It has become an annual ritual for analysts in the recent years to predict the imminent death of the captive model of globalizing services. Very often, the conclusion is arrived by a direct extrapolation from a few instances of captive unit such as those of GE and British Airways, becoming independent third-party service providers.
A few instances of strategic sellouts of such captive and shared-services units such as of Procter & Gamble’s deal with HP and Unilever’s deal with Capgemini, have just strengthened their argument. In addition, a few also point to smaller sellouts like that of SwissAir’s offshore subsidiary and Phoenix Insurance’s offshore unit — both, incidentally, to Tata Consultancy Services.
However, if instances are what one has to go by, the above examples pretty much sum up the entire activity that has happened in the last three to four years of cases where captives have ceased to exist. Contrast this to the number of new offshore captives that have been established and/or announced in 2006 alone, and you will know in which directions is the market heading.
In 2006, India itself attracted at least a dozen large corporations from both America and Europe that announced or established their offshore services subsidiaries. Here is a part-analytical, part-nostalgic look at the offshore captives that made their debut last year.
Tech’s Second Coming
In 2006, some of the most notable announcements in setting up captive offshore units in India were in the area of technology — led largely by large telecom-equipment makers. It was partly dictated by offshoring becoming imperative for these companies in the context of India’s large manpower pool, and partly by the zealous marketing effort by the Indian IT and telecom minister Dayanidhi Maran. Maran, who has taken it on himself to get high-tech manufacturing to India, has got big names like Nokia, Ericsson and Motorola to start manufacturing in India. Combine that manufacturing craze and available software talent. What you have is R&D.
Within a span of few months, Ericsson kick-started a huge Research and Development (R&D) center in Chennai; Nokia announced a network operation center in the same city; and optical networking equipment maker Ciena opened its facility in Gurgaon, near Delhi.
The combination of manufacturing and software is also a deadly combination for semiconductor companies to chip in. And they came in large numbers. Graphics chip maker Nvidia and Tensilica, maker of the configurable processors chose Pune for their captive design centers. Many others like SanDisk, PMC-Sierra, ST Micro as well as relatively smaller VIA, decided to go with the tried-and-tested Bangalore. Freescale Semiconductors and Texas Instruments also decided to scale up their captive operations in India and announced their second centers in Noida (near Delhi) and Chennai respectively.
Software and system technologies makers, of course, continued their passage to India. Storage-solution provider NetApps, conten-management solutions provider Interwoven, web browser company Opera Software, and data center management software maker BladeLogic also debuted their Indian development centers. Both Symantec and RSA Security started their security labs in India. Most of them, fairly predictably, chose Bangalore as the venue.
The fascination with India’s R&D capability was not restricted to telecom and IT alone. At least three large global corporations — oil major Shell; heavy engineering firm, Bosch; and automobile maker Volvo — announced their plans to start facilities in India, the first two focusing largely on research. Instrumentation and test equipment maker Agilent Technologies significantly ramped up its captive operations in India.
