Captives? Really?

In her annual crystal ball report for CIO magazine, Stephanie Overby solicited input from various sources to compile ten outsourcing trends to watch in 2016. Among them, Alsbridge (Senior Director Randy Vetter, specifically) was cited as envisioning a resurgence of offshore captives, as client organizations seek to leverage the experience gained in working with outsourced offshore teams.

In the sharing of the article and discussion that followed, a number of observers responded to our observation, with sentiments ranging from mild skepticism to some who said, essentially, “Where can I get some of what you’re smoking?”

From our perspective, what’s driving the renewed interest in offshores is the opportunity to retain and leverage critical industry-specific knowledge. Not coincidentally, the clients we’ve spoken to recently who are interested in the captive approach are from the financial services, retail and hospitality industries – all of which face competitive pressures that increasingly require specialized business expertise.

Along these lines, Barry Mathews, Alsbridge Managing Director in the UK, reports that European businesses are looking to develop “Global Innovation Centers” (GICs) that operate under a captive model. In addition to leveraging the benefits of lower costs and flexibility, these initiatives are designed to enable “business intimacy” and bring IT closer to competitive imperatives. Mathews recently worked with a UK retailer to assess the feasibility and implementation approach for a new GIC.

Interest in business-focused GICs reflects a broader move toward “smart sourcing,” where enterprises selectively take specific functions back in-house; again, many of these are related to intellectual property management and business knowledge. Director Mary Patry examines repatriation and sourcing strategy in a recent white paper.

So, naysayers notwithstanding, we’re sticking to our guns. In any event, we’ll be on the hook in December, as Stephanie’s January forecast piece is always preceded by a cold-eyed look back at the past year, with predictions falling into the categories of “right on target,” “wait and see” or (gulp) “off the mark.”