Bhoo wears the thinking cap!

As if that is possible!

Why I want to set up a captive center – An ISV’s perspective

Posted by bhoo on September 12, 2006

It was interesting.  The very next day of my meeting with this country head of the  Captive Centre, I met this other man who has setup and been running an offshore “outsourcing” operation for a mid-sized ISV since last year.

They had started with 10 people and have grown their relationship to 70 people.  He was mentioning that he is pretty happy with this outsourcing company based out of Hyderabad.  (We had bid for this project and lost.  To our credit, he was mentioning that he was very impressed with Aspire Systems, but the infrastructure that time was a huge drag.  He said, if he were evaluating companies now, he most likely would have chosen Aspire what with the new infrastructure.  The very fact that he made a special trip to Chennai just to meet with myself and Gowri showed us that he meant it.)

He was saying that he had been and is continuing to advise his company to go captive in India.  His arguments were pretty valid.  While it is a disadvantage for me to mention those points given where we are in our business, it is only fair for me to share what I heard.

He was saying that the relationship is likely to grow to 200 people or more.  What that means is that the economics of scale will be building quickly.  While there are arguments about when a captive centre becomes viable, (500 or 1000 people is the usual advise) his perception was that it will be viable when they become 200.  He was also mentioning that all his company has to do is to hire somebody like me or Gowri who have experience in running an offshore operation, to eliminate the problems associated with outsourcing.

He was saying that to lock such a huge percentage of their critical development operation to the fortunes or misfortunes of another company is looking risky for him.  What control do we have if this company goes belly up or gets acquired or changes business direction etc?  That was his question.

With due credit to his opinions I have some arguments that favor companies like us.  We have a business model that is non-conflicting with our customers.  We have a sound business plan that is very long-term oriented.  We don’t plan to change business direction or go belly up.  Going by our stability for the last 10 years in highs and lows, it is natural to expect that we should be there.

Moreover the kind of risks he talks about is not “non-existent” in a captive Centre.  In this age of mass exodus and two digit attrition nobody can feel safe about any such thing.

This person who is a very smart executive is feeling a little bit constrained that his company is not allowing him to set up a captive unit.  In any case, he was mentioning that he has B. O. T. clauses built into his contract.  So it appears like he is indeed safeguarded against such mishaps, isn’t it?

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