Global Offshore Captive Landscape and Trends-Focus Geography–The Philippines

Copyright © 2012, Everest Global, Inc. EGR-2012-2-PD-0661

Topic: Global Offshore Captive Landscape and Trends Focus Geography – The Philippines

Global Sourcing Report: February 2012 – Preview Deck


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Background and scope of research

The global sourcing market evolved and grew rapidly to reach a size of ~US$116 billion. Captives were a core component of this evolution with companies such as Texas Instruments and GE setting up offshore captive units in the late 1980s and early 1990s

The last 15-20 years witnessed increased adoption of the captive model with a large number of companies setting up/expanding their captive centers. While India continues to remain a leading geography, companies also explored and successfully established captive operations in China, the Philippines, Central and Eastern Europe, and Latin America. Recently, Middle East and North Africa (MENA) has emerged as an attractive offshoring destination

However, significant growth of third-party service providers and selective divestitures during the economic crisis led to the perception that the captive model is under threat. Stated reasons include captive not delivering value and being significantly more expensive than third-party service providers

At the same time, mature users of captive articulate their commitment to the model and reinforce its importance in their sourcing strategy and portfolio. Additionally, our discussions with global sourcing offices of large companies and captive leadership reveal imperatives under way to expand the role of captive and its value proposition

This research report provides an in-depth analysis of the global offshore captive landscape across leading locations. The report is based on Everest Group’s proprietary captive database and is updated every six months. Besides providing details on global captive landscape trends and analysis, the report also contains a focus section that provides deep-dive into the captive landscape in a select geography. This edition features the Philippines as the focus geography


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Buyer organizations have a range of options for capturing value from offshoring, with captive and third-party outsourcing as the primary models

Strategic alliance / Joint Venture model

Offshore business models

Third-party outsourcing model

Captive model

Managed third-party offshoring Full- / part-time resources on the

ground to facilitate transition, relationship management, and transfer of organization and domain knowledge to third-party providers

Example: Greenpoint-Infosys BPO

Pure captive model An internal cost center or a

100% subsidiary company to cater exclusively to the parent company

Examples: American Express, HSBC

Inverted BOT Offshore service providers

provide only implementation support initially and are allowed to buy into the entity at a later date

Examples: AIG-Polaris, BA-WNS

Build Operate Transfer (BOT)/ Joint Venture (JV) Provider-owned / joint

operations that can be transferred back to the customer

Example: eServe-Citigroup

Pure third-party offshoring Use of an offshore provider to

outsource business processes or IT services

Examples: Alcoa-Infosys, Rio Tinto - Wipro

Source: Everest Group analysis

The focus of this report is on the captive model


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This research report leverages Everest Group proprietary captive database that tracks offshore captives of leading companies

Key dimensions tracked Scale (FTE range)

Industry verticals

Functions offered (e.g., IT, BP, ES / R&D)

Parent geographies

Parent size (revenue range)

Location of delivery centers

Unique characteristics

Industry’s most comprehensive database of global captives located across India, Rest of Asia, Europe, Latin America, and Africa

Tracks captives of leading firms (e.g., Forbes 2000 and Fortune 500 companies)

Database covers more than 1,200 captive centers

Focus on captives providing offshore delivery of global services – excludes shared services centers serving the domestic market

Everest Group proprietary captive database


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Table of contents (page 1 of 2)

Section I: Executive summary 8 Section II: Overview of the global captive landscape 12 Summary 13 Global offshore services and captive market: Size and growth 14 Distribution of the global offshore captive landscape by:

– Parent revenue 17 – Parent geography 18 – Industry vertical 19 – Functions supported 20 – Offshore delivery locations 22

Section III: Deep-dive into key industry verticals 25 Summary 26 Banking, Financial Services, and Insurance (BFSI ) 27 Energy and Utilities (E&U) 30 Healthcare 33 Manufacturing, Distribution, and Retail (MDR) 36 Technology 39 Telecom 42 Section IV: Recent trends in the global captive landscape (2009-2011) 45 Summary 46 Recent trends in captive set-ups and divestitures 47

Topic Page no.


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Table of contents (page 2 of 2)

Topic Page no.

Section IV: Recent trends in the global captive landscape (2009-2011) (continued…) Recent trends in offshore captive landscape (2009-2011) by:

– Parent revenue 48 – Parent geography 49 – Industry verticals 50 – Functions supported 51 – Key captive locations 52

List of offshore captive divestitures (2009-2011) 57

Section V: Focus geography: Captive landscape in the Philippines 64 Summary 65 The Philippines’ offshore services and captive market: Size and growth 66 Distribution of offshore captives in the Philippines by:

– Headcount 70 – Parent revenue 71 – Parent geography 72 – Industry vertical 73 – Functions supported 74 – Locations 75

Deep-dive into key industry verticals 77 Appendix 82 Recent offshore captive set-ups (2011) 83 Glossary of key terms 100 Additional research recommendations 101


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This research report provides an in-depth analysis of the global captive landscape and trends

Distribution of offshore captives by parent revenue 2011; Percentage

xx%

xx%

xx%

xx%

xx%

US$xx billion

>US$50 billion

US$xx billion

<US$xx billion

US$xx billion

100% = 1,193

xx%

xx%

xx%

xx% xx% xx%

xx%

100% = 1,193

Distribution of offshore captives by industry vertical 2011; Percentage

A

B

E F

D

C

G

xx%

xx%

xx%

xx% xx%

A

B

C

D E

Distribution of offshore captives by delivery location

2011; Percentage 100% = 1,193

xx%

xx%

xx%

A

B

C

Distribution of offshore captives by type of cities

2011; Percentage 100% = 1,193

Source: Everest Group (2012)


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The report analyzes the captive market across six key industry verticals

BFSI

Energy and Utilities (E&U) Telecom

Technology Healthcare

Key industry verticals

MDR


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This study also provides an analysis of the recent trend (2009-2011) within the global captive landscape

Number of offshore captive divestitures

xx% xx% xx% xx% xx%

xx% xx% xx%

xx% xx% xx%

xx%

xx% xx% xx%

xx%

xx% xx% xx% xx%

2009 2010 2011 Up to 2011

New captive set-ups

1,193 65 82 83

Distribution of offshore captives by parent revenue Percentage

US$xx billion

>US$xx billion

US$xx billion

<US$xx billion US$xx billion

100% =

xx% xx% xx% xx%

xx% xx% xx% xx%

xx% xx% xx% xx% xx% xx% xx% xx% xx% xx%

xx% x% xx% xx% xx% xx% xx%

2009 2010 2011 Up to 2011

New captive set-ups

1,193 65 82 83 100% =

Distribution of offshore captives by industry vertical Percentage

A

B

C D E F G

8

2 1

2009 2010 2011

44%

42%

41%IT

ES / R&D

BP3

100% = 1,193 100% = 65 100% = 82 100% = 83

2009; Percentage1 2010; Percentage1 2011; Percentage1Up to 2011; Percentage1

40%

45%

28%

39%

55%

22%

29%

66%

19%


Distribution of offshore captive by functions


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The report also covers a detailed analysis of the focus geography – The Philippines


Voice BPO

Non Voice BPO

IT/ESO

XX XX 100% =

xx% xx%

xx% xx%

xx% xx%

2006 2011E

Philippines IT-BPO export revenue by service segments US$ billion

xx-xx%

xx-xx% Captive

Third-party service provider

Distribution of market by sourcing models 2011; FTEs

xx%

xx%

xx%

xx% xx%

100% = ~XX

100% = XX

XX-XX

XX-XX

XX-XX

XX-XX

XX-XX

Distribution of offshore captives by headcount – range of FTEs 2011; Percentage

XXX XXX XXX XXX XXX

Pasig

MakatiManila

Muntinlupa QuezonTaguig Alabang

CebuBacolod

Baguio

BulacanClark

Mandaluyong XXX XXX XXX XXX XXX

XXX XXX XXX XXX XXX

XXX XXX XXX XXX XXX

XXX XXX XXX XXX XXX


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Appendix: Additional research recommendtions

For more information on this and other research published by the Everest Group, please contact us: Amneet Singh, Vice President - Global Sourcing: Salil Dani, Research Director: Ritika Dhingra, Knowledge Associate :

[email protected] [email protected] [email protected]

Everest Group Two Galleria Tower 13455 Noel Road, Suite 2100 Dallas, TX 75240

Phone: +1-214-451-3110 E-mail: [email protected]

The following documents are recommended for additional insight into the topic covered in this research report. The recommended documents either provide additional details on the topic or complementary content that may be of interest 1. Global Offshore Captive Landscape and Trends, Focus Geography – China (EGR-2011-2-R-0601); 2011. This report

analyzes the global offshore captive landscape and key trends for the last 30 months (2009 - H1 2011). The report also provides a deep-dive analysis on the offshore captive landscape in China covering market size and growth, distribution of captive landscape, and deep-dives into industry verticals

2. Global Locations Compass – China (EGR-2011-2-R-0606); 2011. The report provides detailed data and analysis on the global services landscape in China

3. Global Locations Compass - The Philippines (EGR-2012-2-R-0637); 2011. The report provides detailed data and analysis on the global services landscape in the Philippines






https://research.everestgrp.com/Product/11590




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About Everest Group

Everest Group is an advisor to business leaders on the next generation of global services with a worldwide reputation for helping Global 1000 firms dramatically improve their performance by optimizing their back- and middle-office business services. With a fact-based approach driving outcomes, Everest Group counsels organizations with complex challenges related to the use and delivery of global services in their pursuits to balance short-term needs with long-term goals. Through its practical consulting, original research and industry resource services, Everest Group helps clients maximize value from delivery strategies, talent and sourcing models, technologies and management approaches. Established in 1991, Everest Group serves users of global services, providers of services, country organizations and private equity firms, in six continents across all industry categories. For more information, please visit www.everestgrp.com and research.everestgrp.com.

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Global Offshore Captive Landscape and Trends-Focus Geography–The Philippines

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