Introduction

Choosing a third-party, captive or hybrid offshoring model is a critical decision for companies seeking to access offshore labor markets. The decision regarding which model to pursue must be aligned with the types of value a company wishes to capture.

For companies seeking to quickly maximize cost savings, this research reveals from a Total Cost of Ownership (TCO) perspective that the third-party outsourcing model is typically 5-15% less expensive than utilizing a captive. This report will assist companies trying to understand the relative costs and benefits of outsourcing and offshore captives in weighing the multitude of factors that influence their decision.

Scope

• Value drivers including one-time reductions in TCO (Total Cost of Ownership), ongoing cost reductions in TCO, business impact, and strategic impact
• Base operating costs, transition costs, third-party SG&A costs, and third-party margins
• Transaction-based and expertise-based processes
  

Contents

This report summarizes key insights to assist management in making more informed business decisions about sourcing model strategies. Key insights are discussed in detail and illustrated with supporting data and analysis. The report discusses the following four themes:

• Sources of value attainable from offshoring
• Methodology for evaluating the Total Cost of Ownership (TCO) of offshore sourcing models
• Results of a TCO analysis comparing outsourced and offshore captive solutions for transaction-based and expertise-based processes
• Factors to consider in interpreting how the results apply to a company