Why Captive Centers Are No Longer The In Thing

Captive centers can creatively excel a company’s existing capabilities by finding out newer avenues of success, streamlining operational objectives while lowering process maintenance cost and improving the overall capitalization while ensuring total operational sovereignty. The end result is obviously overwhelming: Improved process, reduced errors, enhanced security and best of all – great work @ low budget!  But, despite having so many benefits why companies such as Citigroup, Unilever, Deutsche Bank, Dell and AOL have sold or shuttered their dedicated offshore captives? A closer look into the metrics unveils a range of inter aligned possibilities and rational judgments; some very insightful, some really interesting! Continue reading…

Expectation vs. scalability: Every company that decides to venture out in a new country with its existing service/product naturally predetermines a set of relative expectations. The budget preplanned is compared with far sighted vision (initial test and run trail). The latter is then exposed to a set of challenges as diversely dissimilar as attrition, actual output, quality etc. Quite often, captives fail to stand up to the expectation because of their high expectation and low budget. The social, cultural, regional, and national sentiments and agenda play the roles of growth blocking agents, let alone the domestic mindset of internal resources. For example; a lowly known software development company is less preferred by local resources, if they are given the chance of working in a highly reputable firm that periodically develops software.

Real wages vs. genuine achievements: It’s true companies with high end product don’t mind paying fair salary to their employees – especially when the employees are representing benefits of their service. The same rule, however, doesn't necessarily apply for captive resources and even if it applies, it may do no good.  Fundamentally, companies are in the right standing, if their budget remains the same since this is the key reason of their arrival – but a local resource would genuinely expect to see a changed pay hike every year. As obvious as it can get, a captive would surely retain the resource throwing above the market rate, but if new responsibilities don’t match up with the hiked salary of the resource, expect what? The overall cost planning goes for a toss and it ends up with unstable, unorganized result.

Attrition vs. work: Perhaps a greatest decider of captive shutdown is high rate attrition. Despite having a far sighted vision, clear deliverable principle, and employee achievement programs, it is seen that captives experience a high attrition rate.  A top software developer when leaves a dedicated client project at the middle of expected benefits, a company not only experiences uncertainly relating to back up but also experiences a slowdown of further growth prospects for that particular project.

Co ordination with on site team vs. real results: Co ordination for project follow up is an ongoing process that is based on mutual co operation before everything else. Language barriers, lack of specificity, lack of management lead result in reduced level of influential co ordination with on site resources.

With captives having so many significantly productivity issues, the industry need a better and creatively balanced alternative. Offshoring is already in place and doing well. From cost saving to quality – offshoring plays a relatively influential role and we can expect it to creatively shape the trends. Don’t forget to read our next article: How offshoring can save the captive challenges: A detailed review on merits of offshoring and how it can play a decisive role in quality software development work.

Acetetch is an ISO 9001:2008 Certified Software Development Company; a global provider consulting, digital marketing and software development services.

Research inputs from:
OTS SOLUTIONS
IIT NEAR SHORE
CIO