Rising costs, attrition put 15% of MNC captives in exit mode
Smarting under mounting costs and employee attrition, about 15% of captive units of multinational parents are working on an exit strategy. India Inc's hotshots
By TNN |
MUMBAI: Smarting under mounting costs and employee attrition, about 15% of captive units of multinational parents are working on an exit strategy that could include a partial or full exit, says a latest report by Forrester Research on firms in IT and product development work. The captives that are looking for exit strategies are also older ones, operational for over four years.
In contrast, captive units less than a year old, are not contemplating any such move. In fact, they are not even considering outsourcing part of the work to third parties. Many captive units which have been around for between 1-2 years, have been using contractors to handle temporary spikes in their work. The majority of the captives (50%), however, fell in the third category which Forrester termed as ���Expectation Rationalisers���.
���Our research shows that firms reach this stage during years two and five. Captives in this phase are also challenged to justify their existence and struggle to prove their value. They desire to get involved in complex work, but their win rate of such high-end work is quite low,��� the report said.
The researchers polled 59 IT sourcing and product development executives and compared the findings with a similar study done in 2005. While 55% of responsdents intended to follow a ���captive only��� model in 2005, the percentage had dipped to 22% in the latest poll carried out in the first quarter of 2008. Most respondents in the latest survey, about 58%, favoured a captive-cum-partnership model.
In contrast, captive units less than a year old, are not contemplating any such move. In fact, they are not even considering outsourcing part of the work to third parties. Many captive units which have been around for between 1-2 years, have been using contractors to handle temporary spikes in their work. The majority of the captives (50%), however, fell in the third category which Forrester termed as ���Expectation Rationalisers���.
���Our research shows that firms reach this stage during years two and five. Captives in this phase are also challenged to justify their existence and struggle to prove their value. They desire to get involved in complex work, but their win rate of such high-end work is quite low,��� the report said.
The researchers polled 59 IT sourcing and product development executives and compared the findings with a similar study done in 2005. While 55% of responsdents intended to follow a ���captive only��� model in 2005, the percentage had dipped to 22% in the latest poll carried out in the first quarter of 2008. Most respondents in the latest survey, about 58%, favoured a captive-cum-partnership model.
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Ironically, even the percentage of respondents that favoured a ���partners only��� model also dipped form 11% in the older survey to 8% in the current one. The authors of the study led by Sudin Apte also observed that some multinationals, unable to find cost-savings in India, and were now trying other locations.
���Unable to find cost savings from their Indian captive centres, some firms have chosen to believe that the problem is India itself and decide to try another location. We see many firms repeating the same exercise again, but in different offshore locations such as eastern Europe or China,��� the researchers said in the report, warning, ���Without the proper business case and corresponding change management investments, these firms will witness the same experience in these countries as well.���
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