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7/22/2019 India Captives and Offshoring Analysis
1/12
www.redseerconsulting.com [email protected] 2010 RedSeer Consulting Confidential `and Proprietary Information
Captives in India
Market Landscape
7/22/2019 India Captives and Offshoring Analysis
2/12
2010 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
Key Highlights
Captive back office accounts for the 40% of Indian back office revenue. i.e. close to USD 4.3 Billion
There are close to 200 back office captive centers in India with a significant employee count (~>100),
Around 150,000 employees work in the back office captives, research database captures more than 120,000 of these
F&A and financial vertical processes are the most common processes (~48%) outsourced to the back office captives
Customer and Technical support (level-1) (~43%) is the next most common function being performed by the captive back
offices
Bangalore has the highest number of back office captive centers followed by NCR and Mumbai (Captive distribution is
more skewed words Bangalore when compared to the third party vendors which are distributed equitably)
While the average billing rate for third party vendor is between 15 to 20 K per FTE per annum, the captive employee cost
is up to 20% to 30% higher. Captive centers are focused on three themes 1)Global center of excellence 2)Innovation
Incubator 3)Low cost aggregator
In last 2 to 4 years there has been a lower number of captive centers setting up back offices in India, primarily due to: 1)
Increased confidence in third party vendors 2)Global economic slow down has triggered cost reduction measures, as the
captives are more expensive then the vendors
There has been a series of acquisitions of the back office captives in the last 2 to 4 years, a trend favoring the third party
vendors
For the Purpose of this analysis, financial vertical based services have been merged with the F&A process e.g. claims
processing, insurance settlement etc. KPO, equity research and analytics have not been included in the analysis
2Source: RedSeer Call Center Services
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2010 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.3
Captive Back offices account for 40% of the ~USD 10 billion IndianBPO market
Source: Everest Nasscom Report-2008, Web search, RedSeer Analysis
Indian BPO Market was pegged at USD 10.9Billion in 2008
It has grown with a 34% CAGR between 2005 -
08
Services considered in BPO market are by
Nasscom:
F&A (13%)
HRO (4%)
Customer Interaction and Support
(42%)
Procurement & Supply (2%)
KPO (9%)
Vertical Specific Services (27%)
Others (3%)For the purpose of this analysis, vertical specific
processes have been merged with
Customer/Tech Support, F&A and
Manufacturing Support
Captive Back Office
(40%)
Total =USD 10.9 Billion
Revenue Distribution Indian BPO Market
(2008)
Third Party Vendors
(60%)
Source: RedSeer Call Center Services
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2010 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.4
More than 150 back office captives in India employ close to 150Kemployees
0
20000
40000
60000
80000
100000
120000
140000
160000
0 to 50 50 to
100
100 to
200
200 to
500
500 to
1000
1000+ Total
Employee Distribution between Back office Captives
(2008-09)
Size of Captive Center
NumberofEmployees
(inThousands)
Unacco
unted
2%1% 1% 3%
7%
67%
19% 100%
67% of
the
headcou
nt is with
1000+
FTE
sized
centers
Note:
1: Not extrapolated to 150K, as captured in the database
Source: Everest Nasscom Report-2008, Web search, RedSeer Analysis`
Total ~125,000 FTEs1
Back Office Captives in India by Employees
(2008)
0 to 50
(2%)
50 to 100
(1%)
100 to 200
(1%)
200 to 500
(3%)
500 to 1000
(7%)
More than 1000
(67%)
Source: RedSeer Call Center Services
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2010 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.5
Manufacturing followed by Hi-Tech has the highest number of backoffices in India, BFSI accounts for the overall highest FTE base
28%
7%
19%
47%
8%9%
12%11%
9% 5%
23%
20%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
By Number of Centers By FTE Split
Manufacturing Hi-tech BFSI IT/ ITES Services Others
125,000 EmployeesFor 145 Centers
Back office by Number of Centers and Employees
(2008-09)
PercentagebyIndustryVerticals
Findings based on the analysis of the 145
company database:
Manufacturing1companies have the
highest number of back office captivecenters
BFSI vertical accounts for 19% (27
captives) of the captive centers and
47% of the overall headcount
1
Note:
1: Manufacturing companies include chemical, hi-tech manufacturing, aerospace, automotive and all other type of manufacturing heavy sectors
2: Services companies includes the non technical services like consulting, transportation, hospitality etc.
Source: RedSeer Back office Captive Database
2
Source: RedSeer Call Center Services
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2010 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.6
Number of companies setting up back office captives in India has gonedown in last 2 to 4 Years
Companies Setting-up Back office Captives
Years
NumberofCaptives
Started
3
25
39
14
0
5
10
15
20
25
30
35
40
45
1990-95 1995-2000 2000-2005 2005-2009
Illustrative For 65 Centers
Findings based on the analysis of the 65 Back
office centers: Number of new captive centers have
come down drastically in last 2 to four
years
This is primarily because of two
reasons 1) Increased maturity of third
party vendorshence increased
reliability
2) Global slowdown in last 1.5 years
As a sign of increased confidence in
the capabilities of Indian vendors, lot
of companies have sold their stable
captive centers to the Indian Vendors
Selling of the back office centers have
helped MNC in reducing the cost by
20% to 40% and focus on the core
business
The upcoming captives typically have
two rationale:
IP and data security issues
Vertical specific complex
process
Source: RedSeer Call Center Services
7/22/2019 India Captives and Offshoring Analysis
7/12 2010 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
7
More than 2/3rdof the centers and 85% of headcount is with NorthAmerican companies
68%
85%
8%2%
13%
24%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
By Centers By Headcount
NA EUROPE ASIA
125,000 EmployeesFor 145 Centers
Back office by Number of Geography
(2008-09)
1 2
Source: RedSeer Call Center Services
7/22/2019 India Captives and Offshoring Analysis
8/12 2010 RedSeer Consulting Confidential and Proprietary Information. www.redseerconsulting.com.
8
Bangalore followed by NCR is the most preferred back office location
57
37
31
21
20
18
10
0 10 20 30 40 50 60
BANGALORE
NCR
MUMBAI
HYDERABAD
PUNE
CHENNAI
OTHERS
Captive Centers by Cities(2008-09)
Number of Back office Centers
Cities
Bangalore has the highest number of BPO
captives when compared to any other centers
Tendency of a captive center to chooseBangalore ahead of NCR is higher when
compared to third party vendors. This is due to
presence of higher number of MNCs and
support ecosystem
Based on the Nasscom report, 24% of the
overall BPO headcount is in Bangalore when
compared to 21% of NCR and 15% of Mumbai
Bangalore is preferred more
over NCR by captives when
compared to vendors
Source: RedSeer Call Center Services
7/22/2019 India Captives and Offshoring Analysis
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9
F&A is the most common function outsourced to IndianCaptives
Findings based on the Analysis of 55 captive
centers:
F&A is the most commonly
outsourced function to the India back
office captives. This is primarily
because of the data security and
confidentiality issue
For the purpose of this analysis,
vertical specific processes likesclaims have been included in the
F&A
Technical and customer support is the
second most common function at 43%.
It included the voice and non voice
operations, level-1 technical support
(NOC)
HRO is not commonly outsourced tothe back officebecause of relatively
lower volumes of work and constraints
with outsourcing
Total ~115,000 FTEs
Back Office Captives in India by Employees
(2008)
Finance & Accounting
(48%)
Technical andCustomer Support
(43%)
HRO
(4%)Sales and Marketing
(3%)
Manufacturing support activities
(1%)
Procurement & Supply
(1%)
Source: RedSeer Call Center Services
7/22/2019 India Captives and Offshoring Analysis
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1 Technical/Customer services
a Customer Data acquisition
b General Query Handling
c Customer surveys and satisfaction
d Customer Interaction and Support strategy
e Post sales/Product services support
f
Other Technical support (Low level
Infrastructure Management Services)
2 HRO
a Employee data Management
b Payroll
c Benefits Administration
d Compensation
e Recruitment and Selection
f Training and development
g Global Mobility
h Regulatory and Compliance
i Performance Management
j Employee Relations
k Human Resource Management Strategy
3 Finance and Accounting
a Accounts Payable
b General Accounting
c Accounts Receivable
d Tax
e Fixed Assets
f Regulatory Reporting and Compliance
g Management Reporting and Analysis
h Capital Budgeting
i Budgeting/Forecasting
j Internal Audit
k Finance and Accounting Strategy
4 Procurement & Supply
a Transactional Procurement
b Spend and Category Management
c Procurement and Services Strategy
Comments
5 Sales and Marketing
b Sales and Marketing services
6 Manufacturing support activities
High Med LowCapability
Capability Mapping of Indian Back office Captives
Source: RedSeer Call Center Services
7/22/2019 India Captives and Offshoring Analysis
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Illustrative Acquisitions
Companies Acquired by /Spun off Vertical
Aviva WNS BFSI
British Airways WNS Aviation
EDS HP IT/Ites
Serco Group InfoVision IT/Ites
AOL Aegis IT/Ites
Citibank e-serve TCS BFSI
ICICI Onesource FirstSource BFSI/Telecom
GE- Consumer Electronics Genpact Manufacturing
GE- Healthcare Genpact Manufacturing
Travelport Intelenet Services
UBS Cognizant BFSI
Source: RedSeer Call Center Services
7/22/2019 India Captives and Offshoring Analysis
12/12 2010 RedSeer Consulting Confidential and Proprietary Information www redseerconsulting com
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