Press has been replete with stories on the future and sustainability of captive operations in low cost geographies such as India. The questions being raised in the wake of captive selling (monetization) or conversion into third party service providers (commercialization) include:
- Are the captive operations sustainable going forward given the ever increasing maturity of the third party service providers?
- Is there a new paradigm for the co-existence of captive operations with third party providers?
- Will the new captives continue to be set up by parent companies?
All of these questions have one thing in common: change.
Captives that are unable to adapt and make adjustment in the near future will face a sustainability challenge. Others will re-think their operating model strategy and contemplate re-alignment to either “value play” and/or “efficiency play.”
Value play is defined as work that’s of high worth, high complexity, intellectual property sensitive, and/or critical to the core business, Efficiency play, on the other hand, is meant to mimic a third party service provider for transaction or commodity type work in terms of productivity or cost of operations.
In their process of migrating on the value curve, captives will consider India-to-India (i2i) contracting of the bottom of the pyramid. Such hybrids of captives and service providers create opportunities on all ends.
Question is: where will this take the outsourcing industry?
