By: Brian Smith, Partner & Managing Director, Financial Services, TPI
Today’s news that UBS has sold its captive to Cognizant is the continuation of a trend – following captive sales by Aviva to WNS in 2008, Citigroup to Wipro earlier this year, and AIG to HP-owned MphasiS in August. It’s clear that the idea that offshore services can only be provided from within a captive wholly owned structure is dead – certainly for IT services, and probably for most BPO services.
One of the big challenges with this type of transaction is that an internal organization suddenly becomes a third party – and that comes with associated management challenges that are often missed in the heat of executing the transaction. It’s a big change, but often slowly executed – in essence nothing changes on day one – but as the buyer seeks to leverage its investment, conflicts with the former parent can emerge. We therefore recommend paying a lot of attention to governance, and implementing a strong approach to governance from inception.
We anticipate that the trend of captive monetization will continue, and that the capabilities of the captives, once commercialized, will increase the maturity of the overall market – particularly in terms of domain expertise.
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