Almost 90 per cent of companies that started their captive operations (set up to provide internal services and in some cases sell them to clients) in India in the last 18 months are operating with less than 300 people each which is not sustainable in the long-run.
They all started captives, following the success of a handful of global firms like Oracle, Texas Instruments, Cisco and Motorola in scaling up their captive development centres by 'leveraging the cost-benefit'.
Ericsson, for instance, started its own captive in India almost three years ago, failed and later sold it to Wipro due to its unsustainable model. Pervasive Software closed its offshore development centre in Bangalore seven months ago, but it continues to work with its long-term partner Aztecsoft.
Mimosa Systems, a US-based privately-held VC-funded software product company has captive centres in Bangalore and Pune, but works with Symphony Services, its partner in India.
What they forgot was that the global firms took over 10 years to gain expertise in managing distributed research and development.
"They come with some holistic objectives, but without much preparation. They fail to understand that companies like TI, Motorola, Cisco or SAP have reached this stage after years of experience. They should understand it is a journey, not an overnight activity," said Sudin Apte, senior analyst and country head (India) -- Forrester Research.
He says unless a captive has a certain volume and unless it scales up to a 300-odd people organisation, it fails to justify its existence.
Ajay Kela, COO & MD, Symphony Services, "When clients decide to set up their own entity, they want to maintain control and better understand the marketplace for future.
But typically it takes about three years before the captive