Everest Group: Captive model is healthy and evolving towards more complex or unique services | Press Release

Report examines captive history; analyzes recessionary divestiture activity; provides case study of Tesco HSC’s talent development programs

DALLAS, June 28, 2011 ─ Contrary to market speculation, new captive set-ups and expansions continue at a healthy pace, and the captive model is evolving with refinements to approaches and a mix of more complex and unique services, according to a study by Everest Group, a global consulting and research firm.

In the study, Captives are Staying Alive, research analysts examine and explain the often misrepresented story of the evolution of offshore captives. The study focuses on the history of captives in India, incorrect reports that the captive model was failing, drivers of divestiture activity, and the future evolution of the captive model. The report is co-authored with Tesco HSC, the global services delivery arm of 5,000-plus employees supporting the retailer’s presence in 14 countries, and includes a case study of its talent model.

According to the study, four prevalent themes will be important for offshore captives moving forward:

  • Most of the work will be “non-commodity” in nature, particularly due to the desire to control business enabling activities, but will need to be skewed towards more complex or unique activities to support a wide array of processes, many of which are less defined or more nuanced than market-based standards.
  • The importance of talent models will need to be elevated to support captives that take on more complex or unique activities.
  • The understanding of the role of scale to enable success will be critical as captives will require increased diversity of skills in competitive labor markets. Additionally scale is needed to overcome the natural strain of distributed global operations.
  • Scope of services provided by a captive will naturally evolve and require refinement as business needs change, third-party service provider capabilities mature, end-user preferences evolve and captive-provided service performance is assessed.

“Looking back at the 2008-2010 time period, what actually happened was notably different from the market speculation in 2007-2008 when news media headlines said captives were dying or dead,” said Eric Simonson, Everest Group’s managing partner of Research, who co-authored the report with Vinit Vishal, guest analyst of Tesco HSC. “In reality, most closures were small operations and many were ill conceived from the beginning. Meanwhile, successful captives were largely ignored.”

Between December 2008 and December 2010, 37 new captives were established, 21 announced significant expansions, and 13 divestitures occurred.

“While the noise suggested a failure of the captive model, in reality the captive model endured and further evolved. Today, captives continue to have an important role in global sourcing portfolios and are oriented towards providing increasingly unique value propositions,” said Simonson.

Talent models are one of the most important levers for captives to optimize in support of future growth. For Tesco HSC, this means aligning its talent model to building a global pool of end-to-end IT skills and deep domain knowledge, including proactive staff rotation programs to develop and retain employees.

“We have continued to build a strong workforce that is on the cutting edge of ‘future retailing’ concepts with the ability to develop and enhance retail solutions based on deep functional and technical expertise,” said Sandeep Dhar, CEO at Tesco HSC. “Our investment in talent development programs have resulted in positive scores on employee surveys that confirm employee engagement is a leading indicator of our overall business success.”

For more information about the report, Captives are Staying Alive, or other Global Sourcing research and services, please visit research.everestgrp.com, email [email protected] or call +1-214-451-3110.

 

About Tesco

Headquartered in the UK, Tesco today is ranked as the world’s third largest retailer and a market leader in six of the 14 countries it operates in. This includes 5,380 stores, 472,000 employees, US$110 billion in annual revenue, and over 60 million customers. Tesco Hindustan Service Centre (HSC) is the fully owned global services arm of Tesco worldwide. The global service operations of Tesco HSC are involved in creating and executing strategic initiatives for Tesco retail stores worldwide. These strategic initiatives address information technology, business, financial, and commercial activities of Tesco operations, making it one of the world’s most preferred retail stores.

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