Global Offshore Captive Landscape and Trends:Focus Geography - China: October 2011

Copyright © 2011, Everest Global, Inc. EGR-2011-2-PD-0601

Global Sourcing Report: October 2011 – Preview Deck

Topic: Global Offshore Captive Landscape and Trends Focus Geography – China


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Background and scope of research

The global sourcing market has evolved and grown rapidly to reach a size of US$ 105-110 billion. Captives have been 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 have witnessed increasing 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 have also explored and successfully established captive operations in China, the Philippines, Central and Eastern Europe, and Latin America

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

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

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


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Buyer organizations have a range of options for capturing value from offshoring, with captives 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 mgmt, and transfer of org. 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 suppliers 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’s 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 on global captives located across India, Rest of Asia, Europe, Latin America, and Africa

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

Database covers more than 1,000 captive centers

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

Everest’s proprietary captive database


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Table of contents (page 1 of 2)

Section I: Executive summary 7 Section II: Overview of global captive landscape 11 Summary 12 Global offshore services and captive market: Size and growth 13 Distribution of global offshore captive landscape by:

– Parent revenue 16 – Parent geography 17 – Industry vertical 18 – Functions supported 19 – Offshore delivery locations 21

Section III: Deep-dive in key industry verticals 24 Summary 25 Banking, Financial Services, and Insurance (BFSI ) 26 Energy & Utilities (E&U) 29 Healthcare 32 Manufacturing, Distribution, and Retail (MDR) 35 Technology 38 Telecom 41 Section IV: Recent trends in global captive landscape (2009 – H1 2011) 44 Summary 45 Recent trends in captive set-ups and divestitures 46

Topic Page no.


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Table of contents (page 2 of 2)

Topic Page no.

Section IV: Recent trends in global captive landscape (2009 – H1 2011) (continued…) Recent trends in offshore captive landscape (2009 – H1 2011) by

– Parent revenue 47 – Parent geography 48 – Industry verticals 49 – Functions supported 50 – Key captive locations 51

List of offshore captive divestitures (2009 – H1 2011) 56

Section V: Focus geography: Captive landscape in China 62 Summary 63 China’s offshore services and captive market: Size and growth 64 Distribution of offshore captives in China by

– Headcount 67 – Parent revenue 68 – Parent geography 69 – Industry vertical 70 – Functions supported 71 – Locations 72

Deep-dive into key industry verticals 74 Appendix 80 Recent offshore captive set-ups (H2 2010 and H1 2011) 81 Glossary of key terms 97 Additional research recommendations 98


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

Source: Everest Group (2011)

xx%

xx%

xx%

xx%

xx%

Distribution of offshore captives by parent revenue2011; Percentage

US$xx billion

>US$xx billion

US$xx billion

<US$xx billion

US$xx billion

100% = 1,142

xx%

xx%

xx%

xx%xx%

xx%

xx%

100% = 1,142

Distribution of offshore captives by industry verticalJune 2011; Number of Captives

A

B

C

D

E

F

G

xx%

xx%

xx%

xx%xx%

100% = 1,142

Distribution of offshore captives by delivery locationJune 2011; Percentage

A

B

C

DE

xx%

xx%

xx%

100% = 1,142

Distribution of offshore captives by type of citiesJune 2011; Percentage

A

B

C


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The report analyzes the captive market across six key industry verticals

Banking, Financial Services, and

Insurance (BFSI)

Energy & Utilities (E&U) Telecom

Technology Healthcare

Key industry verticals

Manufacturing, Distribution, and

Retail (MDR)


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This study also provides an analysis of the recent trend (2009-H1 2011) within the global captive landscape


Number of offshore captive divestitures

xx

xx xx

2009 2010 H1 2011

xx% xx% xx% xx% xx%

xx% xx% xx%

xx% xx% xx%

xx%

xx% xx% xx%

xx%

xx% xx% xx% xx%

2009 2010 H1 2011 Up to 2011

New captive set-ups

1,142 64 76 42

Distribution of offshore captives by parent revenue Percentage

US$xx billion

>US$xx billion

US$xx0 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 H1 2011 Up to 2011

New captive set-ups

1,142 64 76 42 100% =

Distribution of offshore captives by industry vertical Percentage

A

B

C D E F G

Distribution of offshore captives by functions

xx%

xx%

xx%ES / R&D

IT

BP3

100% = 1,142 100% = 64 100% = 76 100% = 42

2009; Percentage 2010; Percentage H1 20112; PercentageUp to 2011; Percentage

xx%

xx%

xx%

xx%

xx%

xx%

xx%

xx%

xx%


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


Xx-xx%

Xx-xx%

Distribution of market by sourcing models2010; US$ billion

Captives

100% = ~XX

Third-party service provider

Xx-xx%

Xx-xx%BP

IT

100% = ~XX

China offshore services market size2010; US$ billion

xx%

xx%

xx%

xx%

Distribution of offshore captives by headcount – range of FTEs2011; Percentage

xx-xx

100% = 78

<xx

xx-xx

xx-xx

Beijing Dalian

Shanghai Suzhou

Guangzhou

Chengdu

Zhuhai

Nanjing

Shenzhen

Jiangsu Xi'an Wuhan Sichuan

Foshan

Xx Xx Xx

Xx Xx Xx

Xx Xx Xx

Xx Xx Xx

Xx Xx Xx


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Appendix: Additional research recommendations

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 on 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. Market Vista: Q2 2011 (EGR-2011-8-R-0579a); 2011. This report summarizes the key trends and developments for Q2 2011

in the global offshoring and outsourcing market

2. India Captive Market Landscape: Challenging Common Myths and Charting Future Role (ERI-2010-2-R-0472); 2010. This report provides an in-depth analysis of the India captive landscape and insights into key trends. The report also challenges common myths associated with captives and provides deep insights into their evolving role and value proposition

3. Captives are Staying Alive (EGR-2011-2-R-0565); 2011. This report is intended to help educate the market regarding the often mis-represented story of the evolution of offshore captives. It is a pointed narrative of the evolution of the captive model – with an eye towards how captives have often been misunderstood and misperceived

mailto:[email protected]





http://research.everestgrp.com/Product/11542




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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.

http://www.everestgrp.com/


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Global Offshore Captive Landscape and Trends:Focus Geography - China: October 2011

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