To host half of Fortune 500 firms’ captive centres in near future, says study

Multinational captive centres in India are increasing their capacity, according to consulting firm Zinnov.

In a white paper, Zinnov estimates that 50 per cent of the Fortune 500 companies will have their captive centres in India in the next few years, working on tasks related to business processes, technology, HR and others for their parent companies.

Zinnov attributes this trend to the fact that in the last two years, 10 IT and IT-enabled services (ITeS) centres of Fortune 500 companies set up operations in India. It said India is home to about 200 wholly-owned IT and ITeS centres of multinational companies, thus making it the most preferred offshore destination as compared to 120 other offshoring locations across the globe.

IT modernisation

“Reasons like IT modernisation and rethinking ways in which legacy technologies (like Mainframe computing) can be used are driving this,” said Sundararaman Viswanathan, Manager – Consulting, Zinnov. He added that other reasons such as cost advantages and presence in an emerging market are influencing these MNCs to set up centres in India.

The report added that banking and financial services companies leverage India the most for their IT and ITeS operations and there are close to about 45 such MNC centres last year. Retailers such as Walmart, Tesco and financial institutions such as Northern Trust have added to their India headcount in the recent past.

Further, healthcare and life sciences is emerging as a large category amongst the MNC centres.

Companies such as Royal DSM and Sigma Aldrich recently opened their service centres and existing players such as Novartis and Cerner have grown their India centres in the last few years. Currently India is the IT / ITeS hub for about 125 of the Fortune 500 companies.

Losing momentum?

However, industry watchers feel that despite a large share of MNC captives, the country is losing momentum.

Companies have shifted out of India due to mediocre management talent and an inability to be at the forefront of innovation, said an analyst from a multinational consulting advisory firm who did not wish to be named.

(This article was published on April 8, 2013)
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