‘They have been our partners for more than seven years, and they seem to take us for granted.’ ‘They hide,’ ‘We have no access’, ‘They want us to give them full control and ask no questions’, ‘We find them resisting everything we plan to do our way’.
These words came from various technology leaders who were describing the state of transparency with their existing technology service providers. ScrumStart survey finds that more than anything the CIOs are asking for transparency in dealings from their partners and the frustration increases when they see other options that are significantly transparent giving them more control and flexibility. Poor openness is one of the main reason for CIOs to push for their own technology captive companies in offshore locations like India that houses more than 75% global IT Captives and service providers outside the US.
The growing mistrust due to a perception of poor transparency stems out from the fact that alternate options are openly demonstrating better outcomes. Global corporates setting their captive in India are not only getting lower cost but also better control on the work they were getting from IT vendors. The cost-plus pricing and managing and close-knit nurturing teams have given tremendous advance to many companies having their technology captives. However, most of the CIOs still feel that working with a service provider is still a better bet because setting own captive is an expensive affair. Captives also require a change in mindset to harness the benefits of multi-geography and multi-cultural workforce that most of the CIOs find it difficult to commit. This is where their expectations for increased transparency with their partners come into play.
Looking at service providers, they benefit more with opaqueness than transparency. Replacing expensive workforce with a lower cost one at a later stage of a project is a common phenomenon that does not disturb the project outcome while increases the margins significantly. IT Companies also have started using tier three cities to develop IT development centers where they continue to play on margins with a critical focus on keeping the status quo at customer’s end. Most of the companies do not seem to take any notice of such shuffling that almost always happens without any knowledge of the customer. Most large IT companies also have policies to rotate the employee from one project to other. Such rotation of workforce serves only one purpose; maintaining or increasing the margin of the IT companies while customers unknowingly lose people who that have passed the knowledge of their systems.
It is a fact that employees with considerable experience in any company are more productive to greenhorns, and their experience makes them more expensive. However, expensive employees would only mean lower margin to IT companies, and therefore it makes all the sense to replace them with less expensive one on a regular basis and keep this exercise opaque from the customer. A Virtual captive or company-owned captive provides a fresh alternative to this increasing concern of the CIOs.
In one such discussion, a CIO was looking at setting up a captive in India and did not even approach any IT company for that matter. When he understood the option of a ScrumStart Virtual Captive that gave flexibility of a service provider and transparency of a captive, we heard him exclaim; “Excellent.”