Tag Archives: offshoring
Advantages of Offshoring Over Captive Centers
To basically cut down costs, most business enterprises these days have already started offshoring their product development work. In fact, they did this for over a decade by now. Actually, many companies around the world get this idea and followed it so as to make things easier and cost effective.
Nowadays there are already over 500 product companies that have jumped from the offshore bandwagon and established captive centers in South Asia and East Asia. The expectation of the company’s that have established captives is to have close control over the offshore R&D operations and thought they could make things easy and happening.
Despite that, the interest of establishing captive centers is downsized day by day according to studies. The challenges that captives are facing is resulting in a significant decrease in the number of new captives that are being introduced. Some of the key challenges that result in decreasing interests towards captives are:
Lack of Scale – This one of the key factor for operations as it impacts every element of a captive’s performance: cost, attrition, productivity, recruitment etc. The factor that plays a major impact is in-country branding.
Higher than anticipated Costs – captives often pay high above the market rates throwing the entire cost model out of whack so as to scale up. Hence the average cost of captive’s are loaded almost 20% higher than working with a provider.
High Attrition – High attrition rate effects productivity and destroys the morale. Industry statistics show attrition at captive centers is almost twice as high as the average provider rate.
Second-class-citizen status – Many companies treat their captives as their low cost offshore teams. For this reason, this causes low morale and breaks the loyalty bond towards the organization.
Poor Development Process and Coordination with the Onsite team – Many organizations face difficulty in establishing strong development process and implementing productivity measures.
Management Attention Wanes – If truth be told, the difference in time zones is actually the main factor that troubles the collaboration with the onsite team and captive centers. It takes away the attention in focusing towards the core focus of the company.
