June 9, 2011 8:15 AM

TPI has recently concluded its third annual captive benchmarking study in India. To enhance benchmarking results and analysis, in addition to cost factors we included operational and process complexity parameters to identify key industry trends and actionable insights for the participants.

To enhance benchmarking results and analysis, in addition to cost factors we included operational and process complexity parameters to identify key industry trends and actionable insights for the participants.

Here are the TPI Top 5 trends and observations from the study:

1.  Adoption of global service delivery model. Captives have diversified their geographic portfolio by going beyond the typical captive locations. Parent entities now look to leverage the cost arbitrage offered by combining operations in Tier 1 and Tier 2 cities, with the median participant having delivery centres in more than three low-cost locations. They tend to identify a specific city to source best-of-breed skills for their operations, such as Delhi NCR for KPO, Bangalore for applications development and maintenance and R&D, Chennai for IT infrastructure, etc. We also note an increasing trend of multicountry/multiregion captive presence for large companies.

2.  Increasing prevalence of hybrid delivery models. Previously captive-centric parent entities have increasingly taken notice of the relative value of the services offered by third-party service providers. As a result, the captives have evolved to shift or implement hybrid delivery models (blend of their own captives and third-party providers) by utilizing third-party providers to perform non-IP-sensitive processes. The construct of such a hybrid delivery model can be either co-sourcing (co-existence of captive and third-party units) or India-to-India (captives leveraging third-party units for team augmentation while retaining overall project management responsibility).

3.  Constant challenge of cost efficiency. With the adoption of hybrid sourcing models and increasing cost optimization objectives, captives have strategically used attrition at the lower end of the resource pyramid to optimize cost and technology/telecom costs by adopting solutions like Cloud Computing and utilizing optimized terminals and virtualization.

4.  Familiarity with emerging locales for core business. Parent entities are leveraging their captive setups for effective market entry of core business operations by familiarizing themselves with the local markets and using the captive platform for delivering services to support the domestic-market business.

5.  Source of talent for global business. Captives are enabling their parents to successfully acquire domain experts and talent for their core business operations globally. Captive personnel with demonstrated expertise have moved across parent entities to either lead operations in other geographies or to assist in scaling up such operations.

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TPI is the leader in guiding organizations through effective, lasting transformation of their business support operations. Around the globe we have helped hundreds of clients reduce operating risks, streamline complex operations, improve the cost of support functions, achieve sustainable improvements and make competitive gains. Decisions to change and successful transition of existing operations to new service delivery models is hard — and replete with risks. While the decisions are never formulaic, the hard-earned lessons of hundreds of prior evaluations are invaluable.

Posted by Sue Ansell at June 9, 2011 8:15 AM

Categories: Outsourcing

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