Global companies boost captive tech centres in India

  • Manu P Toms, Hindustan Times, Bangalore
  • Updated: Jun 29, 2014 23:12 IST

Global captives or offshore delivery centres (ODCs) of multinational companies that act as technology and business process nerve centres for their global operations are back in favour with about 30 new ones coming up in the last two years.

With outsourcing of IT and technology service projects to Indian companies such as Infosys or Wipro or their global rivals such as IBM and Accenture, multinationals have in the past avoided setting up their own centres in India, called “captives” in India. This enabled cost-cutting and also circumvented the logistical headaches in setting up their own operations. However, research and development seen as a critical in-house activity and increased faith in India as a base, captives are growing again.

Global majors including AstraZeneca, Cargill, Lowes, Mercedes Benz have set up centres in India in the recent years while Grant Thornton, Fidelity and Flextronics are expanding furiously, industry officials said.

“The trend of setting up global captives increased in the last two years with focus shifting to high-end jobs from the cost arbitrage-based model of the past,” said KSVishwanathan, vice president, industry initiatives, Nasscom.

“In the past three months three companies have set up their captives in Bangalore. Four more will come up in the coming months,” he said.

Global captives which had grown rapidly between 2005 and 2010 lost steam with outsourcing to independent vendors for cost reasons before picking up pace again.

“MNCs want to leverage the talent pool. More than cost advantage, their main driver is to retain key data and information within their own set-up and get the mundane work done through partners,” said Vinu Nair, managing partner of recruiting firm Antal International Network.

The trend could hit third-party service providers, but is seen as good news for job seekers. According to Vishwanathan, captives alone may hire 60,000-80,000 employees in the current year.

For instance, Mercedes Benz Research and Development Centre will hire 800 staff to take its strength to over 2,000 by 2015. Auditing firm Grant Thornton has plans to hire over 3,000 and electronics design and contract manufacturing firm Flextronics 2,000 in the next two to three years.

“There is an increasing trend of high-end research and product development work getting done out of India by companies such as Cisco, GE, Facebook and Google,” Kris Lakshmikanth, founder of Head Hunters India. He said a PhD in the US would earn $150,000 a year — while an Indian counterpart gets $50,000.

India accounts for 45% of global captive centres.

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