Zinnov analyzed captive centers of multiple US based technology companies in India. Zinnov found that many of these centers provide just engineering related services and the direct impact on the organization’s bottom line due to current cost savings is very minimal.
– Captive centers executing just engineering functions save only between 3 – 7 % of the organization’s operating expenses.
– Captive centers with engineering and support teams in India save up to 16% of the organization’s operating expenses
– Most technology organizations spend around 50% to 60% on sales and administration. Even if a small part of these activities are undertaken from their India center, it will result in significant cost savings to the organization
– The cost per resource for support functions such as HR, Marketing, F & A, etc. is much lower than that of engineering resulting in higher per resource savings
Some best practices recommended by Zinnov to improve the total cost savings by the captive centers.
– The center head of the development centers should report directly to the executive management of the company and not to any specific business unit. This will ensure that the senior management has complete visibility into the possibilities of the India development center.
– The country head should ideally have experience of running an entire organization and not just the engineering aspect of it.
– Every department in the organization should be encouraged to use the captive center for some of their operations.
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