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Four Strategies for Offshore
'Captive' Centers
The global business environment
is a fast-moving one, and it requires large companies to adapt quickly.
So-called captive centers offer a striking example of this truism. |
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Captive centers are overseas subsidiaries set up by global corporations to
serve the parent company. They are an alternative to contracting out jobs to
an offshore provider.
Many multinational companies set up captive centers in India in the
mid-1990s, farming out tasks such as software maintenance and customer
support. In recent years, however, many have switched strategies for
managing these businesses. Some
companies, for instance, decided to sell their captive center's services to
outside customers—in addition to using the services for their own
needs—while others outsourced non-core tasks to Indian vendors to reduce
costs. Still others sold majority stakes in their captive centers to improve
the firm's operations and
financials.
We looked at 150 of the largest global companies and found that 80 have, or
had, captive centers in India. Of those 80 companies, 30% changed their
strategy for managing their
captive centers in the past six years, some more than once. We found four
major ways in which companies deviated from the basic captive-center
approach.
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