Source: economictimes.indiatimes.com

Indian IT and BPO companies now get some of their businesses with an attachment - people. As these companies win outsourcing deals, they also take people from client organisations on to their rolls, reflecting a broader shift away from captive model of offshoring. Consider some of the recent deals: When Tata Consultancy Services won its $1.2 billion outsourcing deal from Nielsen, it also agreed to take over about 350 people of information services provider’s captive unit at Baroda. Infosys Technolgies took on board 1400 employees of Royal Philips Electronics, when it won a $250 million deal from the Dutch electronics giant.

Similarly, Wipro Technologies took in 58 people from Nokia Siemens Networks, when it agreed to provide research and development activities in radio access to NSN. These are among the deals that were announced. Many remain undisclosed. Cognizant Technology Solutions, for example, has won some deals that would fit into this model, but they have not been made public, a Cognzant official said.

There are more to come, observers say, for a number of reasons. First, these deals reflect a broader trend of moving non-core processes to third parties, Mr S Mahalingam, CFO, Tata Consultancy Services said. While companies have been moving processes offshore to low cost destinations such as India, the debate on whether to outsource these processes to third parties or to set up captive units in these locations is still raging. Today, the debate appears to be tilting in favour of third parties.

Mr Milan Sheth, Partner - Outsourcing Advisory Center, Ernst & Young said, “If you look at the situation from a macro-perspective, the entire captive model business is being questioned from across the spectrum. The whole captive model is under the scanner now,” he said.

The much publicised sale of GE’s captive centre in India and the ongoing attempts by Citigroup to hive off its BPO unit are just a reflection of this phenomenon. And so are these deals. While one might be tempted to look at these primarily as ‘client wins’, and taking on personnel as a way to win a project. But, at a more fundamental level, they reflect the movement away from captives.

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