Will Companies Free Themselves from Offshore Captives?

Ann All

We blogged recently about the declining interest in establishing captive centers in offshore locations like India.


News that Citigroup reportedly plans to sell its captive BPO operation, Citigroup Global Services, appears to confirm this trend. A Banking Business Review article attributes the rumored move to rising costs, and names Capgemini and EDS as likely suitors.


However, a recent report from TPI, noting that the number of captive offshore operations being built still exceeds the number of those being sold, says that Citigroup's exit -- should the rumor prove to be true -- is "not necessarily a trend."


Though GE earned a hefty half-billion when it sold its stake in its offshore captive in 2005, a big rush of similar deals hasn't followed. And Citigroup's move is likely part of a huge reorganization of IT assets that the company hopes will help it cut spending by some $4.6 billion.


Still, TPI cites three "critical captive commercialization factors" that it says could kick off a more significant round of captive sales. They are: companies' desire to relieve themselves of "stranded assets" by offloading captives in favor of deals with third-party BPO providers; captives mature enough to spur buyer interest; and perhaps most important, visible valuations of captives, such as the one that will soon take place with Genpact's forthcoming IPO.


Of course, cautions TPI, Genpact may not provide an accurate valuation measurement, since its Six Sigma expertise and "pure scale" distinguish it from other captive operations.

Add Comment      Leave a comment on this blog post
Jun 20, 2007 11:46 AM Doka Doka  says:
I do not see this trend in Central and Eastern Europe: BT has recently announced its regional centre in Debrecen, Hungary. And there are plenty of newcomers in last year: SAP, Morgen-Stanley in Hungary, MS in Romania, Infinion in Slovakia, ... Reply

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