MNCs use India units to broker outsourcing deals...
As many multinational companies with captives in India are realising the benefit of outsourcing to third party IT and BPO vendors. The companies are being called on to play a new role by their overseas parents, they are using the management expertise in their captive units to broker these deals. In many cases, the final contract is between the third party vendor and the Indian captive, rather than with the multinational parent and the third party vendor. This also gives them a price advantage since it is a domestic contract.
“There is an increasing understanding that it is better to outsource some tasks to a third-party vendor rather than do it at their own captives because it results in higher levels of efficiency. At the same time, firms want to keep their captives for high-end tasks that are sensitive and typically cannot be outsourced. These firms are also tapping the talent at their captives to ink deals with third party vendors because they have a better understanding of the local market,” said Peter Bendor-Samuel, founder and CEO of business solutions advisory firm, Everest Group. Everest Group was the advisor to Royal Philips Electronics on the sale of its finance and accounting captive to IT major, Infosys Technologies.
A top executive with one of the leading Indian IT firms admitted that contracts are now being signed with Indian captive arms. Among the multinational captives in India doing this are JP Morgan, Goldman Sachs and Bank of America. The larger captive units with a staff strength of 5,000-8,000 have enough talent at the top to negotiate such contracts.
There are also compelling economic benefits — a contract that is priced at $20-25 an hour can be negotiated at $15-18 an hour if it is a contract originating from India, said a consultant, who tracks the business.
The recession has given an impetus to such deals. Global sourcing advisor TPI, which is involved in about a quarter of the world’s outsoucing deals, said there has been a rise in such contracts, referred to as I2I contracts or India to India contracts.
“Earlier Indian vendors were not very keen on these contracts since there were no tax benefits. That has changed now, with most of the older facilities not being eligible anymore for STPI benefits, which means vendors are more open to taking on these contracts, said Siddharath Pai, partner and managing director of TPI India. He added that multinational captives, today, have a fair number of senior executives who can take decisions on sourcing.
Source -: http://economictimes.indiatimes.com/articleshow/5044641.cms
“There is an increasing understanding that it is better to outsource some tasks to a third-party vendor rather than do it at their own captives because it results in higher levels of efficiency. At the same time, firms want to keep their captives for high-end tasks that are sensitive and typically cannot be outsourced. These firms are also tapping the talent at their captives to ink deals with third party vendors because they have a better understanding of the local market,” said Peter Bendor-Samuel, founder and CEO of business solutions advisory firm, Everest Group. Everest Group was the advisor to Royal Philips Electronics on the sale of its finance and accounting captive to IT major, Infosys Technologies.
A top executive with one of the leading Indian IT firms admitted that contracts are now being signed with Indian captive arms. Among the multinational captives in India doing this are JP Morgan, Goldman Sachs and Bank of America. The larger captive units with a staff strength of 5,000-8,000 have enough talent at the top to negotiate such contracts.
There are also compelling economic benefits — a contract that is priced at $20-25 an hour can be negotiated at $15-18 an hour if it is a contract originating from India, said a consultant, who tracks the business.
The recession has given an impetus to such deals. Global sourcing advisor TPI, which is involved in about a quarter of the world’s outsoucing deals, said there has been a rise in such contracts, referred to as I2I contracts or India to India contracts.
“Earlier Indian vendors were not very keen on these contracts since there were no tax benefits. That has changed now, with most of the older facilities not being eligible anymore for STPI benefits, which means vendors are more open to taking on these contracts, said Siddharath Pai, partner and managing director of TPI India. He added that multinational captives, today, have a fair number of senior executives who can take decisions on sourcing.
Source -: http://economictimes.indiatimes.com/articleshow/5044641.cms
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