'India to have around 30 captives in 2-3 years'

BANGALORE, INDIA: Zinnov Management Consulting, a management consulting firm, today released a study on the IT captives, titled, “IT Services Captives Landscape in India - Way Forward”.

The study reads that the recent global downtime has resulted in some very key changes in the way business was being perceived until now. IT organizations are also going through a series of changes due to convergence of major technologies such as cloud computing, business intelligence, enterprise mobility and social media. As a result of these, the role of CIO is evolving to support business decisions and market penetration.

The study highlighted that the current IT services captive landscape is indeed bright with mushrooming of many captives in the recent past. The IT Services Captive market in India is expected to be US$ 3.4 billion for 2010 growing at a CAGR of 21 per cent from 2003. Even though North America accounts for a majority of captive centers, European companies, including some of the large banks, are increasingly leveraging India.

The study observes that before 2000, there were around 45 new captives in India. This number came down to 32 in 2002-03 and 22 in 2006-07. In 2008-09 there were only 5 new captives in the country, but in the next couple of years, the trend would go back to the 2002-03 scenario. The growth would be driven by cost escalations and headcount growth.

Also, companies like Tesco, Barclays have moved up the value to deliver high-value IT services. Going forward, the Indian IT landscape is going to witness a strong growth in IT Services Captives thus making it imperative for captives to adopt best practices and address challenges to deliver true value to the HQ organization.

Speaking about the report, Chandramouli C.S, director - Globalization Advisory, Zinnov Management Consulting, said, “The IT Services Captives in India have evolved over the years and surely moved up the value chain. With the total revenue of US$ 3.2 billion coming from them, Testing Services, Application Development and Maintenance (ADM) are the prime focus areas for these centers.”

Detailing the workforce involved, the study read that from a total headcount of approximately 1, 50,306, verticals like BFSI, software and telecom account for more than 75 per cent of the total installed base of talent pool within these IT captives.

“IT Services Captives are increasingly using their India delivery base to offer services beyond application development - such as testing, infrastructure management and consulting services. They indeed have helped CIOs keep up with both business and IT changes,” he added.

According to the report, IT vendors in the recent past have failed to address the changing IT needs of organizations, because they looked at developing expertise in ADM and infrastructure management, while their maturity levels in system integration and IT consulting remained low.

There is still lack of flexibility and agility amongst service providers; they continue to focus on maintaining margins either by increasing utilization or by hiring inexperienced low-cost resources, which makes attrition a key concern area. Also, the management bandwidth, including leadership skills at middle management levels, do not keep pace with the customer expectations, according to Zinnov.

The captive centers would therefore see a demand in terms of productivity to the HQ apart from foremost factors like cost-efficiency, access to talent, access to emerging/new markets and business process innovation.