Imagine that there are two buyers, A and B. Buyer A opened an offshore captive five years ago. It currently has 350 seats. It took almost two years to break even. Now, other companies are poaching the staff. Profitability is becoming a problem.
Buyer B has customer-facing activities that require high touch. The company would love to offshore the process but is afraid to give up visibility and control. And it believes no one at the provider has a deep enough understanding of its customers like its staff does to let them handle it.
Can both companies, with seemingly opposing needs, have the same solution? Yes, and it's called the 'captive hybrid model.' Let me explain how this is an effective alternative for global services delivery for both these buyers.
But first things first - what is a captive hybrid? A captive hybrid embeds the provider's employees in the buyer's operations. There are two main types:
- The buyer embeds its staff in the provider's facility, or
- The provider sends its people to the buyer's captive
In each case the company's employees are still badged to their own company. However, the two groups become one joint, extended team handled a single process end-to-end.
There are many benefits of a captive hybrid. The current practice of just offshoring pieces of a process, leaving the critical segments at home, reduces the efficiencies and effectiveness possible when one company manages the entire process end-to-end. It also breaks the natural flow. This approach can also be more costly because the buyer may have higher than necessary costs for the retained organization. Many retained organizations spend time handling escalations or having the checkers check the checkers. However, if the provider handles the process end-to-end, buyers can have smaller retained organizations. Add together the higher costs of a redundant retained organization and the inefficiencies in segmented processes and I think you may find the business case for a hybrid is neutral or positive.
For buyers with captives struggling with sustainability, a captive hybrid helps spread out the captive's fixed costs. Co-location at the supplier's facility for buyers thinking of starting a captive eliminates all their start-up investment costs, making the business case positive from day one. The service provider can also provide training to new recruits, and it is easier to handle escalations with just one team.
Captive hybrids benefit the provider, too. They allow the outsourcer to develop people in their organization who have a better, deeper understanding of the client. This often translates into additional business for the provider because its staff now knows the company intimately.
The bottom line: The captive hybrid is a win-win for everyone. This should be the model of the future for captives: partner with your provider in its facility.