Captive business process outsourcing (BPO) involves outsourcing to a wholly owned subsidiary, providing companies with control over information and supply chain. It is more expensive than third-party vendors, but offers greater control and security. Companies choose between third-party vendors and captive BPO based on their priorities.
In captive business process outsourcing (BPO), also known as captive service, a company sends its business, not to another company, but to an owned subsidiary. The branch is wholly owned and may be stationed nationwide or in another region or country. The benefits companies see when using captive BPO is that while the business is outsourced, they still have complete control over all information and the supply chain. At the same time, using captive BPO is more expensive than using a third-party vendor to outsource, but many companies would prefer control over a cheaper operating price. If a business goes bankrupt or is sold, its captive service is typically sold as a separate unit.
As companies grow, they often need to outsource part of their business. By outsourcing, they relieve the stress of having to create a particular product or provide a specific service while still getting the job done. Captive business process outsourcing (BPO) and all other BPO branches, separate outsourcing into two types. Back office outsourcing is outsourcing work that takes place behind closed doors, such as product creation or accounting management, while front office outsourcing involves customer service.
If a business needs to outsource work, they will choose a third-party vendor or branch office. A third party vendor is a completely separate company. These providers can normally provide the services at a lower cost but, at the same time, the main company loses some control. For example, if database work is outsourced, a third-party vendor must have access to the company’s database, which can compromise security.
With a captive BPO, the company outsources its work to a wholly owned subsidiary of the parent company. This means that while the subsidiary needs access to the information, the security risk is much lower. The original company can directly control how the products are made, how and when they are delivered, and all other aspects of the outsourced business process, because it does not technically leave the parent company.
Captive BPO units can be located both domestically and offshore. Most commonly, they are offshore so that the company can save more money while maintaining control of their processes. If a company is sold, either because it is bankrupt or the owner or owners no longer want the company, the captive service is usually sold separately.
Choosing between the two BPO choices depends on the priority of the company. If price is a factor, third-party vendors will be better. If security and authority are the primary factors, captive BPOs will work better.
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