India and outsourcing often go hand in hand, but Danske Bank has chosen a different IT offshoring strategy. Last year the largest bank in Denmark announced it was setting up its own captive centre in Bangalore – and it is now finalising the move to in-house IT delivery.
Established in 2014 as Danske IT, the captive centre is ramping up operations as it moves to Danske Bank’s own IT facilities in Bangalore in August 2015.
“From the beginning, emphasis has been on integrating everyone into the organisation, resulting in a global workforce which will be part of solving anything from minor incidents to large development projects,” said Poul Møller, director for separate entities IT in Danske Bank. “In order to maintain the knowledge base in India, we solicited a large part of our workforce from ITC Infotech to Danske IT in India.”
IT services provider ITC Infotech – a subsidiary of Indian conglomerate ITC – has been working with Danske Bank as an offshore IT supplier since 2006. Danske Bank said the companies will remain partners.
Read more about global IT delivery
- Volkswagen (VW) is opening an IT development centre in Pune, India, to keep IT knowledge in-house while also benefiting from the offshore delivery model.
- The opening of an IT service centre in Chennai last week will kick off AstraZeneca’s bold insourcing strategy, announced earlier this year, and focus on a trend that is seeing large businesses invest in global delivery operations.
- India is still the best place for businesses to outsource services and is unrivalled in its scale and availability of skills, according to AT Kearney’s latest index, which ranks business services locations.
Benefits to in-house IT strategy
“Danske Bank has, for example, gained a profound level of experience and insight into running a business in India and we have built a strong partnership with ITC Infotech. This allows us to operate more independently by building global teams with our own IT professionals,” Møller commented.
Currently the Danish bank employs over 700 people in India, including its own and supplier staff, and aims to gradually increase the headcount.
The upcoming Bangalore centre adds to Danske Bank’s captive IT centre (also called "Global In-House Centres") in Vilnus, Lithuania. Danske Group IT Lithuania was established in late 2014 and employs 100 people.
Møller sees many benefits to the in-house strategy for an international company, (Danske has customers in 15 markets).
“A main benefit of a global in-house centre is strengthened competitiveness. We benefit from the ability to tap into skills and ideas from across our organisation. This gives us the necessary control we need over our intellectual property within the bank. We also benefit from a cost perspective,” Møller said.
Captive IT centres back on the agenda
Captive centres seem to be enjoying a comeback after a quiet period following the 2008 financial crisis. Among others, Volkswagen and AstraZeneca as well as Danske’s Nordic fellows Maersk Line and Novozyme, have now set up captive centres in India. In 2012 there were over 760 global in-house centres in India alone. In addition, other high-skill, low-cost areas – such as the Baltics, Malaysia, Philippines and Bangladesh – are gaining interest from global companies.
“Many companies have started to favour captive centres again because they were cutting too deep into their own knowledge base. They actually outsourced too much of their business knowledge and core knowledge. Now they like to have the essential understanding and competencies internally,” said Henrik Ringgaard, managing consultant at PA Consulting.
“They want to make sure they have the right knowledge base and that all business units really have the needed business understanding of their company.”
While Ringgaard agreed that captive centres are gaining popularity among very large companies, he said offshoring in the whole is a growing trend and is maturing particularly in the Nordics.
”We recently did a survey with Whitelane Research and were told more than 75% of delivery models in the Nordics include nearshoring or/and offshoring,” Ringgaard said. “What we actually tend to see is the pendulum constantly swinging from one model to the other when it comes to captive centres or not.”