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Companies Losing Interest in Offshore Captive Centers

Ann All

Though most areas of the offshoring market continue to grow -- some quite strongly -- there is one notable exception.

 

According to a Forrester Research report cited in a recent CIO Insight story, American and European firms are scaling back on captive centers -- the wholly owned facilities that house offshore business operations -- and will continue to do so over the next few years.

 

A big reason for the declining interest in captives is their cost. Forrester found that monthly costs of a captive operation were $4,944, vs.$4,231 for a third-party services provider. Companies are alsoincreasingly confident in the abilities of offshore providers to handle sophisticated tasks, says the president of a software company that shuttered its captive in Bangalore.

 

Some big U.S.-based companies are making big bucks by selling their captives. GE scored $500 million when it did so in 2004, not an insignificant boost to the bottom line.

 

Compliance-driven sectors such as financial services remain inclined to use captives because of their need for close control and tight security.


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