Firstly, a differentiation between an IT product company and an IT service company will be conducted. Afterwards, the term “offshore captive center” will be defined. Thirdly, factors for establishing a captive center will be determined. Last but not least, one Asian city is supposed to be chosen for setting up an IT captive center.
Table of Contents
1. IT service companies vs. IT product companies
2. Definition “offshore captive center”
3. Choosing a suitable location
Objectives and Topics
The primary objective of this assignment is to identify and justify a suitable city in Asia for establishing an offshore captive center for an IT product multinational company, while analyzing key industry differences and location-specific factors.
- Differentiation between IT service and IT product business models
- Definition and strategic advantages of offshore captive centers
- Evaluation of India as a prime offshoring destination based on labor and resources
- Classification of Indian city tiers and cluster competitiveness
- Strategic recommendation of Hyderabad as an ideal location
Excerpt from the Book
3. Choosing a suitable location
Nowadays, many jobs in the IT industry are relocated from Germany, the United States or Great Britain to countries with lower wages. These selected countries are countries with a low barrier of language, such as Ireland, India, Israel or Canada (Rutz Ben & Claus, 2005, pp. 34-39). Generally, India has the biggest supply of IT services (Deutsche Bank Research, 2006).
After gaining its independence in 1947, India took a strong focus on education and established the worldwide famous Indian Institute of Technology (IIT). Before the mid-1990s well educated Indians had often gone abroad to look for a suitable job whereas after the mid-90s glass fiber made it possible for specialists to stay in India and to work for western countries via the internet (Dressler, 2007, S. 119). This might be one of the main reasons more and more companies are doing offshoring to India. India offers know how and good IT resources on the one hand and on the other hand low cost of labor. The consulting firm A.T. Kearney evaluated 50 countries with regard to their eligibility for offshoring in 2011 (table 1). The factors financial attractiveness, people’s skills and availability and business environment have been weighted. According to these factors, India was ranked number one in the world as an offshoring country followed by China and Malaysia (appendix 1). In 2013, the same evaluation was executed. Again, India is number one in the world followed by China and Malaysia as an offshoring country, where offshoring is secure and pays off (Hackmann, 2013). Therefore, in the following sections, potential cities in India are going to be examined for setting up an offshore captive center.
Summary of Chapters
1. IT service companies vs. IT product companies: This chapter delineates the business model differences between software service providers and product-focused firms to establish a conceptual foundation.
2. Definition “offshore captive center”: This chapter defines the concept of captive offshoring as an internal business relocation strategy to leverage cost benefits while retaining institutional knowledge.
3. Choosing a suitable location: This chapter evaluates India as a premier offshoring destination and identifies Hyderabad as the most suitable city for a captive center based on infrastructure, policy, and human resources.
Keywords
Offshore captive center, IT industry, India, Software development, Offshoring, Hyderabad, Business process, IT cluster, Labor cost, Infrastructure, Policy incentives, Human resources, IT service companies, IT product companies, Global Service Location Index
Frequently Asked Questions
What is the primary focus of this assignment?
The assignment focuses on identifying an ideal city in Asia to host an offshore captive center for an IT product company, providing a justification based on economic and industrial factors.
How are IT service companies distinguished from IT product companies?
IT service companies develop software based on specific customer requirements for a fee, whereas IT product companies develop and sell their own proprietary software products to the market.
What defines an "offshore captive center"?
It is a subsidiary established abroad by a company to relocate business processes internally, allowing the firm to benefit from lower labor costs without transferring expertise to external third parties.
Why is India considered a leading destination for IT offshoring?
India is highlighted for its large supply of skilled IT professionals, favorable business environment, historical investment in technical education like the IITs, and strong government policy support.
Which criteria are used to categorize Indian cities for offshoring?
Cities are classified into three tiers based on their supply of talent, employee turnover rates, cost of living, and the quality of physical and telecom infrastructure.
What is the main finding regarding the selection of a location?
The author recommends Hyderabad as the preferred location due to its superior IT policy, high-quality manpower, and extensive incentives for real estate and infrastructure.
How does the author evaluate the competitiveness of different Indian clusters?
The evaluation is based on a survey of seven factors, including manpower, real estate, and telecom infrastructure, synthesized into a comparative analysis of major Indian IT hubs.
What role does the A.T. Kearney Global Service Location Index play in this study?
The index serves as empirical evidence to rank India as the number one global offshoring destination in 2011 and 2013, supporting the case for establishing a center within the country.
- Quote paper
- Johannes Köck (Author), 2013, Choosing a suitable location in Asia for an offshore captive center for a multinational IT product company, Munich, GRIN Verlag, https://www.grin.com/document/378116
