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For Sourcing & Vendor Management Professionals

Shattering The Offshore Captive Center Myth

More Than 60% Of Captive Centers Struggle With Escalating Attrition And Costs

April 30, 2007

Authors

  • By Sudin Apte
  • with Allison Thresher,
  • John McCarthy,
  • Christine Ferrusi Ross,
  • Francesca Bartolomey

Why Read This Report

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.

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Table of Contents

  • The Number Of Captive Centers Is On The Rise
  • The Captive Center Reality Differs Sharply From Many Firms' Perception
  • Captive Turnaround Strategy Scenarios
  • Assessing The Health Of Your Captive Operation And Your Best Strategy
  • WHAT IT MEANS

  • Failed Captive Centers Will Raise Questions In The Near Term
  • Related Research Documents