Shattering The Offshore Captive Center Myth

The trend of establishing a firm's own facility — known as a "captive center" — in locations like India, China, or Russia continues to find converts. During the past two years, more than 300 North American and European companies started their own offshore setup to lower the costs of product development or back-office operations. However, the majority of the reasons firms cite for building their own facility versus outsourcing to a third party are flawed. Our research shows that in the majority of cases, it is driven by personal reasons such as an expatriate employee's urge to go back to India for family reasons. As a result of the lack of management support, spiraling costs, skyrocketing attrition, and a lack of integration, more than 60% of the captive centers in India alone are struggling. Based on how they score on Forrester's 10-question captive center self-test, firms have four captive exit options ranging from simply shutting down and going home to selling out to a third party.