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Global offshore captive landscape and trends - preview deck - feb 2012
 

Global offshore captive landscape and trends - preview deck - feb 2012

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Background and Context ...

Background and Context
The global sourcing market has evolved and grown rapidly to reach a size of ~US$116 billion. Captives have been a core component of this evolution with companies such as Texas Instruments and GE setting up offshore captive units in the late 1980s and early 1990s.
The last 15-20 years have witnessed increasing adoption of the captive model with a large number of companies setting up/expanding their captive centers. While India continues to remain a leading geography, companies have also explored and successfully established captive operations in China, the Philippines, Central and Eastern Europe, and Latin America.
However, due to the significant growth of third-party service providers and selective divestures during the economic crisis has led to the perception that the captive model is under threat. Stated reasons include captives are not delivering value and are significantly more expensive than third-party service providers.
At the same time, mature users of captives articulate their commitment to the model and reinforce its importance in their sourcing strategy and portfolio. In addition, our discussions with global sourcing offices of large companies and captive leadership reveal imperatives under way to expand the role of captives and their value proposition.
This research report provides an in-depth analysis of the global offshore captive landscape across leading locations. The report is based on Everest Group’s proprietary captive database and is updated every six months. Besides providing details on global captive landscape trends and analysis, the report also contains a focus section that provides deep-dive of the captive landscape in a select geography. This report edition features the Philippines as the focus geography.

Scope
This research report leverages Everest Group’s proprietary captive database, the industry’s most comprehensive database on captives. The analysis is based on captives providing offshore delivery of global services, and excludes shared service centers of companies that serve domestic markets
• The data and Everest Group’s experience have been supplemented adequately by interactions with captives and service providers on key topical themes of the study
• This report is applicable to a broad set of stakeholders - buyers, service providers, captive organizations and industry influencers (investors, industry bodies, etc)

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    Global offshore captive landscape and trends - preview deck - feb 2012 Global offshore captive landscape and trends - preview deck - feb 2012 Presentation Transcript

    • Topic: Global Offshore Captive Landscape and TrendsFocus Geography – The PhilippinesGlobal SourcingReport: February 2012 – Preview Deck Copyright © 2012, Everest Global, Inc. EGR-2012-2-PD-0661
    • Our research offerings for global servicesSubscription information Market Vista The full report is included in Global services tracking across functions, sourcing models, locations, the following subscription(s) and service providers – industry tracking reports also available – Global sourcing Banking, financial Finance & In addition to published Procurement services, insurance accounting research, a subscription may include analyst inquiry, data cuts, and other Information Recruitment Human resources services technology process If you want to learn whether Service provider Transaction your organization has a Global sourcing Intelligence Intelligence subscription agreement or request information on pricing and subscription Custom research capabilities options, please contact us:  Benchmarking | Pricing, delivery model, skill portfolio – info@everestgrp.com  Peer analysis | Scope, sourcing models, locations – +1-214-451-3110  Locations | Cost, skills, sustainability, portfolio  Tracking services | Service providers, locations, risk  Other | Market intelligence, service provider capabilities, technologies Copyright © 2012, Everest Global, Inc. 2 EGR-2012-2-PD-0661
    • Background and scope of research The global sourcing market evolved and grew rapidly to reach a size of ~US$116 billion. Captives were a core component of this evolution with companies such as Texas Instruments and GE setting up offshore captive units in the late 1980s and early 1990s The last 15-20 years witnessed increased adoption of the captive model with a large number of companies setting up/expanding their captive centers. While India continues to remain a leading geography, companies also explored and successfully established captive operations in China, the Philippines, Central and Eastern Europe, and Latin America. Recently, Middle East and North Africa (MENA) has emerged as an attractive offshoring destination However, significant growth of third-party service providers and selective divestitures during the economic crisis led to the perception that the captive model is under threat. Stated reasons include captive not delivering value and being significantly more expensive than third-party service providers At the same time, mature users of captive articulate their commitment to the model and reinforce its importance in their sourcing strategy and portfolio. Additionally, our discussions with global sourcing offices of large companies and captive leadership reveal imperatives under way to expand the role of captive and its value proposition This research report provides an in-depth analysis of the global offshore captive landscape across leading locations. The report is based on Everest Group’s proprietary captive database and is updated every six months. Besides providing details on global captive landscape trends and analysis, the report also contains a focus section that provides deep-dive into the captive landscape in a select geography. This edition features the Philippines as the focus geography Copyright © 2012, Everest Global, Inc. 3 EGR-2012-2-PD-0661
    • Buyer organizations have a range of options for capturingvalue from offshoring, with captive and third-partyoutsourcing as the primary models Offshore business models Captive model Strategic alliance / Joint Venture Third-party outsourcing model model Pure captive model Build Operate Transfer (BOT)/ Pure third-party offshoring  An internal cost center or a Joint Venture (JV)  Use of an offshore provider to 100% subsidiary company to  Provider-owned / joint outsource business processes cater exclusively to the parent operations that can be or IT services company transferred back to the customer  Examples: Alcoa-Infosys, Rio  Examples: American Express,  Example: eServe-Citigroup Tinto - Wipro HSBC Inverted BOT Managed third-party offshoring  Offshore service providers  Full- / part-time resources on theThe focus of this report provide only implementation ground to facilitate transition,is on the captive model support initially and are allowed relationship management, and to buy into the entity at a later transfer of organization and date domain knowledge to third-party  Examples: AIG-Polaris, BA- providers WNS  Example: Greenpoint-Infosys BPOSource: Everest Group analysis Copyright © 2012, Everest Global, Inc. 4 EGR-2012-2-PD-0661
    • This research report leverages Everest Group proprietarycaptive database that tracks offshore captives of leadingcompaniesEverest Group proprietary captive databaseUnique characteristics Key dimensions tracked Industry’s most comprehensive database  Scale (FTE range) of global captives located across India, Rest of Asia, Europe, Latin America, and  Industry verticals Africa  Functions offered (e.g., IT, BP, ES / R&D) Tracks captives of leading firms (e.g., Forbes 2000 and Fortune 500 companies)  Parent geographies Database covers more than 1,200 captive  Parent size (revenue range) centers  Location of delivery centers Focus on captives providing offshore delivery of global services – excludes shared services centers serving the domestic market Copyright © 2012, Everest Global, Inc. 5 EGR-2012-2-PD-0661
    • Table of contents (page 1 of 2)Topic Page no.Section I: Executive summary 8Section II: Overview of the global captive landscape 12 Summary 13 Global offshore services and captive market: Size and growth 14 Distribution of the global offshore captive landscape by: – Parent revenue 17 – Parent geography 18 – Industry vertical 19 – Functions supported 20 – Offshore delivery locations 22Section III: Deep-dive into key industry verticals 25 Summary 26 Banking, Financial Services, and Insurance (BFSI ) 27 Energy and Utilities (E&U) 30 Healthcare 33 Manufacturing, Distribution, and Retail (MDR) 36 Technology 39 Telecom 42Section IV: Recent trends in the global captive landscape (2009-2011) 45 Summary 46 Recent trends in captive set-ups and divestitures 47 Copyright © 2012, Everest Global, Inc. 6 EGR-2012-2-PD-0661
    • Table of contents (page 2 of 2)Topic Page no.Section IV: Recent trends in the global captive landscape (2009-2011) (continued…) Recent trends in offshore captive landscape (2009-2011) by: – Parent revenue 48 – Parent geography 49 – Industry verticals 50 – Functions supported 51 – Key captive locations 52 List of offshore captive divestitures (2009-2011) 57Section V: Focus geography: Captive landscape in the Philippines 64 Summary 65 The Philippines’ offshore services and captive market: Size and growth 66 Distribution of offshore captives in the Philippines by: – Headcount 70 – Parent revenue 71 – Parent geography 72 – Industry vertical 73 – Functions supported 74 – Locations 75 Deep-dive into key industry verticals 77Appendix 82 Recent offshore captive set-ups (2011) 83 Glossary of key terms 100 Additional research recommendations 101 Copyright © 2012, Everest Global, Inc. 7 EGR-2012-2-PD-0661
    • This research report provides an in-depth analysis of theglobal captive landscape and trendsDistribution of offshore captives by parent revenue Distribution of offshore captives by industry vertical2011; Percentage 2011; Percentage 100% = 1,193 100% = 1,193 G <US$xx billion xx% xx% F US$xx billion E xx% A >US$50 billion xx% xx% xx% xx% D xx% xx% US$xx billion xx% C xx% xx% US$xx billion BDistribution of offshore captives by delivery location Distribution of offshore captives by type of cities2011; Percentage 2011; Percentage 100% = 1,193 100% = 1,193 E C D xx% xx% xx% B xx% C xx% xx% A xx% B xx% ASource: Everest Group (2012) Copyright © 2012, Everest Global, Inc. 8 EGR-2012-2-PD-0661
    • The report analyzes the captive market across six keyindustry verticals BFSI Energy and Telecom Utilities (E&U) Key industry verticals Technology Healthcare MDR Copyright © 2012, Everest Global, Inc. 9 EGR-2012-2-PD-0661
    • This study also provides an analysis of the recent trend (2009-2011) within the global captive landscapeNumber of offshore captive divestitures Distribution of offshore captives by parent revenue Percentage 100% = 1,193 65 82 83 8 >US$xx billion xx% xx% xx% xx% xx% xx% US$xx billion xx% xx% xx% xx% 2 xx% xx% 1 US$xx billion xx% xx% US$xx billion xx% xx% <US$xx billion xx% xx% xx% xx% 2009 2010 2011 Up to 2011 2009 2010 2011 New captive set-upsDistribution of offshore captive by functions Distribution of offshore captives by industry vertical Up to 2011; Percentage1 2009; Percentage1 2010; Percentage1 2011; Percentage1 Percentage 100% = 1,193 100% = 65 100% = 82 100% = 83 100% = 1,193 65 82 83 G xx% xx% xx% xx% F x% xx% xx% xx% IT E xx% xx% xx% xx% xx% xx% 41% 28% 22% 19% D xx% xx% xx% C xx% xx% B xx% xx%ES / R&D 42% 45% 55% 66% A xx% xx% xx% xx% BP3 44% 40% 39% 29% Up to 2011 2009 2010 2011 New captive set-upsSource: Everest Group (2012) Copyright © 2012, Everest Global, Inc. 10 EGR-2012-2-PD-0661
    • The report also covers a detailed analysis of the focusgeography – The PhilippinesPhilippines IT-BPO export revenue by service segments Distribution of market by sourcing modelsUS$ billion 2011; FTEs 100% = XX XX 100% = ~XX IT/ESO xx% xx% Captive Non Voice BPO xx% xx-xx% xx% Voice BPO xx% xx% xx-xx% Third-party service provider 2006 2011EDistribution of offshore captives by headcount – range of FTEs2011; Percentage 100% = XX  XXX  XXX  XXX  XXX  XXX  XXX XX-XX   XXX XXX Baguio   XXX XXX XX-XX xx%  XXX Clark Pasig Bulacan  XXX Manila Makati xx%  XXX Mandaluyong Muntinlupa Quezon  XXX  XXX  XXX  XXX Taguig Alabang  XXX  XXX  XXX xx% XX-XX  XXX  XXX XX-XX xx% Bacolod Cebu  XXX  XXX  XXX xx% XX-XXSource: Everest Group (2012) Copyright © 2012, Everest Global, Inc. 11 EGR-2012-2-PD-0661
    • Appendix: Additional research recommendtionsThe following documents are recommended for additional insight into the topic covered in this research report. Therecommended documents either provide additional details on the topic or complementary content that may be ofinterest1. Global Offshore Captive Landscape and Trends, Focus Geography – China (EGR-2011-2-R-0601); 2011. This report analyzes the global offshore captive landscape and key trends for the last 30 months (2009 - H1 2011). The report also provides a deep-dive analysis on the offshore captive landscape in China covering market size and growth, distribution of captive landscape, and deep-dives into industry verticals2. Global Locations Compass – China (EGR-2011-2-R-0606); 2011. The report provides detailed data and analysis on the global services landscape in China3. Global Locations Compass - The Philippines (EGR-2012-2-R-0637); 2011. The report provides detailed data and analysis on the global services landscape in the Philippines For more information on this and other research published by the Everest Group, please contact us: Amneet Singh, Vice President - Global Sourcing: amneet.singh@everestgrp.com Salil Dani, Research Director: salil.dani@everestgrp.com Ritika Dhingra, Knowledge Associate : ritika.dhingra@everestgrp.com Everest Group Two Galleria Tower 13455 Noel Road, Suite 2100 Phone: +1-214-451-3110 Dallas, TX 75240 E-mail: info@everestgrp.com Copyright © 2012, Everest Global, Inc. 12 EGR-2012-2-PD-0661
    • About Everest GroupEverest Group is an advisor to business leaders on the next generation of global services with aworldwide reputation for helping Global 1000 firms dramatically improve their performance byoptimizing their back- and middle-office business services. With a fact-based approach drivingoutcomes, Everest Group counsels organizations with complex challenges related to the useand delivery of global services in their pursuits to balance short-term needs with long-term goals.Through its practical consulting, original research and industry resource services, Everest Grouphelps clients maximize value from delivery strategies, talent and sourcing models, technologiesand management approaches. Established in 1991, Everest Group serves users of globalservices, providers of services, country organizations and private equity firms, in six continentsacross all industry categories. For more information, please visit www.everestgrp.com andresearch.everestgrp.com. Copyright © 2012, Everest Global, Inc. 13 EGR-2012-2-PD-0661
    • Everest GroupLeading clients from insight to actionEverest Group locations Dallas (Headquarters): info@everestgrp.com +1-214-451-3000 New York: info@everestgrp.com +1-646-805-4000 Toronto: canada@everestgrp.com +1-416-865-2033 London: unitedkingdom@everestgrp.com +44-207-887-1483 Delhi: india@everestgrp.com +91-124-496-1000 www.everestgrp.com | research.everestgrp.com | www.sherpasinblueshirts.com Copyright © 2012, Everest Global, Inc. 14 EGR-2012-2-PD-0661