When we search for the word Captives (also known as GCCs/GICs/Global CoEs), we find plenty of literature authored by distinguished writers, ranging from software integrators to analyst firms. These articles predominantly focus on how captives are evolving from cost centres to profit centres, while also dabbling in innovation and providing strategic business advantage to headquarters. With a 28.3B market size and 1M resources deployed, there is no denying that captives are now firmly entrenched in IT and business services landscape in India. Understandably, there is a lot of captive-friendly content being churned out by ITES & analyst firms who get a substantial percentage of their yearly run rate from the GCCs.

Today I will focus on a certain aspect of GCCs which is largely overlooked.

How do you sell into a Captive?

To elucidate, how does a salesperson from TCS/Infosys/Wipro/HCL/TechM/Accenture etc carve into the ecosystem of a large Captive like Daimler / Sony / Tesco / Wells Fargo / Honeywell / Alstom / Unilever or others? What are the tricks of the trade and what are the challenges? I shall be delving into a few aspects based on my experience and the narratives of close friends in the captive business.

Global Sales Superstars Tasked with Growing the India Business

A very common mistake made by global organisations. When they want to grow the captive business, they deploy a ‘star’ sales lead with global credentials, but one who is not very well versed with India specific nuances – mostly in terms of stakeholder management, billing model, procurement mechanism, recovery methods, resource supply chain etc. It is always prudent to deploy an India specialist, more precisely a captive specialist to do the job.

A Global Domain Centric model

It is wise not to manage the captive business from the Global ISU. There should be a dedicated India Business unit which should operate almost like a separate company/entity – replete with its own Recruitment, HR, Finance, Bench, Deployment, Sales, Competency Programs and other functions. Of-course it would leverage global capabilities and shared services wherever possible, but it should also be a distinct, independent entity with its own recruitment/salary/appraisal/deployment/relocation policies. The captive business is volume based – margins are low and driven 80% by staff augmentation and 20% by managed projects (approximately). While global customers score in terms of better margins, more diverse customer interaction and more globe-trotting opportunities for resources, captives offer a steady experience at certain phases of an employee’s career. If the captive business is managed within a global unit, many a times a star architect or the ace salesperson is pulled onsite, because it leads to chances of higher billing and margins for a more strategic global customer.

Sub-Contractors

Staffing is a big part of captive business. For example, say the procurement team shares a list of resource requirements to 10 vendors and all of them propose multiple resumes. The customer interviews the candidates and based on competency and billing rate (quite often it is optimized based on these 2 parameters), the resource is selected and deployed. Ideally, one should be able to provide the right resource within the right timelines at just the right costs. To achieve this, one can’t solely rely on bench strength. A strong ecosystem of competent subcontractors who would augment bench strength and mitigate risks is vital. It is always a good option to hire from the market while you anticipate the requirement, but this model has its share of uncertainties. Many a time, recruitment teams select the ‘right candidate’ to hire and send that candidate for a customer interview before rolling out the final offer, only to find the same candidate had been interviewed already by the customer through a competitor organization last week!

The initial entry

Grabbing a toehold in a new account is a sought-after skill, and very few salespeople have mastered it. Many of these competent salespeople (we call hunters) are not interested in firming the acquired customers but prefer to move on to their next target. Sometimes reaching out to the top executive within a growing captive (cold approach) works out, in other times one needs to get the first meeting with the help of some senior stakeholder who has some leeway with decision makers in the captive organization. Getting the first project/opportunity is always difficult. It’s a common practice to offer a few resources initially and based on their performance one gets the opportunity to deploy more resources or get the billing for the deployed ones. The relationship should be established at multiple levels like procurement, HR, competency managers, leadership etc. Sometimes, an executive sitting at the headquarters or a person in finance could be the gatekeeper, one needs to identify these prospects early in the sales cycle to be successful.

Billing & Recovery

Typically, procurement teams within captives are hard negotiators. This can be attributed to the fact that most of the procurement teams had worked on the vendor side earlier as sales or customer support managers before moving into the captive. So, they are well versed with the margins vendors play with and consequently put great pressure on them. While the salespersons from SIs mostly play around with a blended rate and try to adjust the pyramid to strike a decent balance between the top line and the bottom line.

Let me tell you about another scenario that is commonplace nowadays. Departments within organizations are more seamlessly connected because of sophisticated digital platforms. Earlier, regional procurement used to work in silos, but in recent times procurement for many organizations are being streamlined and consolidated to better leverage contract terms and commercials. India rate cards for SIs are different for captive and global deals (with an onsite / offshore component). Typically, captive rates are lower. Many a time the global procurement team from customers question this difference which needs to be justified to a reasonable degree. We give many reasons, one of them being infrastructure cost (seat/hardware etc) which we typically save on a staffing project for a captive, because the resource operates out of customer’s delivery center.

For a captive client, invoicing and recovery are smoother compared to a public sector customer but tougher compared to an onsite customer. In many cases, companies deploy a recovery specialist (or wasooli bhai!) whose job is to follow up with the procurement and finance to get timely payments. Without these specialists the DSOs would be seriously hit.

To Wrap up

These are just some of the subtler aspects of selling in a captive. I have covered only the perspective of large SIs here, who are selling into large captives. For tier 2 suppliers the story is a little different. Also, more and more global deals are being channelized through captive for better cost arbitrage. Engineering services-based captives have more opportunities around end to end deals. This gives rise to more deal-based selling. As a result, the ratio between staffing and managed services could change in the future.