In the beginning there was the word and the word was: “We can’t find enough IT staff in Belgium, lets go look elsewhere”.
So begins the first entry in Tom Geudens’ blog, Colruyt India – Times.
And Belgian retailer Colruyt’s claim that it has been unable to fill 150 IT vacancies at its head office in Halle has certainly been raising a buzz in the local media, and raising concern within the unions.
In any case, whether it was economic factors or a genuine issue with staffing or expertise shortages that lead Colruyt’s IT subsidiary Infoco (Informatics Colruyt) to begin working two years ago with IT specialists from TCS (Tata Consultancy Services) and NIIT (National Institute of Information Technology) in India, what had become clear by mid 2006 was that working with delocalised resources was becoming not only increasingly key to Colruyt, but also increasingly difficult to manage remotely.
In June 2006, CIO Philip Cattrysse announced that in parallel with ongoing work with TCS and NIIT, a feasibility study was to begin evaluating the possibility of setting up a Colruyt-managed Indian company “to have more impact on the cooperation with Indian IT staff.”
Clearly the control and coordination of remote staff was the key difficulty Colruyt had been facing. Six months later, Cattrysse communicated the results of that study.
After a thorough feasibility study in the past months I’ve decided – mainly to have better control on cooperation with Indian IT staff – to start a small IT Captive Center in India in 2007.
By early March 2007, Colruyt IT Consultancy India Private Limited was set up as a legal entity and subsidiary of the Colruyt group, and by the end of that month a lease had been signed for office space in Hyderabad, a city of 7 million and one of the emerging IT hubs of India. As of early July the offices have been cabled, equipped and furnished, and staff on-take and training has begun.
Belgian financial newspaper l’Echo reported earlier this week that staff levels at Colruyt’s new centre will eventually be ramped up to around 100 in order to support a 75 million euro 10 year IT change programme the retailer plans for core enterprise processes such as buying, sales and logistics.
I think this is going to be an interesting experiment to follow. While outsourcing to Indian IT service companies such as Wipro, Infosys, Satyam and NIIT has become a common approach for European companies looking for cheaper IT resource and expertise, this is one of the first cases I’ve seen in the retail world of an off-shore IT insourcing venture. I can understand the attractiveness of the greater degree of control this approach should provide, as well improved communication of corporate culture, vision and priorities to local staff. It remains to see how this plays out in practice.
The IT landscape in India is littered with failed examples like Colruyt. All one has to is look around. While the intentions for setting up a small captive IT set up are good – better control, better management, better integration with home base etc; running and sustaining a small set up far away from home is very difficult with 30% attrition rates, shortage of talent, escalating operational costs etc.
Absolutely. It is clear that Colruyt has a challenge ahead. Building a new centre, attracting talent, these are relatively straightforward compared to talent retention, balancing remote management vs. delegated management for ongoing operations, and so on. I hear that staff turnover for this sort of setup tends to be high, hitting ongoing recruiting and training costs. It would be interesting to see Colruyt’s ROI calculations.
The only other case I know (there may well be others, I am new to the topic) of a retail company building a captive offshore IT centre is Target, whose Target Services India has by all reports been quite a success. One key factor to that success has been the amount of local third-party input that Target brought on board from the outset to ensure that barriers could be lowered, risks mitigated and expertise recruited and retained.
Your comment on “shortage of talent” caught my eye though. Colruyt’s main stated aim in establishing a foothold of its own in Hyderabad is to take advantage of a pool of resource and expertise that is simply not available back home (the shortage of available IT resource in Belgium is quite real). I would sincerely hope that Colruyt has taken the time to analyse the labour market in Hyderabad, and its ability to supply the expertise and numbers required by Colruyt, before committing to this venture.
Captive centre’ are a failed business model. I am not sure why people are still relying on this model when they already have specialised companies doing this for them at fraction of the cost YoY.
At end of the day, Colruyt India is a big success guys.