To Outsource or Go Captive – that is the Question

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H. Narayana Swamy

Partner and Director, CaptiveAide

Those who do not know this would be surprised to hear that there are over 750 companies (Source NASSCOM) that have set up their own IT and/or shared services operations in India over the last decade or so employing in excess of 500,000 professionals.

The fact of the matter is that India is the largest destination for outsourcing of a variety of software, infrastructure and business process services. Business process services themselves have such a wide range of areas and functions and range from the very basic voice based services to more complex knowledge services.

Over the last several decades the Indian market place has evolved in almost every sphere relating to business. The collective and truly globalized experience of the intellectual talent over these years coupled with the significant liberalization of policies and frameworks related to doing business, creation of world class infrastructure along with a hugely successful telecommunications industry, have been key contributors to the establishment of these global in house centers (or captives as they are colloquially called).

Is it really for everyone though? There continue to remain so many scenarios and situations wherein traditional outsourcing is the best method to get one’s returns. Besides, having outsourced all these years the benefits that now accrue may not be easily reproduced by a new captive operation.

Yet there could be strategic reasons why a company could decide to go the captive route. It could be because a company seeks Innovation from its offshore teams, it could be for developing a global talent and leader pool, it could be because the work itself is very strategic and so on.

How does a company go about determining the right path for itself? What are some of the metrics and considerations that it must take into account in making such a decision? Just like a build vs buy decision that companies make so often it’s a captive vs outsource decision that needs to be made.

And even if a company decided that captive was the right way to go how do they ensure that they get it right the first time around, risk free?

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