Tag Archives: captive center outsourcing
The Trends of Captive Center Outsourcing
Companies utilizing Captive Center Outsourcing has grown exponentially.
A survey made by Infosys on companies having outsourced captive centers states that an increasing number of Fortune 500 companies have started using captive centers as part of their business strategy in recent years. Many of these companies have even started utilizing captive centers as far back as more than 10 years ago when captive center outsourcing wasn’t that well known.
These companies come from varied industries ranging from IT, Telecommunications, Retail, Financial services and Software as some of the examples. Companies have exercised almost absolute control on these centers. This may have been because at that time, the technology of countries where captive centers were established weren’t at par with the parent companies from the US and Europe.
The Captive Center in Today’s Global Economy
What is a captive center? A captive center is generally defined as: An operation that is owned by an offshore company. The activities are performed offshore but are not outsourced to a third party.
Why do companies operate captive centers? The answer is simple: to cut down costs. The global recession has forced many companies to seek solutions to a decreasing influx of cash against a rising demand for products. The business model that was widely accepted more than 5 years ago was Captive Center Outsourcing.
In this model, Western companies can take advantage of massive cheap labor in Asian countries as well as the cheaper cost of infrastructure which these countries offer. Another advantage is that trade secrets are given security since the said companies still own the said captive centers.
During this time (5 years ago), the technology of Asian countries were deemed “inferior” compared to their Western counterparts. The Western companies also wanted as much control as possible in order for them to maintain their “edge” over their hired manpower.
