External service providers (ESPs), of which Cognizant is one, and shared-services captive centers (SSCCs) — those insourced by the parent company — have long been means by which enterprises lower costs, improve services to the business and achieve digital transformation. The COVID-19 pandemic has accelerated a major rethinking in boardrooms around the world regarding the future shape of sourcing strategy; we’ve had discussions with many businesses looking for opportunities to transition capabilities from SSCCs to ESPs.
The coronavirus rapidly changed the mood of global business as the wisdom of first practices — online first, mobile first, cloud first, automated first, omnichannel first — became apparent to all. COVID-19 has led to greater interest in sourcing and developing modern, up-to-date solutions and services built on open standards, the cloud, software engineering, data and machine learning.
The pandemic has also painfully demonstrated the weaknesses of many captive centers:
The bottom line is that many businesses that rely on SSCCs are reevaluating their approach.
Wherever an organization is on the SSCC versus ESP continuum, and whatever its next steps may be, there are certain best practices that will become ever more important as stakeholders seek process flexibility and value-based thinking. Foremost among them will be to avoid the following mistakes:
Our objective for captives is focused on helping organizations take the next steps toward realizing their tactical and strategic objectives. Our solutions range from consulting or digital transformation projects to a takeover and transformation of all or part of the captive scope, and could also include joint go-to-market and monetization of the assets and capabilities of the captive.
Here are examples of these options and some approaches that have worked:
Our approach is to tailor the captive transformation strategy to the strategic imperatives of our clients. This could include “escaping the captive” by selling it; restructuring the operations to value-chain ecosystems; or transforming the operations and transferring them back to the client to yield faster, better results that are more aligned to the business’s short- and long-term strategy. In some cases, we’ve recommended actually increasing the reach of the captive as a way to escape current problems.
SSCCs will undoubtedly play a role on this journey to the future, but with the proven track record of ESPs — now with additional capabilities developed during the pandemic — the argument to maintain an internal capability at great expense (of time, money, management overhead and opportunity cost) is weaker than it was a decade (or generation) ago.
For an expanded take, see our paper, “Shared Service Captive Centers: Assets or Liabilities in the Post-COVID-19 Era?” To learn more, visit the Digital Systems & Technology section of our website or contact us.