SIG Conference: Day 2 – Examining Offshore Measures & Encouraging Tech Advancement

By Bill Huber, Director, CPO Services, TPI 

Captive vs. Outsource:

DuPont’s Frank Conway co-presented with our own Brian Smith  on the considerations between captive and outsourced solutions, which they compared to “seeing in a sandstorm.”  

As Frank pointed out, the decision is often a journey that reflects executives’ mindsets.  Having a captive can have a strong psychological benefit, but when times get tough, executives can often swing from not wanting to outsource to trying to outsource too much.   

• Frank also pointed out that whether outsourcing or managing a captive, you never give up your ultimate accountability.  The buck stops with you.  Whether it is outsourced, internal, onshore or offshore, the CEO expects it to work.
• Brian Smith noted that the most efficient captives and service providers achieve a fairly similar cost level, with the best captives operating at a 2%-4% lower cost than the best service providers.  However, median service provider costs amount to 79% of median captive costs.  Two reasons for this are that captives tend to have a significantly higher percentage of support staff, and a lower span of control (Apparently there are a number of captives that are currently “for sale”).

 

Newt Gingrich:

Former Speaker of the House Newt Gingrich provided the keynote at today’s lunch, covering an encyclopedic range of issues.  Equally critical of both U.S. political parties, he emphasized more changes in technology in the next 25 years than in the previous 125. He pointed out that no bureaucracy could possibly grasp, plan for, or react to this level of change and that only the private sector, reacting to the market, often through trial and error will be able to take our economy through this change. 

His key challenge to the sourcing audiences: 

Define what conditions would be required for the U.S. to be the preferred sourcing destination for more business activities, and become a force to advocate for those changes.  He mentioned taxes, regulation, education, and energy among those key issues.

Newt also pointed out that those countries that become protectionist, ultimately lag in technology, become more expensive and ultimately become backwaters on the global stage.  

The audience appeared to like Gingrich’s messages. Stay tuned for some more from day 2…

  

Comments

[Bill Huber]

For more on the subject of captives, see Brian's White Paper "Offshoring — Managing Captives or
Outsourcers: Which is the Biggest
Challenge?" http://www.tpi.net/knowledgecenter/whitepapers/private/papers/ManagingCaptivesBSmith.pdf

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