Friday, July 18, 2008

Freeing Captives

No, this has nothing to do with prisoners, but ITES. Companies that opened captives in India are slowly selling them to third party providers, reports BW. Is there anything wrong? Nope. It is business as usual.

Arriving at a decision to run a captive in India is part of the "make or buy" decision that I am sure these companies must have undertaken at the outset when they set out to create captives in India. Chief among them would have been considerations of "how third party services are making money out of us" and "how we can beat them at their own game". Also would have included "we cannot let anyone access our sensitive data and proprietary algorithms" and "we can retain good employees rather than let them go from our account with the service providers" it would have given them a nice rosy picture. There is nothing wrong with this picture - it usually ends up deciding in favour of "making" your own captive when there is a critical mass.

Now, that the US economy is getting the jitters, the critical mass which companies dreamed of a few years back seems to have reduced, which is why the make or buy decision is now, closer to buy rather than make. Also, a lot of this will apply to those who have sent excess work out to India - using India to handle spillover and surge capacities - who suddenly find themselves with an excess work force. This is not so much of a trend, as much as it is part of a business cycle. Also, no captive can survive unless there is some sort of critical mass at any location that they are at. Who has the critical mass? Those service companies? The same ones you said would stagnate their way out of business? Yes.

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