Executive Summary

The captive model continues to be robust. Market growth and adoption is healthy and most captives seem to meet their promise on cost savings and service levels to their onshore users. In addition, a broad base of parent company executives strongly endorse the need for the captive establishment to transcend from a service provider to a partner supporting the strategic priorities of the global enterprise. Everest Research Institute’s recent research on captives indicates that some captives already deliver transformational impact today by proactively assuming a lead role in global change programs.

Lately, however, a confluence of market forces is reshaping the global sourcing landscape. Captive divestitures, increasing competition from third parties, and emerging alternative sourcing models raise questions about the health and relevance of the captive model. These market forces along with increasing expectations from parent organizations represent a clear call to arms for captives to evolve their current operating models and sharpen their competitive advantage.

Sustained success of the model in the future will require captives to be more deliberate in defining compelling end-state objectives and organizing to deliver against them. At least three potential end-state alternatives emerge: Low-Cost Aggregator, Global Center of Excellence (CoE), and Innovation Incubator each requiring appropriate operational trade-offs across capability building, metrics, organization structures, and decision making processes.