Location Strategy for setting up a captive in india

Captive location strategy

One of the first and important questions that comes to the mind of the executives of the organization which is planning to set up a captive in India is: Which city should we based out of? Having advised multiple organizations in helping them set up their captive centers in India over the past few years, the ScrumStart team has come up with a set of 5 critical parameters that need to be considered while setting up a captive to ensure sustained benefits. These are as listed and discussed below:

Talent availability
No offshore center can sustain and thrive without the availability of quality talent aligned to the specific requirements of the organization. For example, there are cities where the availability of BPO related talent is very high, but the availability of niche talent needed for high-end work is low. Also, it is not necessary that organizations should look for ready-made talent that fits completely into their needs. Rather, availability of a supply chain of talent that can be trained is more important than having a limited set of ready-made talent.

Infrastructure & Support Ecosystem
Availability of quality office spaces is an important factor in deciding the office location. Rapidly growing cities are putting huge strain on the available resources leading to chaotic traffic situations in cities. This not only restricts the ability of the organization in attracting talent from places away from the office location, but also reduces the productivity of their staff. Ease of expansion is another important factor to be considered by companies that have plans to expand. Without the right expansion plan, they run the risk of getting stuck with a small first office and end up creating many more smaller offices, leading to substantial increase in the cost of operations. Availability of thought leaders, partners and vendors, and presence of other similar captives are added advantages.

Quality of life
There are multiple parameters that need to considered with respect to this factor. These include climatic conditions, cost of living in the city, availability of healthcare facilities, housing and recreational facilities and so on. This is an important consideration, especially if you are looking at attracting talent to relocate from other cities in India.

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Cost of operations
Research conducted by ScrumStart involving hundreds of CXOs and IT executives around the world clearly shows that the main motivation for outsourcing remains cost reduction, with 78% of the respondents choosing this as their first reason for considering outsourcing as an option. With constantly increasing employee salaries in Tier-1 cities like Bangalore, many organizations have started looking at Tier-2 and Tier-3 cities as the preferred location for their offshore centers. In fact, the key factor of lower cost is not just about lower salaries, but also about higher productivity at every level.

Ecosystem Stability
Political and social stability are very important factors that normally get ignored. Many captive organizations were adversely impacted with the strikes and riots that happened in Hyderabad while floods in Chennai cut out the city from outside world for days. Such disruptions adds up the cost of operations and the level of anxiety. Law and order situation is a non-negotiable parameter, especially when it involves working in shifts.