as-you-go model, allowing organizations to scale resources up or down based on demand. This flexibility eliminates the need for large upfront investments in hardware and provides a more predictable cost structure. CIOs appreciate the agility and cost-efficiency that cloud services bring to the table, allowing them to allocate resources more strategically.

Data Center Exits and Cloud Migration

According to a recent CIO Pulse Survey 2023 of IT leaders, a striking 40% emphasized the critical importance of continued migration to the cloud and data center exits in the next 12 months. This highlights a collective recognition among IT decision-makers that reducing IT costs hinges on embracing cloud solutions and gradually moving away from traditional on-premises data centers.

Data center exits not only align with cost-efficiency goals but also reflect a broader industry trend toward leveraging the scalability and performance benefits offered by cloud providers. By entrusting certain functions to the cloud, organizations can redirect resources to core business activities, enhance innovation, and maintain a competitive edge.

Shifting IT Cost Paradigms

The cost implications of cloud adoption extend beyond the obvious operational advantages. With the cloud, organizations can benefit from regular updates and improvements to infrastructure without the burden of managing these upgrades internally. This dynamic shift in cost paradigms allows CIOs to focus on innovation and strategic initiatives rather than being bogged down by the intricacies of infrastructure maintenance.

Furthermore, the cloud facilitates a shift from a capital expenditure (CapEx) model to an operational expenditure (OpEx) model. This transition aligns IT costs with business outcomes, providing a more transparent view of how resources are allocated and enabling better budget management.

Leveraging Cloud for Innovation

Beyond cost considerations, CIOs recognize the intrinsic link between cloud services and innovation. Cloud providers offer a rich ecosystem of tools and services that empower organizations to experiment, iterate, and bring new ideas to the market faster.

The ability to access cutting-edge technologies, such as artificial intelligence, machine learning, and data analytics, via the cloud, enables businesses to stay at the forefront of innovation. CIOs understand that innovation is not only a driver of growth but also a means to differentiate their organizations in a competitive landscape.

Looking Ahead

As we navigate the ever-changing terrain of technology, it is evident that CIOs are steering their organizations toward a future where digital transformation and cloud services are not just advantageous but imperative. The strategic importance of these initiatives lies not only in cost reduction but in fostering a culture of innovation, adaptability, and sustained business growth.

In the coming months and years, we can anticipate a continued shift toward cloud-centric strategies, with organizations leveraging the expertise of cloud providers to enhance efficiency, reduce costs, and unlock new possibilities. For CIOs, the journey involves not just embracing technology but harnessing it strategically to propel their organizations into a future where innovation and cost-efficiency go hand in hand. Learn how we can help your organization navigate the digital skies with wisdom and foresight, ensuring a seamless journey toward innovation and success.

How GICs have evolved from execution to leadership and innovation

GICs have evolved over the years in terms of scale and delivery capacity in addition to business acumen, leadership maturity, and credibility within their global enterprise. As a result, their performance and stakeholder satisfaction have both improved. They are now reaching a stage where they can more fully appreciate the numerous unique advantages of this in-house model.

Until recently, GICs were viewed as low-cost aggregators for IT services and backend operations. Today, GICs have evolved as innovation drivers and value contributors by making new things possible. Today, there are multiple business success stories where GICs have played an integral role in accelerating growth.

In a nutshell, GICs are moving from working at a lower cost to collaborating in solving some of your biggest problems. This is how the journey and evolution of GICs have been seen so far.

GICs growing in maturity and a shift from execution to leadership:

1.Cost & Productivity continues to be important.

Cost optimization & productivity continue to be a focus area, especially while kickstarting new GICs for global enterprises. Despite the growing focus on innovation, cost optimization is still a core expectation from stakeholders and GIC leaders have to continue to deliver it.

2.Innovation and Value Addition:

There are tremendous opportunities for GICs to add value beyond the traditional focus on cost & productivity in back-office processes. There is significant momentum already in building strong capabilities in new and emerging technologies. In addition, GICs drive product/service innovation in developing markets.

Also, many GICs are leveraging the cost and talent optimization advantage to extend services to new segments and markets that were earlier not viable to serve for the parent organization. This is a transformational opportunity not just for GICs but also for parent organizations.

3.The methods of governance are changing.

In the past, GIC’s operational models have been at either the extreme of the shared services or vertical integration spectrum. There are more sophisticated, hybrid operational models emerging as a result of the expanding scope of GICs. This makes governance and controlling the matrix in particular, more difficult. Also, the organization-wide distribution of GICs is changing. Business Heads are now frequently taking a direct interest in the GICs instead of reporting directly to the COO or the CFO. As a result, in the framework of their global organizations, GIC executives’ roles and responsibilities are also expanding.

How we can help?

The Managed GIC model, also known as the Virtual Captive model, delivers you all the strategic advantages of a Global In-House center while reducing your legal risks, securing your intellectual property, and resolving your ongoing management challenges. Additionally, having access to a talented staff pool allows your managed GIC to act as your company’s R&D and Innovation Center, which will benefit your bottom line.

We have years of experience delivering this model for clients, and on average, they save 30% or more in costs compared to standard offshore. Reach out to us for a free consultation and a price comparison matrix tailor-made to your skill needs.

The Virtual Captive value proposition for your enterprise

Historically, outsourcing has been associated with setups like captives of big corporations. These captives operate a full-fledged establishment in a low-cost location or managed services by a cost-effective Managed service provider(s) with exceptional capabilities to understand and execute processes. Managed services as a market have matured immensely in the last two decades. Established service providers with global footprints have proven their potency in managing operations, improving efficiency, and increasing margins big time.

The IT Outsourcing landscape has evolved immensely over the last few years. Historically, the two most common outsourcing models have been captives and the other being managed services.

Analyzing Captives Vs. Managed Services:

Let us analyze and break down the strengths and weaknesses of both these outsourcing models. Captives and managed services offer a distinct set of pros and cons.

The captive model offers operational control and transparency. It also enables a cultural alignment between the extended offshore IT team and the enterprise. IP protection is another primary benefit that captives bring to the table.

However, the Captive model has a much higher risk in terms of infrastructure setup. The captive model needs a huge initial investment to establish it from the ground up. The enterprise must take the onus of talent management- from acquisition, recruitment, and retention. Also, the responsibility of compliance with local laws and regulations falls on their shoulders.

When looking at the managed service model, the benefits and shortcomings of the captive model get exactly reversed. There is a lack of operational control, cultural alignment, and IP ownership/protection. However, the cost savings that the managed service providers offer are unmatched and are often the decisive factor in pushing their case.

So far, outsourcing decisions have been hanging in the balance of this pull-push phenomenon. Additionally, we have seen how turbulent the global pandemic has been over the last 18 months. COVID-19 has aggravated the need for better control and visibility of day-to-day operations with the entire world working from home, thereby pushing the case further in favor of captives.

The advent of the Virtual Captive Model:

Until recently, outsourcing decisions were on either end of the spectrum of both these models- either choosing a captive that offers control and ownership compared to managed services providers who come with cost benefits, and innovation.

The quest to extract the maximum value led to the advent of “Virtual Captives.” It strikes a wonderful balance between control, cost, and innovation.

A Virtual Captive model is a “people first” outsourcing model which is fundamentally all about providing the right talent at the right time and at the right price. Virtual Captive teams have more experienced resources and are a lower turnover model that offers better knowledge retention and intellectual property protection than 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.

Virtual Captive as an offering is undoubtedly poised to gain popularity and momentum in the coming times due to the sheer value and advantages it promises to offer. Virtual Captives will be of great utility to clients who intend to gain back control and ownership of already matured and transformed processes that have remained with a Managed Services provider for long.

Building Your Technology Talent Management Strategy to ensure Enterprise Success

Post-pandemic, enterprises have been largely impressed with how IT service and technology providers have stepped up in terms of improving commercial models and customer-centricity.

However, talent management has become a big issue of concern for customers. They want providers to be able to ensure resource availability, improve employee quality, and manage attrition – all while dealing with the Great Resignation and the current labor shortage.

In order to maintain customer loyalty and satisfaction, it’s essential for service and technology providers to focus on talent management and providing value-add and innovation.

For enterprises, talent management and attrition are key focus areas that they want their IT service and technology partners to invest in. Enterprises expect their partners to ensure that the right talent with the right skills is available to them at the right time and at the right price.

What are the Enterprises looking for from their IT service providers?

Strategic Partnership:

Enterprises want IT service and technology providers to be more than just people who give you a service or product. Enterprises want them to be strategic partners with whom they can have a balanced, forward-looking relationship.

Innovation and collaboration:

Customers are looking for providers who are open to collaboration and innovative ideas. They want providers who they can work with to jointly decide the best way forward.

Control and transparency:

Customers want to see that their IT service and technology providers are responsive and proactive with high customer-centricity. They expect transparency and flexibility in project management, delivery, and commercials. In other words, customers want to know what they’re getting for their money and feel confident that they can rely on you to deliver what was promised.

How can we help?

At Versitae and Systems Plus, we continuously plan our workforce while considering the various elements that affect talent acquisition and output. We also take a more all-encompassing approach to managing employee attrition. By being employee-centric and investing in learning and development, we improve employee productivity and build an employee-focused culture.

We help you build an offshore extension of your IT team of skilled technology professionals who have the experience and expertise you need to improve your development process and output.

Reach out to us to know how you can leverage our Virtual Captive model to drive enterprise success.

How Virtual Captives are enabling Next-Gen Technology Adoption

Over the last couple of decades, we have witnessed explosive growth in IT outsourcing and India has been established as one of the major offshoring destinations with access to a wide, low-cost talent pool.

We have also seen the nature of services provided through outsourcing has evolved from mere cost arbitrage to innovative, business outcome-driven service offerings leveraging emerging technologies and paradigms to drive strategic value.

A trend observed across the IT outsourcing landscape is that the managed GICs are set to enable and sustain digital transformation.

The managed global in-house centers are currently in the initial stages of digital service delivery maturity but are beginning to lead the way in driving greater value to enterprise transformation.

During this period, the nature of services provided through outsourcing has also transformed from mere cost arbitrage to high-quality, innovative, and strategic IT solutions.

According to Eric Gordon, strategic technology advisor, and Managing Partner at Versitae, “ The more technology becomes embedded with business processes, the more technology then becomes part of the ongoing business as usual changes that are required to keep up with changing customers, changing business conditions.

So, a business can no longer implement a technology system and then just run itself without touching technology for the next several years. Now, technology is embedded with the process, BI and analytics, consumer-facing digital, and in a lot of different ways. So as the business needs to change and evolve, then everything becomes a technology project partially. What that means is you must have the talent, skills, and capability to iterate and evolve, your operating capabilities using technology.”

Eric says, “One and done projects are good, or over. That is how technology was run 20 years ago. Today, as a business evolves, changes its website, and needs to attract new and different customers, there’s an ongoing churn of technology capabilities that must be built, maintained, and enhanced which naturally takes people and that costs money. And so, this is where the virtual captive comes into play. Suppose you need these teams, and you need these people with the skills on an ongoing basis. Why not put them in a virtual captive and use the cost advantages you gain by doing that, to get very talented people that can drive value for your business at the lowest total cost of ownership? That’s kind of the magic of what a virtual captive can do for you.”

Furthermore, they’re effectively your team and resources. It’s just they’re sitting somewhere else. It works like any other remote team. So, you have got full control of what they do and how they do it.

Eric strongly believes that Virtual Captive can facilitate the process of getting into the next-gen technology adoption for enterprises.

The virtual captive model given the cost advantage provides an opportunity for the enterprise to invest in newer technologies at a significantly lower cost structure. Adopting newer technologies involves a certain amount of trial and error, along with research and development.

In the new business landscape, every company is a technology company.

“Every company that the private equity firms invest in, they view as a technology play, and how they can leverage technology. Well, sometimes it involves an amount of experimentation. So, you can get that on a more cost-effective basis, by leveraging virtual captive, and in many cases, business leaders, look at the cost of domestic resources, especially technology resources as huge barriers to doing things and so many times they just don’t do things because they can’t afford it. They can’t afford to keep those technology resources on an ongoing basis. And here’s

where the virtual captive model brings a tremendous amount of capability and capacity at just a fraction of the cost. So, it opens the doors for a lot of things, especially next-gen technology adoption”, according to Eric.

The Virtual Captive model, also known as Managed GIC, gives you all the strategic benefits of a Global In-House center while mitigating your legal risks, protecting your IP risks, and solving your day-to-day management issues. Plus, access to a quality talent pool means that your managed GIC can serve as the R&D and Innovation Hub for your enterprise and contribute positively to your bottom line.

We have decades of experience in operating this model for clients where our clients achieve 30%+ cost savings on average compared to traditional offshoring. Reach out to us for a free consult and a free price comparison matrix tailor-made to your skill needs.

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