Captive Centers Among Global 5,000 Companies to Increase Due to Satyam Saga

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Recent events at Satyam have created a period of uncertainty for all customers and many are looking for business contingency plan to ensure delivery of services

The India growth story is still strong. The fundamentals are still very attractive despite what has happened. We have an ambitious educated workforce, and most importantly, there is a lot of innovation that is taken place. The Indian offshoring story surely remains intact in the long run

The pace at which the recent developments at Satyam have unfolded have rattled not only its customers but the whole offshoring industry as well. Customers of all sizes are now worried about the known and unknown risks involved and the resulting impact that it would have on the delivery of their services.

There are multiple risks such as delivery discontinuities, team attrition, quality of service, insolvency of the vendor, loss of domain expertise, insufficient time for transition that customers should now analyze and take proactive steps to de-risk themselves from any potential threat to their own business.

Some suggestive scenarios' that customers can explore to emerge unscathed from the situation are:

  •      Exercise the 'Build-Operate-Transfer' (BOT) model to augment/setup their captive center.
  •     Exercise "Right to Hire" where the customers can talk to other service providers to rebadged employees and function as usual with minimal business risk.
  • Grow "other" vendor partnerships: For customers with multi-sourcing strategy, they can increase the scale of work with other vendors to perform similar services and simultaneously also evaluate new vendor partnerships that can provide best in class service.

"We now expect the clients to closely evaluate options of setting up their own captive centers or alternatively also opt for new vendor evaluation techniques. Infact for those who have operations for very many years now, we feel that it's the right time for them to consider options of having a direct presence or local program management offices for better control", said Mr. Vamsee Tirukkala, Co-Founder & Managing Principal, Zinnov LLC.

Setting up own captive surely emerges as one of most viable option. Some of the following attributes that would favor companies to setup/augment their captive centers:

1. Skilled Talent Pool: The size of the available talent pool in India has grown tremendously in the past 7 years. More than 2 million professional are currently working in the Indian IT/ ITeS industry. In terms of the fresh talent pool, there are about 650,000 science and engineering graduates passing out of colleges and universities in India. This is hence enabling companies to hire the required talent with relative ease.

2. Cost of Operations: Most offshoring destinations continue to offer huge cost advantages and in this case, countries such as India offer 50-70% of direct cost savings compared to the onsite locations. Also, salary inflation and infrastructure costs which were growing rapidly till early 2008 have stabilized in the past few quarters. Overall, increase in cost of operations has reduced to less than 5-6% per year for most of the companies owing to the global economic meltdown and maturity of the offshoring industry.

3. Low Attrition Levels: One of the rare advantages of the economic slowdown has been the reduction in attrition levels because of the uncertainty in the job market. Based on our estimates, the attrition levels have come down to less than 9% for the past year which is significantly lower compared to previous few years. Lower attrition levels have hence improved the level of domain expertise in companies as well as reducing the cost of operations.

4. Operations Maturity: Many large and mid-sized companies have had operations in India for the past 7+ years through multiple engagement models. As their offshore operations have grown over this period, management teams in these companies have acquired immense capabilities to manage remote teams efficiently.

5. Eco System: India has evolved as one of the most sought after offshore destinations over the last 25 years. India is currently host to more than 720 MNCs spread across 5 key locations and has evolved from being a low cost destination to an innovation sandbox over the last decade or so. Today, more and more organizations are maturing and using India center as not only a cost center but also for market access and innovation capabilities.

"The India growth story is still strong. The fundamentals are still very attractive despite what has happened. We have an ambitious educated workforce, and most importantly, there is a lot of innovation that is taken place. The Indian offshoring story surely remains intact in the long run", added Mr. Mr. Vamsee Tirukkala, Co-Founder & Managing Principal, Zinnov LLC.

About Zinnov LLC
Founded in 2002, Zinnov - meaning Zeal in innovation - is a leading management consulting company providing services in the area of Offshore Advisory, Market Expansion and Human Capital Optimization to Fortune 1000 and reputed SMB companies. We work collectively with clients to tackle prevailing Organizational challenges by analyzing the changing dynamics, improving performance, and building institutional capability. The services delivered to our clients through advanced reasoning and analytical techniques, provides solutions that help in integrating Organizational vision, business definition & processes.

For more information, contact:
Kinjal Chhetri
Zinnov LLC
Ph: +1-408-716-8432    

Michael Lindenberger
BOCA Communications
Ph:+1-415-531-1449

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Kinjal Chhetri
Zinnov
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