Captive and Shared Service Centres

Abstract

Offshore captive centres are one of a broad range of sourcing models available to firms. While the focus of most of the outsourcing and offshoring literature is third-party sourcing arrangements, this chapter will focus on the mainly in-house option, but from an offshore or nearshore location perspective. According to a GrandView research report, there are over 75,000 such shared service centres (SSC) globally in 2022, having grown at a compound annual growth rate (CAGR) of close to 30% from 2015 to 2022. (Note that nearly half of these SSCs involve working with some external service provision.) Heading into the 2020s, the growth prospects were bullish for large organisations due to the increased need to reduce costs and improve the quality of delivered services. Resourceful implementation of the SSC model for certain functions and in the operational stages can yield greater operational efficiency and cost reductions, while enhancing productivity. But the future is uncertain. For example, will labour costs stay low, will tax regulations stay relaxed, and will governments continue to favour this sourcing mode in key country locations like India, China, Latin America, and parts of Eastern Europe? Not surprisingly, by 2022, many companies were reviewing their shared service plans and sourcing decisions.

The key aspects examined in this chapter are as follows:

• The history of the captive-centre industry

• The strategies pursued by captive centres

• Trends and changes in the captive-centre industry

• Shared service centres and the captive model.