Businesses who want to create captive centers in Singapore should consider a lot of things before starting up. Captive centers have its upsides and downsides and business owners should look it all up to weigh what is good for their businesses.

Captive centers are also called “in sourcing” centers because multinational companies made them in cheaper labor countries instead of hiring another company to do the work for them as off shoring does. The multinationals benefits through cheaper labor in captive centers compared to their main branches. Also captive centers are a way to separate there core and non core competency plus having full control of the company.

Cheap labor and the focus on core competencies on mother companies are the prominent advantages of captive centers in Singapore but these upsides have been downgraded by a lot of disadvantages surrounding this kind of company structure. For example, since the company has two kinds of paying structure, the standard and the cheap ones then there is a strong possibility of conflict between employees. Also the standard of input or production from cheaper captive centers might be low due to this reason.

Also the quality of human resources in captive centers may be not as good as companies have in the mother company. This depends on how the company fares in the global environment. Companies with no names find it harder to find quality employees because individuals with high qualifications tend to apply to multinational companies that have a name like Google, Intel etc.

All in all having captive centers in Singapore might be beneficial or disadvantageous to you. So it is very important that you weigh in all the advantages you can get from having captive centers and all the downsides of the structure. The success of your goal depends on the company’s decision making process which includes brainstorming all the possibilities that can happen in a single decision to be made.

Nearly in every corner of the world today you can see captive centers operating round the clock. It seems that they are all over the place now. From South Asia to East Asia, captive centers continue to be the main preference of different top organizations in this day and age so as to effectively meet their sourcing needs.

Various international companies these days set up Captive Centers in countries like India and China in order to leverage the offshore advantage of these nations and pool in resources to work for them. If truth be told, captive centers are unable to get by without the parent company for operation and business.

In the same way, parent companies are helpless without these captive centers in view of the fact that they provide reasonably priced and time-effective services to the conglomerate. Without a doubt, captive centers are really the true extensions of the onshore teams of the parent companies.

Individuals and businesses nowadays opt for captive centers because it’s cheap to run and at the same time it lets the parent company to benefit from full intellectual rights and onshore buy-ins. It also guarantees proper control of offshore processes, resources, costs and technologies.

Global corporations that have long-term and larger resource requirements%3b companies that require intellectual property protection and need strong delivery processes can actually set up captive centers. Captives would be highly beneficial for organizations with a strong brand presence and larger market share.

When you come right down to it, the benefits of establishing a captive outsourcing center are having a greater level of control over operations of the outsource operations. In some cases, a business only needs to outsource a specific, routine task, which is not core to the companies operations. On the contrary, captive outsourcing centers are an excellent option for companies that want to establish an offshore delivery center for core business processes.

For instance, in this day and age, customer service is recognized as a core business area for leading ecommerce companies. Because the same products can easily be found for sale on other websites, these ecommerce companies today are using high level customer support to keep their customers happy.

It would be simple to find an offshore partner to outsource customer service too. In some cases, with a staff leasing partner company, new customer support representatives could even be available within an hours notice.

However, while the ecommerce company may value the cost advantage of an offshore partner, they may feel hesitant to turn over such a core area of their business to a 3rd party partner. This could be because of the very special way in which they perform customer service activities, or it might be because they would eventually like to even have ‘ownership’ of this offshore center.

Captive outsourcing relationships often involve the understanding of a ‘buy out’ clause. This entitles the captive outsourcing center to eventually be taken over fully, and owned by the purchasing company. This guards against the outsourcing provider from acting against the interests of their partner, and also lets the buyer feel they are making a long term investment – rather than simply outsourcing a service for a current need.

Are captive centers in Bangalore dying? There is a significant increase in the IT industry in India these past years however, captive centers made by multinationals are slowly dying. What are the reasons for this? And what is another alternative other that captive off shoring in Bangalore?

We are aware that the primary reasons why multinationals opt to create their own captive centers in Bangalore are cost savings, quality improvement, and strategic reasons.

The two main motives to create captive centers would be to safeguard the company’s competence and/or of course a vision to transitioning the essential from tactical to strategic. The plan to go captive demands that you have sufficient size and scale that is sustainable in the long term, and in a way have the ability to compete with the outsourcing providers. Also, essential are the capability to integrate with the new outsourcing location in terms of setting up infrastructure, hiring staff, managing remotely etc.

However, even with these so called advantages, captive centres in Bangalore are failing due to the following reasons:

Lack of time

Lack of time is a major factor in the failing of captive centres in Bangalore and its relative to captive critical mass or CCM – Inexperienced managers and cross cultural issues could be significant factors for the failure of captive centers in Bangalore.

Issues concerning quality of work and production

This issue is about customer dissatisfaction due to security breaches, bad service etc
In the recent past, the Indian outsourcing industry has become extra efficient and their brand value sucks most good resources available in the market. Infrastructure cost is shooting up like anything in India and it appears quite unlikely that these rapid market dynamics featured in the original business plans which paved the way for captive centers in India. To give you a sense, the cost of commercial office space in Bangalore has quadrupled in 2002 – 2006.

Bad handling these kinds of events can be fatal to captive centres. Given the trend where in captive centers are failing, outsourcing partners need to think on how they can leverage this situation to their advantage.

In recent years an increasing number of Americans have visited the charming country of Vietnam for the first time. Unfortunately, they have been military personnel, government officials, and newsmen involved with the Vietnam War. I spite of the war, civilian travelers have not been banned from South Vietnam, provided they obtained required special visa. North Vietnam does not welcome Western tourists, particularly Americans.

Vietnam was mostly viewed as a state that depends on its agricultural exports and low-wage manufacturing. But that scenario has completely changed. Back in the day when Bill Gates, the founder of Microsoft Corporation visited Vietnam, he said that “there was no reason why Vietnam could not follow India into software development and other forms of outsourcing”.

In the past, Vietnam was identified as one of the unpromising countries in the world. In fact, it was in the business of making bicycles, shoes and clothes cheaper than anybody else. While established countries like India, the Philippines and South Africa were already up the race latching on more outsourcing business.

But now, it is already an emerging software outsourcing destination. If truth be told, the country has gained recognition as a low cost quality software maker in Asia. Vietnamese government is trying hard to boost its rising economy by pushing itself into higher-technology and higher-margin businesses. The

Actually, Vietnam is a top contender these days when it comes to captive centers. Factor like low wages, improving English-language skills and technical proficiency have made this country reach the top. Without a doubt, Vietnam has an edge over other top countries in offshoring and outsourcing such as when attrition and wages were getting higher in India.

Today loads of companies in North America employs over a thousand people across Vietnam through captive centers. And it appears that many potential investors had long sensed that Vietnam is equipped of doing much more after it opened up its economy in the late 1980s.

When you come right down to it, Vietnam is entering the main stream of outsourcing destinations. Perhaps it is time for you to consider Vietnam for your IT outsourcing and offshore software development too. As a matter of fact, Vietnam has long been a popular destination for offshore manufacturing, with many large American and European manufacturers establishing operations.

Malaysian captive centers have been booming since its inception. Outsourcing companies in Malaysia boost a 30% increase annual income according to industry sources and is expected to reach the $1.9 billion mark in 2013. This is due to the fact that big companies like Shell, HSBC and DHL setting up their own Malaysian captive centers.

Here are some of the reasons why multinationals decide to create their own captive centers on this country:

Growth in IT – most multinationals chose to create their own captive centers in Malaysia because of the knowledge advancement of human resources in the said area. The industry in Malaysia is driven by IT generally and it leads these multinationals to set up their IT captive centers in the country. Other companies such as IBM, HP, Apple and Sun Computer Systems set up their Malaysian captive centers to gain geographical advantage.

Multi lingual population – another main reason why this nation is attractive for multinational companies who want to set up their own captive centers is the advantage in language. The population of Malaysia is consists of a multicultural and multilingual based making it beneficial for multinationals. A lot of Malaysian speak and are proficient in the English language generally and other languages such as Japanese, Korean, Indonesian and Chinese.

Domain knowledge – People in Malaysia are knowledgeable in a lot of industries such as Logistics, Oil and Gas etc which make them possible and excellent candidates as employees to multinational companies in these sectors.

Support of the Malaysian government – The support of the government of Malaysia for outsourcing activities in the country plays a major role in the growth of the industry. This reason assists some multinationals to finally decide having their Malaysian captive centers in the country. The government support help in making the move of multinationals a rather beneficial action for their business.