Unlocking the power of Virtual Captive Center: A comprehensive guide
- July 1, 2020
- Posted by: Anupam Shrivastav
- Categories: International, Offshore, SAP
A virtual captive center, also known as a virtual captive unit or virtual captive offshore, is a business model where a company sets up its operations in a foreign country without establishing a legal entity or a physical presence. It involves outsourcing specific business functions or processes to a third-party service provider while maintaining a high level of control and integration with the parent company.
In the context of offshoring, a captive center typically refers to a subsidiary or a dedicated offshore facility established by a company to carry out its operations in a foreign country. It allows the parent company to have complete ownership and control over the operations, including the recruitment and management of employees, technology infrastructure, processes, and intellectual property.
However, in the case of a virtual captive center, the company doesn’t set up a physical presence or legal entity in the foreign country. Instead, it partners with a third-party service provider to establish a dedicated team or offshore unit that operates as an extension of the parent company. The service provider handles the administrative and legal aspects, while the virtual captive center operates under the guidance and control of the parent company.
Some benefits of a virtual captive center include:
Cost savings: By leveraging the resources and expertise of a service provider in a lower-cost location, companies can achieve significant cost savings compared to setting up and managing their own offshore operations.
- Operational control: The parent company maintains control and oversight over the operations, ensuring that the processes, quality standards, and intellectual property are aligned with its requirements.
- Risk mitigation: Companies can mitigate certain risks associated with expanding into a foreign market, such as legal and regulatory compliance, by partnering with a service provider that has local expertise and knowledge.
- Scalability and flexibility: Virtual captive centers offer scalability, allowing companies to quickly ramp up or downsize their operations based on business needs. It provides flexibility in managing the workforce and adapting to changing market conditions.
- Talent access: Companies can tap into the talent pool available in the offshore location, benefiting from specialized skills, language proficiency, and cultural knowledge that can enhance their operations and customer service.
Virtual captive centers are particularly popular in industries like information technology, business process outsourcing, and knowledge process outsourcing. They offer an alternative to traditional outsourcing models by providing greater control and integration with the parent company while still leveraging the advantages of offshoring.