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Shell the latest multinational to insource IT offshore

Oil giant Shell is the latest large business to announce plans to insource its IT operations at a delivery centre in Bangalore, India

Oil giant Shell is the latest multinational to insource its IT – previously outsourced – with the opening of a global IT centre in Bangalore which will host in-house software development and cloud operations.

The centre in Bangalore will have about 2,000 employees eventually and will be a major delivery hub for the company.

According to reports in India, Shell CIO Jay Crotts said Shell is “on a path to insource our project delivery capabilities".

"Our concentration has been to bring it in-house to Shell and actually focus our delivery centre here in Bangalore,” said Crotts.

“We do in-house  software development  and we will  continue  and take advantage of the talent we have here to improve the processes. We will also bring in our IT cloud operations which will take us through middle of next year.”

Shell also plans to reduce the number of suppliers it uses.

The insourcing strategy mirrors what other large multinationals are doing. Companiessuch as AstraZeneca are setting up IT delivery hubs across the world to give them control of their IT and still allow them to take advantage of different regions.

Large companies today are setting up IT operations in different regions for different reasons including proximity to customers, access to skilled people and lower costs. For example AstraZeneca’s IT department is saving $350m (£243m) a year through an IT insourcing project.

Read more about offshore IT delivery

  • India is the prime location for offshoring IT – but it may not be the best fit for every business, and there are now many alternatives around the world.
  • The man heading up AstraZeneca’s project to insource its IT updates Computer Weekly on progress and explains the early benefits being reaped.
  • Daimler is planning to make savings of €150m a year by bringing IT services in-house and expanding its IT operations in India and Turkey.
  • As General Motors brings its outsourced IT in-house, Computer Weekly examines whether others will follow or whether it will prove a one-off.

India offers competitive advantage

AstraZeneca previously outsourced about 70% of its IT operations. But after deciding to insource in 2013, the pharmaceuticals giant began a three-year project in January 2014 that has seen it replace seven major IT suppliers with in-house resources. It also created global delivery hubs in India, Mexico and China.

Other large multinationals that have insourced include Daimler and General Motors. But these companies still want to benefit from offshore delivery and, in many cases, India-based expertise, according to Peter Schumacher, director at business consultancy The Value Leadership Group. He said there are cities in India where global technology companies, multinational businesses, investors and academics have converged to create ecosystems with IT advancement at the core.

He said Bangalore, Gurgaon, Pune and Hyderabad are now the places to go for IT brains, experience and capital – as well as research and development (R&D). He said setting up operations in these cities can yield a huge advantage, to companies of different sizes. “These cities have become the largest, most diversified ecosystems in the world.”

He said Shell had established three centres in India, in Bangalore and Chennai.

“While the advantages around cost-efficient knowledge-based capabilities and innovation are well-known, more companies now believe that India is evolving into a strategic platform for transformation and new competitive advantages,” added Schumacher.

“While US-based companies have traditionally been driving these trends, European firms like Astra Zeneca, Bosch and Daimler too are expanding their captive centers in India, many with a heightened sense of urgency.”

He said that, over the last 20 years, the talent pool in India has significantly developed and can now handle complex projects that companies might have previously kept onshore. “The India-based centres of many firms have moved up the value curve as measured in patent filings, number of chief engineers, and the ability to manage complex projects end-to-end.”

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