The Captive Model for Offshoring Is Thriving, Says Research Firm

CIO: In recent years, several large firms have shut down their wholly-owned offshore IT and business process centers, leading some observers to predict that the captive model for offshoring was on the decline. However, a new report from Everest Group finds that the reverse is actually true. The researchers reported that in 2010, 10 new captives opened and 13 expanded, while only two closed down.

Eric Simonson, Everest Group’s managing director, says the model is likely to continue to thrive for two reasons: “First, it is a large part of the market, representing about 25 percent of delivery within India. Second, the model is different from third-party models and that is not widely understood. A captive can not only deliver the typical services of a [third-party] service provider, but also many other services which are just part of the normal business. In effect, a [captive center] is a corporate campus which happens to be based offshore.”