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Captives: Efficiency rules the game

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CIOL Bureau
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BANGALORE, INDIA: In any business be it BPO or IT, at the end of the day efficiency in addressing the customer’s requirements is utmost importance.

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Echoing the opinion of the panelists, Rajiv Ahuja, vice president, Call Center Operations and Back Office, AOL, said, “Captive centers may not take over the third party vendors or vice versa. Both will co-exist. At the end of the day, one who is efficient will continue to exist in this industry. It all depends upon how one runs the ship.”

Speaking at the session on “Captives: caged in inefficiency or leading the way?” at the Nasscom Summit here, Ahuja said that captives and third party vendors have to maintain the industry standards. However, captives stringently have to maintain and compete with global standards be it with process, infrastructure, productivity and policies unlike third party vendors who have the flexibility.

Nina Nagpal, head and general manager, Morgan Stanley Advantage Services, repudiating that captive is caged in inefficiency, she said that captive centers brings in its own advantages such as easier transition from practical to strategy, trust, data confidentiality, minimum risk, culture alignment, work opportunities, work mobility, career progression, being a part of global standards. The huge career opportunities in captives also in a way bring down the attrition rate.

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“We work in terms of one full time headcount productivity in global office is equal to one full time head count productivity in India,” she added.

Discussing about the pitfalls of the captive industry the panelists highlighted the threat of being consumed by the parent company and the cost involved in setting up a captive center.

According to McKinsey report, captives are 34 per cent more expensive than the third party vendor. Addressing the cost issue, Nagpal said, “One has to climb up the value chain given the environment and regulation constraints. Efficiency is the underlined theme and obviously cost has to be watched. If efficiency seizes, we seize to exist.”

“Value and capability comes at a higher cost, but finally it builds sustainability in the long term,” said Mahesh Mazumdar, senior vice president and country head, BPO, Fidelity India. “Further, while outsourcing, a company has to decide whether the work has to be outsourced or is it comfortable in doing on its own.”

Captive centers are only seven to eight years old in India. Around 300 captive centers have been set up in India in last two years in BPO as well as in IT sector. Captive centers are growing at a rate of 30 per cent per annum and employs around 50,000 employees and in future it continues to stay in the market.

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