When the software companies started off-shoring the product development work in order to cut their cost largely, it has been more than a decade. The trend is being followed by the companies around the globe to make the things easier and cost effective. More than 500 product companies have jumped from the offshore bandwagon and established captive centers in India, China etc. To have close control over the offshore R&d operations and thought they could make things easy and happening, the expectation of the company’s that have established captives.
The study showed that the interest of establishing captive centers is being decrease day by day. In the number of new captives that are being introduced, the challenges that captives are facing is resulting in a significant decrease. Some of the key challenges that the result in decreasing interests towards the captives are the following.
The Lack of Sales plays a major factor for the operations as it impacts every element of a captives performance: cost- attrition, productivity, recruitment etc. In country branding, the factor that plays a major impact. People always have a preference to be associated with the big names to grow faster.
The higher than anticipated costs, in here many companies are not willing to pay the good salaries to attract the top talent and the underestimate high G&A costs which can crush a small organization. The captives often pay high above the market rates throwing the entire cost model out of whack. The average cost of the captives are loaded almost 20 percent higher than the working with a provider.
In the high attrition its rates effects productivity and destroy the morale, the industry statistics show the attrition at captive centers is almost twice as high the average provider rate. The factors that are responsible for the captives attrition are Lack of career path opportunity. In the Poor Development Process and Coordination with the Onsite team, many of the organizations face difficulty in establishing a strong development process and implementing a productivity measures.
The management attention wanes that the major factor that harms the cooperation with the onsite team and captive centers are the difference in time zones, which it takes away the attention in focusing towards the core focus of the company. In the very beginning, everybody are excited but the management attention moves to the rest thing. In offshoring, the above limitations do not play any role. The offshoring just contracting with the another company or person to do a particular job functions. The firms are providing the outsourcing services are the third party providers as they are more commonly called. The services provides already well establish with the facilitating all resources and infrastructure that is required to carry out the development process.
Every companies evaluates a service provider before outsourcing the work this is based on the strategic thinking, this is inorder to develop the organizations philosophy about the role of the outsourcing in its activities, then evaluation and selection, this is done in oder to decide on the appropriate outsourcing projects and potential locations for the work to be done. Then the contract and development and the outsourcing management governance.
REFERENCE:
http://bookmarks.oneindia.in/category/Tech/advantages-of-offshoring-over-captive-centers/
http://examdoze.blogspot.com/2011/06/advantages-of-offshoring-over-captive.html
http://nagarro.blogspot.com/2010/03/advantages-of-offshoring-over-captive.html
