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Releasing Cash from Captive Engineering Centers
Executive Summary Companies today need a way to convert Fixed Costs to Variable Costs Engineering Centres are a fixed a Cost Companies need Offshore captive centers for furthering their needs for talent and regional growth A Hybrid Model for achieving all of the above proposed in this document Can result in release of $__Mn* per 100 people transfer No resultant loss of IP or destabilization of the operations * Valuation parameters not outlined
Higher savings Knowledge retention – Vendors move people around IP retention – Product Development key  process Why Captive Center Vs Vendor relationship
General Performance of Captive Centers All figures only illustrative To the CFO, Vendor Vs Captive Cost benefit has been blurring  $1.5 $  $ 6 Captive Cost of Management NPM Establishment costs (Legal,Entity formation) 0.75 Cost of Attrition Cost of facilities Wt avg cost of resources across different locations $ 5 Cost of Labor Reasons Vendor
Non-Financial realities of the Captive HQ wants to treat captives like Profit centre Captive wants to be treated at Par with Employees in HQ- Cost Centre Mismatch of expectations results in lack of clarity and trust Growth of employees limited – leads to attrition Availability of talent restricted due to limited Geo reach of captive Engineering Talent in India siloed by region
What does this recession mean for Captive Centres? Fixed Cost in Books Less ability to flex manpower costs Larger erosion of intellectual capital
The New “Captive” Business Model Employees will be rotated on a  min 2 year period. No more than 15% of rotation in one year Facilities No control Data and data centre Bulk of the staff Small Percentage People Vendor OEM
OEM interests met? Data Security- Ensured People Retention- Ensured to the extent of attrition which is lower than Captive
Opportunities for Releasing Cash Value the  captive for FCF for next 5 years Upfront release of cash for the valuation Vendor relationship with XX Rebadge current employees Pre-agreed rotation %  Reverse transfer clause after 5 years
Benefits for OEM Cash No loss of IP – All IP with OEM Secure environment Non-Compete if value of deal large
Why XX Largest Engineering Brand in India Breadth of Engineering domain Deep Pockets Highest Ethical standards in the World

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Releasing Cash From Captive Engineering Centers

  • 1. Releasing Cash from Captive Engineering Centers
  • 2. Executive Summary Companies today need a way to convert Fixed Costs to Variable Costs Engineering Centres are a fixed a Cost Companies need Offshore captive centers for furthering their needs for talent and regional growth A Hybrid Model for achieving all of the above proposed in this document Can result in release of $__Mn* per 100 people transfer No resultant loss of IP or destabilization of the operations * Valuation parameters not outlined
  • 3. Higher savings Knowledge retention – Vendors move people around IP retention – Product Development key process Why Captive Center Vs Vendor relationship
  • 4. General Performance of Captive Centers All figures only illustrative To the CFO, Vendor Vs Captive Cost benefit has been blurring $1.5 $ $ 6 Captive Cost of Management NPM Establishment costs (Legal,Entity formation) 0.75 Cost of Attrition Cost of facilities Wt avg cost of resources across different locations $ 5 Cost of Labor Reasons Vendor
  • 5. Non-Financial realities of the Captive HQ wants to treat captives like Profit centre Captive wants to be treated at Par with Employees in HQ- Cost Centre Mismatch of expectations results in lack of clarity and trust Growth of employees limited – leads to attrition Availability of talent restricted due to limited Geo reach of captive Engineering Talent in India siloed by region
  • 6. What does this recession mean for Captive Centres? Fixed Cost in Books Less ability to flex manpower costs Larger erosion of intellectual capital
  • 7. The New “Captive” Business Model Employees will be rotated on a min 2 year period. No more than 15% of rotation in one year Facilities No control Data and data centre Bulk of the staff Small Percentage People Vendor OEM
  • 8. OEM interests met? Data Security- Ensured People Retention- Ensured to the extent of attrition which is lower than Captive
  • 9. Opportunities for Releasing Cash Value the captive for FCF for next 5 years Upfront release of cash for the valuation Vendor relationship with XX Rebadge current employees Pre-agreed rotation % Reverse transfer clause after 5 years
  • 10. Benefits for OEM Cash No loss of IP – All IP with OEM Secure environment Non-Compete if value of deal large
  • 11. Why XX Largest Engineering Brand in India Breadth of Engineering domain Deep Pockets Highest Ethical standards in the World