August 21, 2011: It’s a booming period in the global outsourcing and offshore market as the expansion of captives in the sector is immense according to the latest trends.
There were reports earlier that the captives in the offshore market are diminishing, but a gradual change is being witnessed down in the market. The captives in the offshore sector are expanding in number and looking forward to deliver high quality service for the parent company putting to an end to the assumptions of negative trend with the captives.
As we know, captive is an entity formed to bring down the various risk factors faced by the parent company and to exploit the opportunities to deliver high quality service for parent company in the offshore markets like India. Companies prefer captives according to their choice, it depends on the requirement of the parent company whether they want offshore captives or onshore.
Captives are expanding and the offerings and services by them are also bringing in more business solutions for parent companies from its offshore portfolio. 37 new captives started functioning in the India within the past one and half years out of which 23 came into existence the previous year’s only; which is a very constructive indication of growth.
The positive trend in the offshore captives’ market will enhance the Asian business. When compared to Easter Europe and North America where establishments of new captives were expected, the Asian market is far better and has a favorable approach towards offshore captives. It could be expected that the trend of approaching a third party service provider for cost effectiveness would become a second option in the long run.
Today the multinational firms are more focused on quality business and excellent service which can also enhance internal functioning and strength of the firm. Captive provide many advantages to the parent company. Financial advantages are always there such as reduced insurance cost, protected cash flow and matching of revenue and expenses. Moreover the captives can also provide better risk management and flexible programs for the achievement of long run business objectives. This makes the companies depend on the captives in the offshore market rather than going for a third party vendor.
The upcoming trend will end up with a mutual benefit for both captives and third party vendors as the captive can learn more about the local resources availability and other benefits by maintaining the relationship with vendors. And it will benefit the third party vendors to become skilled by matching the superior capabilities of the captives.
Ultimately the growth rate in the captive sector is high which is calculated to be 10 % higher compared to the previous years. In the present scenario the spotlight is not only on cheap labor but also on quality service provided by the captives. Parent companies are more concerned about other benefits from the offshore captives than the obvious monetary benefits alone.