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Wholly-Owned Operating Subsidiary (“Captive” or “Shared Services Center”)
“Absolute” Control. An enterprise may choose to establish a wholly-owned subsidiary to perform particular services for all corporate affiliates. Such an enterprise is often referred to as a “captive” or a “shared services center.” The enterprise controls all aspects of operations and is able to integrate the back-office operations with its front-office customer-facing business.
Costs. The “shared service” or “captive” model has certain inefficiencies due to size and structure.
Benefits. Of source, the benefits of a shared-service model may be significant, depending on the “outsourced” business processes and core business. With the flexibility of controlling its workforce, the enterprise can redeploy its shared service center’s personnel to new tasks without having to go through the sometimes cumbersome, sometimes contentious process of “change control” with a third-party supplier.
Regional Service Delivery Centers. Multinational enterprises may have several such captives, one in each region, to perform services on a continuous “24/7” basis. Such multiple regional captives serve functions of redundancy and “handing off the baton” at the moment when one center’s day ends and another’s day starts.
Exit Strategy. The enterprise may choose to sell or spin-off the captive entity to a service provider to recoup its investment and achieve a profit, to achieve competitive pricing and to divest a non-core operation. Such sales enable service providers to enlarge their portfolio of service specialties and territorial footprint. Spin-offs have created a number of new service providers.
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