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HOUSTON and LONDON (August 31, 2007) — According to a just-released Perspective paper from EquaTerra, many variables dictate whether captive offshore (e.g., buyer owned and maintained) shared services operations are a preferred alternative to internal domestic shared service centers or third-party outsourcing.

The paper, entitled, “Assessing the Role of Captive Operations in Global Services Delivery Models”, stated that G2000 organizations must assess a broad range of factors, including operating costs, attrition rates, and economies of scale, as well as industry-specific factors and the competitive landscape, when evaluating their captive center operations.  Failure to adequately account for  these factors frequently results in an under-performing captive center that becomes a catch-all for non-essential work sent piecemeal by managers with short-lived interest in using the center.  Further, operating without a strategic goal, captive centers fail to cultivate a culture of continuous improvement which not only negates their value to the corporation but may also cause significant and costly operational challenges.

EquaTerra estimates that over 300 western organizations currently have captive operations in India alone, and expects the growth of offshore captive operations to continue to grow upwards of 30 percent annually.  Given these growth levels, buyers must clearly determine how to assess performance levels, identify the best means to drive performance improvements, or seek alternatives to existing operational models.  These alternatives include Realignment; Partnerships; Hybrid Partnerships; Virtual Captives; and Divestiture.

Concluded paper co-authors Cliff Justice, EquaTerra’s Managing Director of Globalization, and Stan Lepeak, EquaTerra’s Managing Director of Research, “Organizations that have deployed or are considering deploying offshore captive centers need to clearly define what services those centers can best perform and whether they can do so more efficiently and effectively than a third-party.  This bundle of services will change over time and, in some cases, outsourcing may become preferable for more routine activities while the captives handle specialized services.  The bottom line is that buyers must carefully examine their offshore outsourcing strategies to determine the route to maximum value.”

The paper also provides further insights into the pros and cons of captives, a pulse-check on captive center performance, and strategies to generate maximum value from business process outsourcing (BPO) and knowledge process outsourcing (KPO.)

To obtain a copy of EquaTerra’s “Assessing the Role of Captive Operations in Global Service Delivery Models” perspective paper, please go to:   http://www.equaterra.com/KR/research/assessing-the-role-of-captive-operations-all.aspx.

EquaTerra sourcing advisors help clients achieve sustainable value in their IT and business processes.  With an average of more than 20 years of industry experience in over 600 global transformation and outsourcing projects, our advisors offer unmatched industry expertise.  EquaTerra has deep functional knowledge in Finance and Accounting, HR, IT, Procurement and other critical business processes with advisors throughout North America, Europe and Asia Pacific.  We help clients achieve significant cost savings and process improvement with outsourcing, internal transformation and shared services solutions.   For more information on EquaTerra, please contact Lee Ann Moore at +1 713.669.9292; leeann.moore@equaterra.com; www.equaterra.com.