Turning Captive Centers into Third Party Ones

There is a distinct trend in the Indian BPO scene when many global corporates exit out of their own captives preferring to sell them to Third-Party providers.

This transition usually comes as shocks to all concerned - the global corporate, the employees of the center and the third-party provider. Many classy BPO providers have extensive experience handling these these transitions with ease but still these are some of the typical problems encountered:

a. Cost Structure: Many captive centers are used to a higher cost structure than third-party providers. They have dedicated IT folks while third-party providers have IT costs spread across many many engagements. In general the attitudes towards costs is a shock to everyone.

b. Attrition: Because of cultural differences or in general, unease with the change, many people may decide to leave, especially good ones!

c.Culture Change: Captive centers have a culture of serving internal groups. Third-party providers have a culture of being scrappy to land engagements. They may not be used to the speed and efficiciency with which some of the third-party providers may move compared to the captives.

d. Emphasis on Performance: Many captives have a very streamlined, disciplined approach to performance measurement, reporting and analysis but many may have a lax attitude that may be different from the culture of the third-party providers.

Captives transitioning to third-party comes with its own advantages, but invariably, the transition period may be marked by culture shock and procedural changes on how work gets done.

Tags: Captive, Third-party, providers

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Comment by Nari Kannan on January 14, 2010 at 10:58pm: People who have been comfortable working for Global Bank X in their captive center will probably be more comfortable working for Global Bank Y Captive Center in the same town or even be prepared to move to another town so that they can work in a similar environment. No point in chasing after such people. In most cases, what I have seen is massive change at the top with the third party management moving in a complete senior management team replacing the older one. It is easier this way rather than fighting captive center- third party company cultural battles. Then this team gets rid of middle management that does not buy into their way of doing things and promote others that buy in. This is what seems to be happening in practice, no matter what fancy HR doublespeak is spoken! Senior management and middle management in good captive centers easily get placed in other places so this is not a traumatic thing or anything, at least in India.

Comment by Donald Kelly on January 14, 2010 at 8:55pm: Hello Nari,

I agree with many of your points concerning the trend to exit from a captive set of employees to a Third Party provider. You mentioned several difficulties that transitioning workers might face in such a move;

An increased awareness of cost control
Increased need for speed while maintaining acurracy
Adapting to new attitudes
Encountering significant changes in procedures

As you mention, these can result in some employees deciding to leave the organization, taking valuable skills and knowledge with them.

What mechanisms or policies have you seen Third Party providers put in place that would lessen the impact so that employees decide to stay rather than leave?

Don Kelly

Comment by Rajat Verma on January 13, 2010 at 12:35am: Got the point ! I have been reading your blogs for quite a while, you have an interesting flow of thoughts... I really liked this one : You want Process Performance Reports? - Provide Raw Data to BPOs Fi...

Comment by Nari Kannan on January 13, 2010 at 12:30am: When you serve only internal groups, your marketing and selling capabilities may not be as finely honed as a third party vendor. You may also not have as much emphasis on margins and profits. You may have to train your people or bring in new people with those skills!

Comment by Rajat Verma on January 13, 2010 at 12:22am: I couldn't get this part - "Captive centers have a culture of serving internal groups. Third-party providers have a culture of being scrappy to land engagements." Otherwise an informed post !

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