Captive Center vs Outsourcing : How to Choose the Right One

Captive Center vs Outsourcing : How to Choose the Right One

captive center vs outsourcing how to choose the right one itechnolabs

Competition between companies in the market has a direct correlation to business expansion. In today’s marketplace, the product or service must be of excellent quality and be competitively priced. The cost competitiveness of the company is an important element that can either take the company into progress or lead to its failure, therefore it is essential that it determines the most effective way to manage its costs and expenses. Here you will learn about the difference between Captive Center vs Outsourcing. 

One of the most common ways to run a business is to set up a captive center or to outsource to BPO, i.e., to a call center or business process to Software Development outsourcing company. However, which one is better is a tough decision to take.

Due to the rapid growth of the market, there is a high level of cost competition. Consequently, companies are choosing third-party outsourcing to reduce costs and suit their business needs. Instead, many companies create their captive model and keep control over security and authorization. Each company chooses what is most important to their business.

As we examine both Captive Center vs Outsourcing models separately, let’s analyze their workings in more detail.

Captive Model

captive model itechnolabs

Captive companies are those who set up their own operations and handle the entire process themselves. As the functions aren’t outsourced to another company, they can be managed remotely. The company conducts its subsidiary in low-cost areas. In this model, a company can take control under their own authority rather than delegate the work to another provider. In the case of services, they inspect the whole customer life-cycle, from product creation to delivery, etc.

A disadvantage of Captive Shared Services is that they are more expensive as compared to third-party outsourcing. For example, land required for constructing a building, maintenance fees, and so on, significant investment is necessary to cover the costs of equipment and infrastructure.   

Third-Party Outsourcing

third-party outsourcing itechnolabs

Third-party outsourcing, however, involves assigning all responsibility for operations to the third-party provider. The whole organization benefits from it as it reduces costs and improves efficiency. In an outsourced environment, a company’s processes vary with the industry, location, level of complexity, and other factors. Companies can save up to 40% of their current costs by outsourcing.  

You appoint IT Company or Software development agency on a contractual basis when delegating your operations. The company is responsible for handling all your customers’ needs. With third-party outsourcing, you don’t have to worry much about responsibilities because the vendor takes care of them. To ensure reasonable controls, a robust review system is required.

Lets discuss Some factors on which you can decide Captive Center vs Outsourcing

some factors decide captive center vs outsourcing itechnolabs

  • It’s important to know how quickly you need to reach your savings goals

In the first year, the cost of establishing a captive center is much higher than outsourcing. When you start a new center, the first question is, “Where?”. The decision of where to locate a shared services center is a crucial one, and should involve consideration of both financial and regulatory factors (labor and tax laws, etc.) in local markets. Usually, this process requires considerable analysis and takes time, which typically involves the use of a third-party resource.

Following the selection of the location, the building of the facility must be accomplished. To complete lease negotiations, more time will be needed, and improvements to the leasehold and infrastructure will require a significant outlay of funds. Additionally, you will have to create an organization from scratch, which involves HR, training, recruiting and other costs. If you outsource, you can avoid all of these costs, since the provider should already have established facilities and infrastructure you can enter in a short period of time and become operational without investing any capital.

As a result, captive models tend to have a longer payback period, and the speed to benefit is much slower. One of our clients recently helped us build the business case for both outsourcing and captive scenarios, and the captive scenario’s payback period was more than double (>4 years) compared to the outsourcing scenario’s (~ 2 years).

 It is unlikely that captive will meet your needs within 2 years of starting the project.

  • Achieving Success in Hiring

Service and sales associates are being expected to do more today than ever before. Having high emotional intelligence is essential for today’s workforce. It is must to have advanced problem-solving skills, excel at people management, and coordinate well with others. Nowadays, artificial intelligence is handling so many simple tasks, leaving human beings to handle complex problems – which is why finding the right people is important.

Brands have a tough time finding contact center representatives who possess the correct skillset. In contrast, an outsourced provider with experience and expertise in this area is able to relieve the brand of this burden so that it can focus on its core business functions.

When companies have the right employees, both their customers and their bottom line benefit: employees feel empowered to make decisions that benefit both the company and their customers, and customers experience positive customer service.

  • Improving Efficiency

Currently, businesses are conducted worldwide 24/7, and customers expect brands to be accessible whenever they want them. It means companies must offer support anywhere, anytime, in any language. When associates do not meet these expectations, it leads to frustration and disconnect.

Captive centers face this challenge, but outsourcing has the advantage of having resources all over the world – including physical space, technology, and staff. Bringing in partner experts ensures that the next objective can be achieved quickly. This allows for more effective and faster completion of tasks.

  • Improved Training Speed and Effectiveness

It is imperative to close sales quickly and efficiently. Getting more agents trained faster and more effectively with an outsourcer can help you reach your goals. Outsourcers are well versed in the best practices for their industries, which makes them ideally suited for using the latest technology to increase productivity and profits, such as TTEC’s RealPlay Bot, which lets associates practice with and receive real-time feedback from a virtual assistant.

With customer service outsourcing, employers can ensure their staff are motivated and equipped with the right skills to deliver exceptional customer service. Brands can create a workforce that is capable, collaborative, and connected because they provide the right tools and training.

  • Expertise is at our fingertips

Brands are usually so focused on their products and services that customer service is relegated to a secondary role. The bad news is that customer experience is quickly becoming a differentiator for brands, even ahead of the products and price in some cases.

Outsource partners who live and breathe customer experience, on the other hand, are the right choice. A CX company specializes in end-to-end customer service, utilizes digital and next-generation strategies, provides operations rigor, and hires and retains world-class employees who act as brand ambassadors.

A brand may lack expertise in-house, but the right partner can fill that gap.

  • Digital optimization

Digital plays a crucial role in the success of contact centers. Furthermore, outsourcing partners can give a digital edge to brands compared to captive centers.

Brands must provide multiple channels of support to customers because they want more digital and technology options. Furthermore, they need to know how to choose the best channels for each type of interaction.

A deep understanding of artificial intelligence is becoming increasingly important.

Organizations with low levels of customer support and simple requests may benefit from a captive center. It is crucial to work with experienced partners to deliver a great customer experience.

Partnering with the right company will help brand owners focus on their core business mission while balancing the right combination of people and technology. 

  • The preparation of facilities can take some time

Your implementation timeline will probably be longer if you decide to go captive. Why is that? Normally, preparing the facilities takes four to eight months. Your shared services organization has the best chance of success if it can leverage existing office space and extra space, but this isn’t always possible.

Do You Want to Build a Captive Center For Your Organization?

do you want to build a captive center for your organization

Black and white isn’t the whole story of Captive Center vs. Outsourcing. Hybrid models are most commonly used. Your organization’s business and operational needs must ultimately dictate the choice of model. You can achieve your goals by combining many different models when you use shared services. You might decide to outsource less risky, transactional activities such as invoice processing, cash application, and reconciliations and realize significant savings in a short amount of time while setting up a captive center for other processes that can be centralized, but operated internally.

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