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October 03, 2007
Everest Research Institute: Third-Party Outsourcing Suppliers Can Provide 5-15 Percent More Savings Than Captives; Best-in-Class Captives Can Match Third-Party Performance
Third-parties outsourcing suppliers are typically 5-15 percent less expensive than captives in terms of their total cost of operations, according to a recent study by the Everest Research Institute. The study makes a holistic comparison of costs across operating costs, productivity, transition, sales and marketing and margins. The cost advantage of the third-party model is derived primarily from better leverage of scale, leaner operating environments, more complex overhead management associated with most captives, as well as higher investments that captives make in knowledge transfer during offshore migration and creation of a more global culture. However, best-in-class captives are observed to operate at similar and even lower costs.
Although cost reduction is important, the study, Comparison of Outsourced and Captive Solutions for Capturing Value from Outsourcing, advises that a company’s decision of which model to leverage must be aligned with its near- and long-term strategic goals. The Institute will also host a Webinar on October 11 at 8 a.m. CDT, to provide multiple viewpoints on the third-party and captive offshore divide.
This report builds on to the results of a recent Everest study, Captive Value Diagnostic Study Market Update, which surveyed over 100 key executives who operate captives across global companies. The survey revealed that more than 85 percent of these executives believe that their captive operations are delivering on cost savings and service expectations, despite contrary opinions.
The Webinar will take place on October 11, 2007, at 8 a.m. CDT; 1300 GMT; 6:30 p.m. IST. To register, please visit: www.everestgrp.com/Webinars.
Posted by jbowles at October 3, 2007 05:02 PM
