To understand the virtual captive outsourcing model, it is important to fully understand two other service delivery models for offshoring: captive and third party outsourcing. A captive is an offshore extension of wholly owned by a company. Its benefits include full control over operations and the other advantages that come with growing the business with a team in a different geographic location: quality labor at lower costs, risk mitigation, etc. However, this would require a large amount of investment and a long-term commitment, which would entail high risks. On the other hand, in third party outsourcing, another entity owns and manages the offshore equipment provided by the company. The provider here takes care of the entire setup process and manages offshore operations as it runs. While there is less risk, even almost zero, to the company, they also relinquish control of their equipment abroad.
Fortunately, there is no need to weigh the pros and cons, because there is a virtual captive, or hybrid model, that combines the benefits and strengths of the two models. It makes use of the expertise, facilities, and other resources of an outside provider, and the good news is that decision-making power and control remain in the hands of the parent company. The parent company is free to customize operations to its preferences. Also, once you set up a virtual captive, some providers will allow you to take full ownership, from administration to all other processes. As the offshore team grows in number and company processes stabilize, it is possible to take over the property through a Build-Operate-Transfer agreement.
The Philippines, which has proven to be a major player in outsourcing, is the perfect place to set up a virtual captive. A virtual captive in the Philippines will allow you to select Filipino talent to build your team abroad, as well as mitigate risk and save on capex through this setup.
A virtual captive in the Philippines is the best way to start with offshoring. A virtual captive can be established in Manila, the capital of the Philippines, in a matter of weeks, depending on a provider’s expertise, management and infrastructure, and easy access to new talent.
